When the Fed decreases the money supply, interest rates
A. rise, causing velocity to fall.
B. fall, causing velocity to fall.
C. rise, causing velocity to rise.
D. fall, causing velocity to rise.
Answer: C
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During one winter quarter at Frozen U., snow falls every Friday night. Students assume that, on their campus, Fridays cause snow. This hypothesis
a. should more properly be considered a theory. b. assumes that correlation implies causation. c. assumes that causation implies correlation. d. reflects the fallacy of composition.
"Crowding-out" refers to the process by which
a. high consumption leads to low saving and investment. b. the Fed prevents "runs" on banks. c. Fed sales of bonds reduce the ability of corporations to buy bonds. d. increased government spending raises interest rates, thus lowering investment spending.
Suppose the U.S. government banned the sale and production of cigarettes. Which of the following would be most likely to occur?
a. No one would smoke anymore. b. The amount of violence involved in the buying and selling of cigarettes would increase. c. The price of cigarettes would decrease. d. The supply for cigarettes would become elastic.