Refer to the given figure where the nominal interest rate equals 6 percent and the money supply equals 600.
If the Federal Reserve wants to set the nominal interest rate at 4 percent, it must conduct open market ________ to set the money supply at ________.
A. purchases; 800
B. purchases; 200
C. sales; 200
D. sales; 800
Answer: A
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A) credit risk. B) interest-rate risk. C) currency risk. D) security risk.
An economic model is useful only if it:
a. contains no positive statements. b. captures all the complexities of reality. c. yields accurate predictions. d. has both macro- and microeconomic applications.
The prisoners' dilemma is used to illustrate the basic idea that
a. oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement. b. oligopolistic firms are always worse off when they collude. c. oligopolistic firms never have an incentive to cheat on collusive agreements, unlike prisoners. d. students who cheat on economics exams end up in jail.
When considering the change to the money demand curve, if the interest rate rises, the quantity demanded is:
A. lower, moving rightward along the money demand curve. B. lower, moving leftward along the money demand curve. C. higher, moving leftward along the money demand curve. D. higher, moving rightward along the money demand curve.