Table 24.5.1 -Refer to Table 24.5.1. the Spreadsheet Provides Information About the Provides

question 13

Multiple Choice

Table 24.5.1

-Refer to Table 24.5.1. The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two different levels of real GDP: Y0 is $10 billion and Y1 is $20 billion.
The quantity of money is $3 billion. Real GDP is $20 billion.
If the interest rate is greater than 4 percent a year,

• A)people buy bonds, the price of a bond rises, and the interest rate rises.
• B)people buy bonds, the price of a bond rises, and the interest rate falls.
• C)people sell bonds, the price of a bond falls, and the interest rate rises.
• D)people sell bonds, the price of a bond falls, and the interest rate falls.
• E)the demand for money decreases.

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Definitions:

Aggregate Demand

The sum of all requests for products and services in an economic system, marked by a certain price level during a defined period.

Price Level

A calculation of the current average prices for a comprehensive range of goods and services in the economy, usually tracked through a price index.

Real Output

The quantity of goods and services produced in an economy, adjusted for inflation, reflecting the actual productivity.

Expected Inflation Rate

The anticipated rate at which the general level of prices for goods and services will rise over a period.