The direct effect of an increase in the money supply is to
A. decrease aggregate demand as people anticipate future economic problems.
B. increase interest rates as people anticipate higher inflation in the future.
C. increase aggregate demand as people try to spend their excess money balances.
D. raise interest rates as people increase their saving.
Answer: C
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The United States chooses to have ________ and ________ and therefore, cannot have a fixed exchange rate at the same time
A) capital control; an independent monetary policy B) free capital mobility; an independent monetary policy C) free capital mobility; no control of monetary policy D) capital control; no control of monetary policy
Which of the following is an assumption made while constructing a production possibilities frontier [PPF]?
a. Dynamic technological know-how b. Flexible resource quality c. Fixed resource quantity d. Full and efficient use of resources e. Flexible money supply
Which of the following is a tool of monetary policy?
A. Buying and selling government bonds B. Making loans to banks C. Setting reserve requirements D. All of the above are tools of monetary policy.
According to the rational expectations theory
A. anticipation of inflation can cause deflation. B. anticipation of inflation actually causes inflation. C. inflation rates are unrelated to unemployment rates. D. the economic understanding of workers and managers is incomplete, making it unlikely that their inflationary expectations will influence the economy.