Recall the Application about the Fed's response to the collapse of the investment house Bear Stearns as well as its handling of the 2008 financial crisis with respect to other financial institutions to answer the following question(s). According to this Application, the Fed increased its lending by hundreds of billions of dollars to financial institutions as a response to the ongoing financial crisis. This increase in loans to financial institutions increased the supply of money in the economy. When the supply of money increases, the money supply curve will:
A. shift to the right, increasing the interest rate.
B. shift to the right, decreasing the interest rate.
C. shift to the left, increasing the interest rate.
D. shift to the left, decreasing the interest rate.
Answer: B
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The interest rate:
A. is the price of borrowing money for a specified period of time. B. determines the total amount that must be paid back on a loan. C. is expressed as a percentage per dollar borrowed and per unit of time. D. All of these are true.
Exhibit 7-6 A firm's cost and MC curves
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In Exhibit 7-6, if this firm is currently producing 20 units of output, this firm is
A. earning a profit of $10. B. earning a profit of $.50. C. losing $10. D. losing $0.50.
How are most fundamental economic decisions now determined in China?
A) Individuals, firms, and the government interact in a market to make these economic decisions. B) These decisions are made by the country's elders who have had much experience in answering these questions. C) The government decides because China is a centrally planned economy. D) The United Nations decides because China is a developing economy.
Answer the following statements true (T) or false (F)
1. The quantity supplied is inversely related to price. 2. If demand and supply increase by the same amount, equilibrium price will rise. 3. If supply increases more than demand, equilibrium price will fall. 4. A change in demand occurs whenever consumers will purchase more because of a decrease in price. 5. An increase in demand tends to increase both the equilibrium price and the amount of a commodity exchanged.