Suppose That the Equilibrium Nominal Interest Rate Is 4 Percent

question 18

Multiple Choice

Suppose that the equilibrium nominal interest rate is 4 percent and the equilibrium quantity of money is $1 trillion. At any interest rate above 4 percent,

• A)more than $1 trillion will be supplied and the interest rate will rise.
• B)less than $1 trillion will be demanded and bond prices will fall.
• C)more than $1 trillion will be supplied and bond prices will fall.
• D)there is a shortage of money and the interest rate will rise.
• E)less than $1 trillion will be demanded and bond prices will increase.

Identify the subject matter specialization within economics, e.g., microeconomics and macroeconomics.

Describe the roles and duties of various economic advisory bodies and government offices in formulating economic policies.

Analyze the shifts and movements on the production possibilities frontier and interpret their implications.

Understand how technological advancements affect the economy's production possibilities.

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Definitions:

Gram

A unit of measurement for mass that is exactly one thousandth part of a kilogram.

Basic Unit

The fundamental, smallest, or simplest quantity or component in a system or set of measurements often used as a standard of measurement.

Metric System

A measurement system that uses the meter for length, liter for volume, and gram for weight or mass, all based on decimal calculations.

Ml

Milliliter, a unit of volume in the metric system equal to one thousandth of a liter.