Suppose the Current Level of Output and the Interest Rate

question 71

Multiple Choice

Suppose the current level of output and the interest rate are such that the economy is operating on neither the IS nor LM curve.Which of the following is true for this economy?

• A)production does not equal demand.
• B)the money supply does not equal money demand.
• C)the quantity supplied of bonds does not equal the quantity demanded of bonds.
• D)financial markets are not in equilibrium.
• E)all of the above

---

Definitions:

Relatively Inelastic

Describes a situation where the demand or supply for a good or service changes only slightly in response to changes in price.

Price Elastic

Refers to a situation where the demand or supply for a product or service significantly changes in response to its price change.

Soft Drinks

Non-alcoholic beverages that are usually carbonated and contain various flavorings and sweeteners.

Price Elasticity

A measure of the responsiveness of the quantity demanded or supplied of a good or service to a change in its price.