Assume that the one-year interest rate is on the vertical axis of the IS-LM model and that the yield curve is initially upward sloping. Suppose that financial market participants expect that the central bank will pursue a monetary contraction in the future. Given this information, we would expect which of the following to occur?
A) The yield curve will become steeper.
B) The yield curve will become flatter.
C) The yield curve will become horizontal.
D) The yield curve will become downward sloping.
A
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Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?
What will be an ideal response?
Seignorage is also known as an inflation tax since ________
A) money balances lose value in real terms B) inflation can be caused by rising energy costs C) higher interest rates can crowd-out investment spending D) budget deficits entail an increase in the size of the national debt
Collusion can earn higher prices and higher profits under the Bertrand model, but why is this an unlikely outcome in practice?
A) Firms prefer to remain independent of other firms so that their pricing plans can be more flexible over time. B) The collusive firms have an incentive to gain market share at the expense of the other firms by cutting prices. C) The federal antitrust authorities have an easier time catching firms that collude on price rather than quantity. D) none of the above
Refer to the above figures. A tariff is placed on a foreign good. Which figure represents the situation in the domestic market for the foreign good?
A) Panel A B) Panel B C) Panel C D) Panel D