How does an increase in the price level lead to a higher interest rate?
What will be an ideal response?
An increase in the price level reduces the supply of real balances, shifting the supply curve to the left. As a result, the quantity demanded for real money balances exceeds the quantity supplied. Households and firms will attempt to restore their desired holdings of real balances by selling short-term assets, such as Treasury bills. This increased supply of Treasury bills will drive down their prices and increase interest rates on those bills.
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Perfect competition is characterized by numerous firms
a. True b. False Indicate whether the statement is true or false
In a duopoly situation, the logic of self-interest results in a total output level that
a. equals the output level that would prevail in a competitive market. b. equals the output level that would prevail in a monopoly. c. exceeds the monopoly level of output, but falls short of the competitive level of output. d. falls short of the monopoly level of output.