In the interest-rate-based transmission mechanism, a decrease in the money supply will
A) reduce investment, shift the aggregate demand function inward, and lower real Gross Domestic Product (GDP).
B) reduce the rate of interest and the level of investment.
C) increase the price level.
D) shift the aggregate supply function inward and increase real Gross Domestic Product (GDP).
A
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The volatility of stock prices, particularly in the short-run, may, according to Professor S. Grossman, be due to
a. large numbers of stockholders fearful of losing wealth who sell at some predetermined level. b. some traders being better informed than others about real financial conditions. c. either or both of the above. d. the increasing use of stock options as compensation for corporate executives.
At the current level of output, a firm's marginal cost equals 16 and marginal revenue equals 10. The firm
A) is producing the profit-maximizing amount. B) should produce more. C) should produce less. D) Not enough information.
The rise in equilibrium GDP shifts the money demand curve to the left
a. True b. False
Which of these is a characteristic of monopolistic competition? a. There are barriers to the entry of new firms
b. There are many firms with no control over price. c. The product of each firm is a close substitute of the products produced by other firms. d. The product of each firm is unique and entirely different from the products produced by other firms.