When the Federal Reserve decreases the money supply, at the previous equilibrium interest rate households and firms will now want to
A) buy Treasury bills.
B) sell Treasury bills.
C) neither buy nor sell Treasury bills.
D) hold less money.
Answer: B
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An increase in Treasury deposits at the Fed causes
A) the monetary base to increase. B) the monetary base to decrease. C) Fed assets to increase but has no effect on the monetary base. D) Fed assets to decrease but has no effect on the monetary base.
What limited the effectiveness of monetary policy during the Financial Crisis of 2007-2009?
What will be an ideal response?
The costs associated with the user cost of capital include all of the following except
A) the real price of the capital good. B) the expected change in the marginal cost of capital based on expectations of the future. C) the real interest cost of borrowing to finance the purchase of the capital good. D) the depreciation costs associated with actually using the capital good.
According to critics of new Keynesian economics, it is doubtful that
a. menu costs are very important in the real world. b. efficiency wage considerations play an important role in the real world. c. bargaining models are of significance in the real world. d. All of the above e. None of the above