What impact does the Fed's raising the interest rate have on the money supply and on the price level?
A) An increase in interest rates raises the money supply and eventually reduces prices.
B) An increase in interest rates lowers the money supply and raises the money demand, which will neutralize price increases.
C) An increase in interest rates will increase investment spending and GDP, which will lower prices.
D) An increase in interest rates reduces the money demand which will slow the growth in prices.
D
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If the nominal interest rate is 4 percent and the inflation rate is 1 percent, then the real rate of interest is
A) 1 percent. B) 3 percent. C) 4 percent. D) 5 percent.
Which of the following will shift the aggregate demand curve to the left?
A. The government increases spending on education. B. Income taxes are lowered. C. Foreign economies fall into recession, reducing their demand for domestic exports. D. Consumers become optimistic about the future.
On the island of Yap, 5 canoes have a value of one stone wheel known as a fei. What function of money do fei serve in this example?
A. store of value B. medium of exchange C. medium of deferred payment D. unit of account
Which of the following statements is true?
A) The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices. B) The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices. C) Because the demand curve for a monopolistically competitive firm is downward-sloping its marginal revenue will be negative. D) The marginal revenue of a monopolistically competitive firm will be always be positive.