If the nominal interest rate is less than the equilibrium nominal interest rate determined in the money market, then in the short run households and firms
A) buy financial assets.
B) sell financial assets.
C) increase real GDP.
D) lower the price level.
E) raise the price level.
B
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Which of the following will NOT occur in the short run when the money supply decreases?
A) The interest rate will increase. B) The price level decreases. C) People will buy fewer goods and services. D) Aggregate supply decreases.
One advantage of a consumption tax is that there are fewer problems with inflation.
A. True B. False C. Uncertain
The marginal factor cost of borrowing $1,000 for new equipment when the interest rate is 10 percent and the MRP is $700 is
a. $1,000 b. $700 c. $100 d. $70 e. $0 since the firm won't borrow $1,000 when the MRP is only $700
If the Fed wanted to use open market operations to reduce interest rates, it would:
A. buy T-bills from banks. B. sell T-bills to banks. C. issue T-bills on behalf of banks. D. grant banks permission to issue T-bills.