Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?
What will be an ideal response?
In the money market, the interaction between the supply of money and the demand for money determines the equilibrium nominal interest rate. The quantity of money available is greater than the quantity of the money demanded when the nominal interest rate is above the equilibrium interest rate. When this occurs, in an effort to decrease the amount of money to the quantity people want to hold, people buy bonds with the excess. As a result, the demand for bonds increases. The price of bonds rises and the interest rate falls. When the nominal interest rate reaches its equilibrium, there is no longer an excess supply of money because at the equilibrium nominal interest rate, the quantity of money supplied equals the quantity demanded.
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A few economies have the interesting characteristic that exports are more than 100 percent of the economy's GDP. How is this possible?
What will be an ideal response?
When selecting explanatory variables to include in a regression
A) you should pick all observable variables available. B) you should pick all observable variables that are likely to have a meaningful impact on the dependent variable. C) ignore all variables that have t-statistics less than the critical value. D) ignore variables that have an R2 less than 1.