Explain how the money market determines the equilibrium interest rate
What will be an ideal response?
The demand for money curve, MD, is downward sloping because as the interest rate decreases the quantity of money demanded increases. The supply of money curve, MS, is vertical at the quantity of real money. There exists only one interest rate for which the quantity of money demanded is equal to the quantity supplied. If the interest rate is above the equilibrium interest rate, so that there is an excess supply of money, people respond by buying bonds so that the interest rate falls. Likewise, if the interest rate is less than the equilibrium interest rate, so that there is an excess demand for money, people respond by selling bonds and the interest rate rises.
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What are the factors that affect the supply curve for labor?
What will be an ideal response?
In economics, the term ________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade
A) trade-off B) collective C) cooperative D) market