If increased supply leads to lower prices, why is rapid growth of the money supply usually accompanied by high interest rates?
What will be an ideal response?
The key issue is that rapid growth of the money supply usually creates inflation, and banks raise nominal interest rates to compensate. Real interest rates may remain low or be even negative at times.
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In the long run, ________ differences in economic growth rates result in ________ differences in GDP per capita
A) small; no B) small; large C) large; no D) large; small
According to the simple circular flow concept, whenever planned investment is less than planned saving
a. total output and/or prices rise. b. total output and/or prices fall. c. prices fall and total output rises. d. prices rise and total output falls.
The GDP chain price index is designed to adjust nominal GDP for changes in:
a. the level of transfer payments. b. the quality of goods over time. c. the costs of economic bads such as pollution and crime. d. the general level of prices over time.
After the Federal Reserve increases reserves in the banking system, banks create new deposits through multiple rounds of lending and accepting deposits until the:
A. actual reserve-deposit ratio is equal to the desired reserve-deposit ratio. B. actual reserve-deposit ratio is greater than the desired reserve-deposit ratio. C. deposit insurance limit is reached. D. Federal Reserve requires them to stop.