Which of the following is not a necessary condition for a flat BP curve?
A) perfect capital mobility
B) perfect asset substitutability
C) fixed exchange rates
D) floating exchanges rates
E) Both C and D
E
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Suppose the Fed conducts an open market operation in which it buys government securities from a commercial bank. Why is there a multiplier effect on the quantity of money?
What will be an ideal response?
You notice that the price of butter rises and then falls. The best explanation for this is that:
A. demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down. B. demand for butter decreased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down. C. demand for butter increased causing price to rise, which induced other firms to exit the market causing supply to decrease, which caused the price to go back down. D. demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to decrease, which caused the price to go back down.