In the short run, how does the Fed change the nominal interest rate?
What will be an ideal response?
The Fed changes the nominal interest rate by changing the quantity of money. If the Fed increases the quantity of money, the supply of money curve shifts rightward and the equilibrium nominal interest rate falls. If the Fed decreases the quantity of money, the supply of money curve shifts leftward and the equilibrium nominal interest rate rises.
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In the short run, a perfectly competitive firm can make a profit, a loss, or shut down
a. True b. False Indicate whether the statement is true or false
During the 2009-2010 debate on the stimulus package, democrats argued primarily for increased government spending. What effect would this have on the value of the multiplier?
a. It would decrease the value of the multiplier. b. It would have no effect on the multiplier. c. It would increase the value of the multiplier. d. The effect is uncertain.