Periods of price deflation, such as the Great Depression, are characterized by
A) low nominal rates but high real rates of interest.
B) low nominal and real interest rates.
C) real rates of interest lower than the nominal rate of interest.
D) high nominal and real rates of interest.
A
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What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?
What will be an ideal response?
Which of the following is a key criticism of the market economy as a system of allocation?
a. Goods and services are allocated unequally based on ability to pay. b. Producers have strong incentives to innovate because successful innovators are rewarded with higher profit. c. Consumers can transmit their preference for product quality and variety by way of their "dollar votes" cast in the marketplace. Since price is freely set based on supply and demand, there are few shortages or surpluses. d. None of the above.
Price levels rarely remain the same. This implies that
a. money is an excellent medium of exchange. b. money is divisible. c. money is a good medium for measuring value. d. money is an imperfect medium for storing value.
If the Fed decreases the discount rate, what happens to reserves and the money supply?
a. Reserves increase and the money supply decreases. b. Both increase. c. Reserves decrease and the money supply increases. d. Both decrease.