When the Fed increases the money supply, the interest rate
a. rises
b. falls
c. remains unchanged
d. rises during recessions only, otherwise remains unchanged
e. falls during recessions only, otherwise remains unchanged
B
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According to the economic way of thinking, alcohol prohibition in the U.S
A) effectively destroyed peoples' incentives to produce and drink liquor. B) abolished the supply and demand process in liquor. C) led to a surge in prices and considerable profit opportunities for people willing to break the law. D) failed to make liquor truly illegal.
An increase in income causes the demand for inferior goods to_____________ and the price of inferior goods to ____________
a. Increase; increase b. Increase; decrease c. Decrease; increase d. Decrease, decrease
A lender of last resort is a financial institution that is willing and able to lend to: a. individuals who have other debts outstanding
b. individuals who do not have a positive net worth. c. banks that are not members of the Federal Reserve System. d. fractional reserve system banks experiencing runs on their deposits. e. Federal Reserve System member banks experiencing runs on their deposits.
If the government increases its spending, which of the following would tend to reduce the size of the multiplier?
a. higher taxes for the finance of the additional spending b. higher interest rates as the result of additional borrowing to finance the spending c. the flow of the spending into sectors where the unemployment rate is low d. all of the above