Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must
a. increase the money supply so interest rates rise.
b. increase the money supply so interest rates fall.
c. decrease the money supply so interest rates rise.
d. decrease the moneys supply so interest rates fall
c
You might also like to view...
The economy's marginal social benefit curve for a public good is equal to the ________
A) horizontal sum of the individual demand curves B) vertical sum of the individual marginal benefit curves C) horizontal sum of the individual marginal benefit curves D) vertical sum of the individual supply curves
When a new product is introduced in the market, Lenny always wants to see how popular the item becomes before he purchases it. Lenny's behavior is known as
A) overt collusion. B) limit-pricing. C) a network effect. D) price leadership.
The achievement of greater efficiency in the United States has been at the expense of growing inequality
a. True b. False Indicate whether the statement is true or false
In Table 13-1, the Federal Reserve System has
a. sold $10 million in government securities to banks, taking payment in cash. b. sold $10 million in government securities to banks, taking payment from the bank's reserves. c. purchased $10 million in government securities from banks, paying for them with increases in banks' reserves. d. purchased $10 million in government securities from banks, paying for them with new Federal Reserve notes.