In the Classical view, rising interest rates reduce
A) government spending.
B) saving.
C) velocity.
D) investment.
D
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How does the study of microeconomics differ from that of macroeconomics? Give one example each of an issue studied in microeconomics and in macroeconomics
What will be an ideal response?
Which of the following is NOT an example of a supply shock?
A) a drought in the Midwest B) a decline in natural gas prices following discovery of new fields C) the introduction of a new line of computer-controlled machine tools in manufacturing D) a substantial increase in federal government spending on Medicare
Persuasive advertising is used to
A) induce a consumer to try a product and discover a previously unknown taste for it. B) promote only used goods. C) sell to an established clientele. D) cut costs.
What are the consequences for a nation that keeps its exchange rate fixed, holds its own domestic interest rates below market to encourage domestic spending, and allows free foreign investment?
a. Foreign investors will not invest, so the only consequence will be a decline in the inflow of foreign investment. b. Domestic and foreign investors will invest in other nations, causing a sell-off of the domestic currency and, to maintain fixed rates, the central bank will have to buy its own currency, depleting its treasury reserves. c. There will be upward pressure on the rate of interest as more borrowing occurs, so the central bank will have to increase the stock of money. d. Interest rates in other nations will also fall as banks and other firms have to compete for international borrowers.