The interest rate effect suggests that
A. an increase in the price level will, reduce interest rates, and therefore reduce consumption and investment spending.
B. an increase in the price level will, increase interest rates, and therefore reduce consumption and investment spending.
C. nominal interest rates do not accurately measure the yield on loans unless adjusted by use of a price index.
D. a decrease in the real interest rate will stimulate consumption and investment spending and therefore inflate the price level.
B. an increase in the price level will, increase interest rates, and therefore reduce consumption and investment spending.
You might also like to view...
Which of the following goods would have the smallest elasticity of demand?
A) Exxon brand premium unleaded gasoline B) insulin sold to diabetics C) an education at Harvard Law School sold to recent college graduates D) a bottle of Bayer Aspirin sold to someone without a headache
Suppose we were analyzing the pound per Swiss franc foreign exchange market. If Switzerland's tax level rises relative to England and nothing else changes, then the:
a. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market rises, causing an uncertain change in the value of the Swiss franc. b. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc. c. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc. d. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate. e. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc.
Suppose an economist tests the theory that when the price of leather increases, fewer pairs of shoes are produced. He observes more shoes being produced when the price of leather increases. At the same time, a new production technology allowed for more shoes to be produced in less time. He has
A. confused association and causation. B. misunderstood the Ceteris paribus assumption. C. used normative economics to answer a positive question. D. built an untestable model.
If the annual interest rate is 5% (.05), the price of a one-year Treasury bill per $100 of face value would be:
A. $95.00 B. $96.10 C. $95.24 D. $97.50