Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of the used bikes are lemons (low quality), how much will they be willing to pay for a used bike?

Cut on tax & debt

What will be an ideal response?

If the Fed wants to raise the interest rate, in the short run in the money market the Fed

A) increases the quantity of money. B) shifts the demand for money curve leftward. C) shifts the demand for money curve rightward. D) decreases the quantity of money. E) directly raises the interest rate and does nothing to either the supply of money or the demand for money.