The liquidity premium theory holds that investors
A) always choose the bond with the highest expected return, regardless of maturity.
B) require a term premium to compensate them for investing in a less preferred maturity.
C) view bonds of different maturities as perfect substitutes.
D) view bonds of different maturities as completely unsubstitutable.
B
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Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP. Explain what happens to aggregate demand, real GDP, and the price level
What will be an ideal response?
In the 1850s, the growth rate of real wages in U.S. manufacturing slowed to nearly zero because
a. the demand for manufacturing labor and the supply of manufacturing labor increased by approximately the same amount during this period. b. the demand for manufacturing labor and the supply of manufacturing labor decreased by approximately the same amount during this period. c. the demand for manufacturing labor increased more rapidly than the supply of manufacturing labor during this period. d. the demand for manufacturing labor increased while the supply of manufacturing labor decreased during this period.
The equation of exchange is M × Y = P × V
a. True b. False Indicate whether the statement is true or false
Which of the following is an example of U.S. foreign direct investment?
a. A Swedish car manufacturer opens a plant in Tennessee. b. A Dutch citizen buys shares of stock in a U.S. company. c. A U.S. based restaurant chain opens new restaurants in India. d. A U.S. citizen buys stock in companies located in Japan.