In the short run, how is the nominal interest rate determined? If the nominal interest rate is less than the equilibrium nominal interest rate, what occurs?
What will be an ideal response?
The nominal interest rate is determined in the money market by the interaction of the demand for money and the supply of money. If the nominal interest rate is less than the equilibrium, there is an excess demand for money. In order to increase the quantity of money they hold, people sell bonds and other financial assets. As a result, the price of financial assets falls and the interest rate rises. People continue to sell assets and the interest rate continues to rise until it reaches its equilibrium.
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The "free rider problem" occurs in connection with
a. private goods. b. both public and private goods. c. goods that are not scarce. d. public goods.
Which of the following is an example of capital?
A) a gravel truck B) a savings account C) a share of General Motors stock D) a lake
The problem faced by farms in the long run as portrayed in the diagram would involve price and quantity changes from:
A. P 2 to P 3 and Q 1 to Q 4 .
B. P 1 to P 4 and Q 1 to Q 4 .
C. P 2 to P 1 and Q 1 to Q 2 .
D. P 4 to P 1 and Q 4 to Q 1 .
The unregulated, single-price monopoly shown in the figure above will produce where its demand
A) equals its MC curve. B) equals its ATC curve. C) is inelastic. D) is elastic.