According to liquidity preference theory, if the quantity of money demanded is greater than the quantity supplied, then the interest rate will
a. increase and the quantity of money demanded will decrease.
b. increase and the quantity of money demanded will increase.
c. decrease and the quantity of money demanded will decrease.
d. decrease and the quantity of money demanded will increase.
a
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One similarity between the policy recommendations of the new classical and monetarist models is that
a. both believe that monetary policy has much stronger employment effects than does fiscal policy. b. are policy activists. c. both believe in the natural rate of output. d. both believe that discretion is preferable to rules. e. none of the above.
If the Fed buys bonds in an open market operation, which of the following is most likely to occur?
a. the equilibrium level of GDP will decrease. b. the money supply will decrease. c. the aggregate demand curve will shift to the right. d. the interest rate will rise. e. the aggregate supply curve will shift to the left.