Assume that the Fed is targeting interest rates. If a desirable new type of bank deposit increases the demand for money at a given level of income and the rate of interest, then
a. shocks to money demand will affect income.
b. a negative shock to money demand will not affect income.
c. inflation will decrease as the money supply decreases.
d. both a and c.
e. None of the above
B
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In the long run, the nominal interest rate is
A) negatively related to the inflation rate. B) positively related to the inflation rate. C) negatively related to the price level. D) positively related to the price level. E) not related to the price level or the inflation rate.
The U.S. current account equals
A) U.S. exports - U.S. imports - net income from foreign investments + net transfers from abroad. B) U.S. exports - U.S. imports + net income from foreign investments + net transfers from abroad. C) U.S. exports + U.S. imports + net income from foreign investments + net transfers from abroad. D) U.S. imports - U.S. exports + net income from foreign investments + net transfers from abroad.