Give three examples of ways in which financial markets channel household savings into investment projects
What will be an ideal response?
(1.) Banks make loans to businesses using funds saved by households.
(2.) A corporation uses its retained earnings to purchase new equipment.
(3.) A new firm issues stock to get funds to set up its business.
(4.) Venture capital
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Under the gold standard, all except one of the following are true. Which is not true?
a. Paper currency was convertible into gold at a fixed rate. b. A balance-of-payments deficit would result in a loss of gold. c. A balance-of-payments surplus would result in an inflow in gold. d. The money supply of any country was largely determined by flows of gold. e. A surplus country experienced a rise in its money supply and a drop in its price level.
Which of the following is true in the long run? a. The aggregate demand curve determines the level of potential output
b. The long-run aggregate supply curve is horizontal. c. The actual price level and the expected price level are equal. d. Cyclical unemployment is between 5 percent and 6 percent. e. The price level is determined entirely by the long-run aggregate supply curve.