If money demand is extremely sensitive to changes in the interest rate, the money demand curve becomes almost horizontal. If the Fed expands the money supply under these circumstances, then the interest rate will
A) change very little and investment and consumer spending will change very little.
B) rise substantially and investment and consumer spending will rise substantially.
C) fall substantially and investment and consumer spending will fall substantially.
D) fall substantially and investment and consumer spending will change very little.
A
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In the figure above, suppose that $20 is the market equilibrium price. What is the amount of the consumer surplus?
A) $3,375 B) $3,000 C) $375 D) 150 units E) $1,500
In real business cycle models and new classical models
a. monetary factors are responsible for fluctuations in output and employment. b. changes in unemployment are involuntary. c. markets always clear. d. prices and wages are perfectly flexible. e. none of the above.