A price elasticity of infinity corresponds to a demand curve that is:
A. vertical.
B. horizontal.
C. either vertical or horizontal.
D. downward sloping with a slope always equal to 1.
Answer: B
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When the Fed buys a U.S. bond in the open market
A) its action contracts total reserves and the money supply. B) total reserves increase by the amount of the purchase but the money supply stays the same. C) its action expands total reserves and the money supply. D) its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another.
Any theory of the term structure of interest rates needs to explain each of the following, except why:
A. the yields of different maturities tend to move together. B. short-term yields are usually higher than long-term yields. C. short-term yields are more volatile than long-term yields. D. long-term yields are usually higher than short-term yields.
An increase in the money supply will increase aggregate demand.
Answer the following statement true (T) or false (F)
All of the following take place in the direct finance market except
A) ownership in corporations is sold in the form of common stock. B) deposits from savers are accumulated and loans made to borrowers. C) ownership in corporations is sold in the form of preferred stock. D) corporate bonds are sold to savers.