What is the effect of the interaction of buyers and sellers on a market?
(A) Association of both supply and demand with income.
(B) Agreement on the price and the quantity traded.
(C) Theoretical relationship between price and use.
(D) Desire for goods that cannot actually be afforded.
Ans: (B) Agreement on the price and the quantity traded.
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Which is larger: the present value of $1 two years from now or the present value of $1 one year from now? Explain
What will be an ideal response?
The figure above illustrates the effect of an increased rate of money supply growth at time period T0. From the figure, one can conclude that the
A) liquidity effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation. B) liquidity effect is larger than the expected inflation effect and interest rates adjust quickly to changes in expected inflation. C) liquidity effect is larger than the expected inflation effect and interest rates adjust slowly to changes in expected inflation. D) liquidity effect is smaller than the expected inflation effect and interest rates adjust slowly to changes in expected inflation.