The real-balances effect indicates that:
A. an increase in the price level will increase the demand for money, increase interest rates,
and reduce consumption and investment spending.
B. a lower price level will decrease the real value of many financial assets and therefore
reduce spending.
C. a higher price level will increase the real value of many financial assets and therefore
increase spending.
D. a higher price level will decrease the real value of many financial assets and therefore
reduce spending.
D. a higher price level will decrease the real value of many financial assets and therefore
reduce spending.
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If the interest rate on the loanable funds market is above its equilibrium level,
a. the equilibrium rate will rise b. people will want to borrow more funds than are available c. the supply curve of loanable funds will shift to the left d. there is an excess supply of loanable funds e. this is an excess demand for loanable funds
A bond promises to pay $500 in one year and $10,500 in two years. What is the correct way to find the present value of this bond?
a. $500(1 + r) + $10,500/(1 + r)2 b. $500/(1 + r) + $10,500/(1 + r)2 c. $11,000/(1 + r)2 d. $500(1 + r) + $10,500(1 + r)2