Question

According to the theory of liquidity preference, the opportunity cost of holding money rises when the interest rate rises, so people desire to hold more of it.

Select one:

True

False

In the long run, changes in government spending can affect prices, output, and unemployment rates if the spending programs alter the availability of natural resources, capital equipment or technology

Select one:

True

False

According to liquidity preference theory, the money supply curve is vertical because the Fed can dictate the quantity of money supplied by engaging in the purchase and sale of government bonds.

Select one:

True

False

An increase in the interest rate induces firms to borrow less, which will result in less investment spending and a decrease in the aggregate demand for goods and services.

Select one:

True

False

A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded

Select one:

True

False

Answer 1

Q. According to the theory of liquidity preference, the opportunity cost of holding money rises when the interest rate rises, so people desire to hold more of it.

Answer- True

Q. In the long run, changes in government spending can affect prices, output, and unemployment rates if the spending programs alter the availability of natural resources, capital equipment or technology

Answer- True

Q. According to liquidity preference theory, the money supply curve is vertical because the Fed can dictate the quantity of money supplied by engaging in the purchase and sale of government bonds

Answer- True

Q. An increase in the interest rate induces firms to borrow less, which will result in less investment spending and a decrease in the aggregate demand for goods and services

Answer- True

Q. A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded

Answer- True