What is the short-run and long-run effect on the nominal interest rate from an increase in the growth rate of the quantity of money?
What will be an ideal response?
In the short run, the increase in the growth rate of the quantity of money lowers the nominal interest rate. However in the long run the increase in the growth rate of the quantity of money creates higher inflation and the higher inflation leads to a rise in the nominal interest rate.
You might also like to view...
If the production possibilities curve is a straight line,
A. opportunity costs rise as output of either commodity is expanded. B. resources are not equally productive in the production of both goods. C. opportunity costs are negative. D. resources can be moved from the production of one good to production of others with no loss of productivity.
For the first time since the Civil War (1861–65), laborers were forced into active military service during World War I (1914–18)
Indicate whether the statement is true or false
A bond that never matures is known as a
a. perpetuity. b. an intermediary bond. c. an indexed bond. d. a junk bond.
Refer to the above table. Suppose the price of a hamburger is $2, the price of a movie is $5, and the income of the consumer is $29. How many hamburgers and movies will this consumer buy to be at an optimum?
A. 2 hamburgers and 5 movies B. 1 hamburger and 5 movies C. 6 hamburgers and 3 movies D. 4 hamburgers and 4 movies