The dependent variable (vertical axis) in standard graphical treatments of the money market is:
a. the exchange rate.
b. the real rate of interest.
c. real GDP.
d. the nominal rate of interest.
Ans: d. the nominal rate of interest.
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The economic way of thinking assumes
A) people act selfishly. B) people act altruistically. C) people act to promote the projects in which they are interested. D) people do not act at all; they merely react to the environment around them.
Suppose that Google announces that its profits for the third quarter of 2013 were $1.6 billion. As a result of this announcement the price of Google's stock declines. The best explanation of this is
A) market participants expected Google's profits to be greater than $1.6 billion for the third quarter. B) market participants expected Google's profits to be less than $1.6 billion for the third quarter. C) the stock market is not an efficient market. D) market participants have adaptive expectations.