The money market clears as people with excess real balances:
a. buy bonds and drive down nominal rates of interest until the demand for real balances equals supply.
b. sell bonds and drive up nominal rates of interest until the demand for real balances equals supply.
c. increase spending, driving up nominal GDP and raising nominal rates of interest.
d. sell financial assets such as stocks to increase the total supply of real balances.
Ans: a. buy bonds and drive down nominal rates of interest until the demand for real balances equals supply.
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In many cities in the United States, a single firm provides electricity. Those firms are:
A. oligopolists. B. monopolists. C. monopolistic competitors. D. perfect competitors.
Describe and explain the relationship between the price of bonds and the interest rate
What will be an ideal response?
Monetarists believe that changes in the money stock
a. have an immediate effect on the level of income. b. will always have a persistent impact on output for more than two years. c. do not affect the level of income to any great extent. d. have a persistent impact on output for as long as it takes the expected price level to adjust to the actual price level. e. both b and d.
The individual pictured in Figure 5.2
A) must be risk-averse. B) must be risk-neutral. C) must be risk-loving. D) could be risk-averse, risk-neutral, or risk-loving. E) could be risk-averse or risk-loving, but not risk-neutral.