Suppose you purchase a new home for $150,000, making a down payment of 10% and taking out a mortgage on the balance. What is the return on your investment in your home if one year later the price of your home decreases by 20%?

Which of the following summarizes the limitations of monetary policy?

A. The Fed is most effective at influencing long-term interest rates but is unable to have a short-run impact on the economy. B. The Fed directly sets all interest rates, but no interest rate has any short-run effect on the economy. C. The Fed can directly influence many different interest rates, but it can only influence them a little bit. D. The Fed has a lot of control over just one interest rate, and interest rates influence economic activity in the short run only.

In the long run, one-time increases or decreases in the nominal money supply affect

A) real output, but not the price level. B) the price level, but not real output. C) both real output and the price level. D) neither real output nor the price level.