Stocks are
A. promises to repay loans.
B. a liability of a corporation.
C. a liability of a proprietorship.
D. shares of ownership in a corporation.
Answer: D
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If real GDP exceeds potential GDP, to move the economy to potential GDP the Fed
A) raises the federal funds rate to increase potential GDP but not real GDP. B) lowers the federal funds rate to decrease real GDP but not potential GDP. C) raises the federal funds rate to decrease real GDP but not potential GDP. D) lowers the federal funds rate to increase potential GDP but not real GDP. E) raises the federal funds rate to decrease both real GDP and potential GDP.
A study has estimated the effect of changes in interest rates and consumer confidence on the demand for money to be: ln M = 14.666 + .021 ln C ? 0.036 ln r, where M denotes real money balances, C is an index of consumer confidence, and r is the interest rate paid on bank deposits. Based on this study, a 5 percent increase in interest rates will cause the demand for money to:
A. increase by 1.8 percent. B. increase by 0.18 percent. C. drop by 0.18 percent. D. drop by 1.8 percent.