The velocity of circulation is defined as the
A) average number of times in a year that each dollar is used to buy goods and services.
B) price level obtained when the money market is at its equilibrium.
C) quantity of money demanded at equilibrium.
D) speed with which changes in the interest rate spread throughout the economy.
E) quantity of money supplied by the Fed.
A
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When the Fed lowers the federal funds rate and the real interest rate falls, what happens to the opportunity cost of investment? What happens to investment?
What will be an ideal response?
If tax reduction and simplification are effective, then
A) real wages will rise as labor supply and demand increase. B) economic efficiency will increase. C) interest rates will rise in financial markets and demand for financial assets falls. D) fewer new firms will be established, since existing firms will make more profit.