Suppose that in Mysore, the reserve—deposit ratio is
res = 0.5 - 2 i,
where i is the nominal interest rate. The currency—deposit ratio is 0.2 and the monetary base equals 100. The real quantity of money demanded is given by the money demand function
L(Y, i) = 0.5Y - 10i,
where Y is real output. Currently, the real interest rate is 5% and the economy expects an inflation rate of 5%. The money multiplier equals
A) 2.00.
B) 2.40.
C) 3.00.
D) 4.00.
B
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The government regulates monopolies in order to
A. Prohibit mergers or acquisitions that would lessen competition. B. Protect consumers from false advertising. C. Ensure that product quality meets minimum standards, such as testing of new drugs. D. All of the choices are correct.
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C