Which of the following statements is correct?
a. Both liquidity preference theory and classical theory assume the interest rate adjusts to bring the money market into equilibrium.
b. Both liquidity preference theory and classical theory assume the price level adjusts to bring the money market into equilibrium.
c. Liquidity preference theory assumes the interest rate adjusts to bring the money market into equilibrium; classical theory assumes the price level adjusts to bring the money market into equilibrium.
d. Liquidity preference theory assumes the price level adjusts to bring the money market into equilibrium; classical theory assumes the interest rate adjusts to bring the money market into equilibrium.
c
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In the current year, the CPI is 122 and during the previous year the CPI was 115. The inflation rate between these years is
A) -5.7 percent. B) -6.1 percent. C) 6.1 percent. D) 5.7 percent. E) 1.61 percent.
The risk that a borrower has a greater understanding about their potential future behavior than a potential lender is known as ________
A) the problem of adverse selection B) the problem of moral hazard C) ornamental torsion D) the asymmetric innovation problem
The price of good B has a pattern such that P = $20 on Monday through Thursday of every week, and P = $25 on Fridays. If speculators begin participating in the market for good B, their actions will likely lead to a(n) ______________ in the price of good B on Monday through Thursday and a(n) _______________ in the price of good B on Friday
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
A positive temporary supply side shock will:
A. increase the level of potential output in the long run. B. decrease the price level in the long run. C. increase the price level in the long run. D. have no effect in the long run.