By Lowering Short-Term Interest Rates, a Central Bank Can Stimulate

question 39

Multiple Choice

By lowering short-term interest rates, a central bank can stimulate economic activity

• A)since it encourages more investment spending
• B)since more durable consumption goods will be bought
• C)but only in the short run
• D)but it may lead to a higher price level
• E)all of the above

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Definitions:

Article VI

A section of the United States Constitution that establishes the Constitution, federal statutes, and treaties as the supreme law of the land, overriding state laws.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource.

Average Product

Output per unit of a particular input.

Perfect Competitor

An idealized firm that has no market power and operates in a market with many buyers and sellers where all have perfect information.