What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?
What will be an ideal response?
An increase in the interest rate increases the opportunity cost of holding money. There is a movement upward along the demand for money curve.
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A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
a. result in no net change in AD once people's expectations adjustments have been accounted for b. shift AD in the opposite direction intended once people's expectations adjustments have been accounted for. c. be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment. d. have to be a surprise to change real output in the intended direction.
When firms have had to defend themselves against the charge that they have adopted unjustifiably low prices either to drive a competitor out of business or to prevent the entry of a rival, they have been accused of
a. creating a trust. b. conspiracy. c. predatory pricing. d. price discrimination.
Zero lower bound refers to:
A. a bank with zero excess reserves. B. a situation where there is little to no inflation C. the rate that the Federal Reserve is currently paying on bank reserves D. a level below which the Fed cannot further reduce short-term interest rates
Over the last 100 years in the United States, unemployment reached its highest rate
A. in the 1930s. B. in the 1970s. C. in late 2010s. D. in the 1920s.