According to the liquidity preference theory, an increase in the overall price level of 10 percent
a. increases the equilibrium interest rate, which in turn decreases the quantity of goods and services demanded.
b. decreases the equilibrium interest rate, which in turn increases the quantity of goods and services demanded.
c. increases the quantity of money supplied by 10 percent, leaving the interest rate and the quantity of goods and services demanded unchanged.
d. decreases the quantity of money demanded by 10 percent, leaving the interest rate and the quantity of goods and services demanded unchanged.
a
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Use the following table to answer the next question. The money supply and investment are in billions.Money Supply (billions of dollars)Interest RateInvestment (billions of dollars)$507%$100606110705120804130903140 Assume that the MPC is 0.8 and the reserve requirement is 0.1. If the Federal Reserve needs to increase aggregate demand by $100 billion at each price level to move the economy back to full employment and the current interest rate is 7%, then the Federal Reserve should ________ bonds on the open market equal to ________.
A. sell, $2 billion B. sell, $4 billion C. buy, $4 billion D. buy, $2 billion
Three hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula TC = 1,000Qmill + (Qmill)2, where Qmill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula MEC = 200 + 2Qmill. Finally, annual market demand (in thousands of tons) is given by the formula Qd = 200,000 - 100P. What is the efficient quantity?
A. 34,286 B. 131,429 C. 1,200 D. 90,000
There is a bias in the political process against free trade because
A) those who lose from free trade are better organized than those who gain. B) the gains from free trade cannot be measured. C) those who gain from free trade can't compensate those who lose. D) foreign governments make large donations to U.S. political campaigns. E) there is a high correlation between the volume of imports and the unemployment rate.
The slope of the IS curve will be steeper the __________ is the sensitivity of investment to a unit change in the interest rate and the __________ is marginal propensity to save
A) greater; larger B) greater; smaller C) less; larger D) less; smaller