Show the effects of a change in the nominal interest rate and a change in real GDP using the demand for money curve
What will be an ideal response?
An increase in the nominal interest rate decreases the quantity of real money demanded. The slope of the demand for money curve shows how the quantity of real money demanded depends on the nominal interest rate. As illustrated in Figure 8.1, a decrease in the nominal interest rate results in a movement downward along the demand for money curve.
A change in real GDP changes the demand for money. An increase in real GDP increases the demand for money and shifts the demand for curve for real money rightward from MD0 to MD1, as shown in Figure 8.2.
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China's growth rate has ________ that of most other countries, ________
A) topped; but its real GDP per person is still lower than other industrialized countries B) lagged behind; and its real GDP is close to other Asian economies C) lagged behind; but its real GDP per person is higher than other Asian economies D) topped: but its real GDP per person declined in 2008-09 E) equaled; and its real GDP per person declined in 2008-09
Bond prices in the marketplace will fall when
a. interest rates fall. b. the company is losing money. c. interest rates rise. d. the company is making money.
For a country to successfully maintain a fixed exchange rate value of its currency relative to another currency (for example, as is done when currencies are unified or pegged), it must
a. maintain a relatively high rate of inflation. b. balance the government budget each year. c. give up the independence of its monetary policy. d. run a trade deficit.
In the United States between 1980 and 2000, employment:
A. grew more rapidly than the over-sixteen population. B. decreased, while the over-sixteen population increased. C. grew at approximately the same rate as the over-sixteen population. D. was constant, while the over-sixteen population increased.