In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?
What will be an ideal response?
The interest rate is determined in the money market by the interaction of the demand for money and the supply of money. If the interest rate is less than the equilibrium, there is an excess demand for money. In order to increase the quantity of money they hold, people sell bonds and other financial assets. As a result, the price of financial assets falls and the interest rate rises. People continue to sell assets and the interest rate continues to rise until it reaches its equilibrium.
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When productivity growth has been rapid and then slows, the natural rate of unemployment is likely to ________
A) decrease B) be unaffected C) increase D) vary unpredictably
Scatterbrain Samantha often forgets to lock her house. This has caused the probability of a burglary to be 30%. If her house gets broken into, she faces a property loss of $10,000, otherwise she gets to keep her $100,000 . If Samantha is offered an insurance policy for her house to protect her from loss at $3,000, what is her expected wealth?
a. $80,000 b. $87,000 c. $97,000 d. $99,000
A decrease in the quantity of available resources would be represented by:
a. a steeper PPC. b. a point inside the PPC. c. an inward shift of the PPC. d. an upward movement along the PPC. e. a downward movement along the PPC.
Refer to the figure below. In this game, how many dominant strategies does Player A have?
A. 1 B. 4 C. 0 D. 2