If the asset market is to remain in equilibrium, then if the money supply increases, output is unchanged, the price level is unchanged, and the expected inflation rate is unchanged, then
A. the real interest rate must decline.
B. the nominal interest rate must rise.
C. the real interest rate must rise.
D. the inflation rate must rise.
Answer: A
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Other things constant, if the Fed decreased the discount rate,
a. the earnings of the Fed would increase. b. the incentive of commercial banks to borrow from the Fed would be reduced. c. the prime interest rate would automatically decline. d. commercial banks probably would reduce their excess reserves and be more willing to extend additional loans.
If the Fed conducts open-market sales, the money supply
a. increases and aggregate demand shifts right. b. increases and aggregate demand shifts left. c. decreases and aggregate demand shifts right. d. decreases and aggregate demand shifts left.
Which of the following likely occurs when households and firms become more pessimistic?
a. increased spending, increased aggregate demand, rising real GDP, and a rising unemployment rate b. decreased spending, increased aggregate demand, rising real GDP, and a falling unemployment rate c. decreased spending, decreased aggregate demand, falling real GDP, and a rising unemployment rate d. decreased spending, decreased aggregate demand, falling real GDP, and a falling unemployment rate
Which of the following accurately contrasts AD2 and AD3?
a. AD2 shows an increase in price level; AD3 shows a decrease in price level.
b. AD2 shows a decrease in price level; AD3 shows an increase in price level.
c. AD2 shows an increase in real GDP demanded; AD3 shows a decrease in real GDP demanded.
d. AD2 shows a decrease in real GDP demanded; AD3 shows an increase in real GDP demanded.