In the case where money demand is completely interest insensitive (interest elasticity equals zero), an increase in the quantity of money will
a. increase income but leave the interest rate unchanged.
b. increase income and lower the interest rate.
c. lower the interest rate but leave income unchanged.
d. leave both income and the interest rate unchanged.
B
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A system in which depository institutions hold reserves that are less than the amount of total deposits is called
A) central banking system. B) required reserve banking. C) fiat money banking. D) fractional reserve banking.
When the price level falls from 135 to 120, the aggregate level of GDP supplied falls from $140 billion to $125 billion. This ________ relationship represents the ________ relationship between GDP and the price level
A) positive; long-run B) negative; short-run C) negative; long-run D) positive; short-run
The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,
a. the average is increasing. b. the average is decreasing. c. the marginal is increasing. d. the marginal is decreasing. e. the total is decreasing.
If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market
a. True b. False Indicate whether the statement is true or false