The "direct effect" of an increase in the money supply is to
A. increase aggregate supply as producers anticipate higher future profits.
B. decrease the rate of inflation.
C. increase aggregate demand as people spend their excess money balances.
D. increase aggregate demand as interest rates fall and investment spending increases.
Answer: C
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Return to the case of Jan, the hyperbolic discounter from the previous question. Suppose she can sign a contract that requires her to give up money equivalent to a loss of X utils if she does not undertake the action. Assume she does not behave consistent with her plans without this contract. How high would the contractual value of X have to be to prevent her inconsistency?
a. C – B/2. b. B. c. C. d. B + C.
Bonds are
A) equity. B) equity and debt. C) debt. D) paid dividends.
The term federal funds market refers to the market for overnight interbank reserve loans
a. True b. False Indicate whether the statement is true or false
The main difference to an economist between "short-run" and "long-run" is that:
A. Variable costs are short-run investment decisions where as fixed costs are long-run production decisions. B. In the short-run all resources are fixed where as in the long-run all resources are variable. C. In the long-run all resources are variable where as in the short-run at least one resource is fixed. D. Fixed costs are more important then variable costs in the short-run.