Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?
When the price level increases, the purchasing power of money held on hand and in bank accounts declines. This decline makes people feel less wealthy so that they lend less. The reduction in lending causes the interest rate to rise. The rise in interest rates discourages spending on investment goods so that the aggregate quantity of goods and services demanded decreases. As the interest rate increases, the supply of dollars in the market for foreign-currency exchange falls as people wish to purchase fewer foreign assets. This makes the dollar appreciate which decreases net exports.
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The beginning point of a graph (the 0,0 point) is known as
A. ground zero. B. mother lode. C. the origin. D. square one. E. the beginning.
A straight-line demand curve with negative slope intersects the horizontal axis at 100 tons per week. At the midpoint on the demand curve (corresponding to 50 tons per week) the price elasticity of demand is
A) 0. B) 0.5. C) 1.0. D) unknown without more information.
A situation in which the price charged is less than society's opportunity cost would lead to
A) too little being produced. B) too much being produced. C) an efficient amount being produced. D) marginal cost pricing.
In 2015, the labor force participation rate was 62.6 percent. This means that:
A. 62.6 % of all working age people wanted a job. B. there was 37.4 % unemployment. C. 62.6 % of all working age people were employed. D. only 62.4 percent of labor force was in working age population.