In September of 2007, the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year. Explain how lower interest rates affect the aggregate demand curve
What will be an ideal response?
Reducing the interest rate lowers the cost of borrowing to firms and to households. As a result, both firms and households will increase expenditures. This increase in expenditures will shift the aggregate demand curve to the right.
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If the expected gains on stocks rise, while the expected returns on bonds do not change, then
A) the demand curve for bonds will shift to the right. B) the supply curve for loanable funds will shift to the right. C) the equilibrium interest rate will fall. D) the equilibrium interest rate will rise.
Voice-Beat is an earphone manufacturing firm. Suppose 900 units of earphones are demanded when the price of each unit is equal to $40 . When the price is $42 per unit, 837 units of earphones are demanded. On the basis of the given data, we can say that the price elasticity of demand of Voice-Beat earphones is: a. inelastic
b. elastic. c. perfectly inelastic. d. perfectly elastic.
In communities where more people carry property insurance you would expect people to be:
A. less careful about securing their possessions. B. more careful about securing their possessions. C. less likely to engage in behaviors that would be classified as moral hazard. D. paying less for property insurance relative to communities where fewer people carry property insurance.
According to estimates by Richard Vedder, rates of exploitation for slaves:
a. are similar to those of antebellum manufacturing workers. b. indicate that slaves received nearly the full marginal value product of their labor. c. equaled 50-65 percent of their value marginal product. d. cannot be determined due to inadequate data on maintenance costs of adult slaves.