The theory of liquidity preference illustrates the principle that
a. monetary policy can be described either in terms of the money supply or in terms of the interest rate.
b. monetary policy can be described either in terms of the exchange rate or the interest rate.
c. monetary policy must be described in terms of the money supply.
d. monetary policy must be described in terms of the interest rate.
a
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Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Which of the following gives the market-clearing curve for cereal?
A. Pc = 100 - (Pm/10) B. Pc = 8 - (Pm/10) C. Pc = 10 - (Pm/10) D. Pc = 10 + (Pm/10)
Which of the following actions by the Fed would increase the money supply?
a. Reducing the required reserve ratio. b. None of the answers are correct. c. Selling government bonds in the open market. d. Increasing the discount rate.
According to most economists, the development of markets is:
A. both a necessary and a sufficient condition for development. B. a sufficient condition for development but not a necessary condition. C. a necessary condition for development but not a sufficient condition. D. neither a necessary nor a sufficient condition for development.
A positive demand shock increases consumer and investment spending and tends to decrease the budget deficit.
Answer the following statement true (T) or false (F)