A bond’s price is sensitive to changes in
A. the interest rate.
B. the accepted rate of return on investment.
C. investor confidence in the stability and credit worthiness of the firm.
D. All of these responses are correct.
Answer: D
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An increase in the money supply in the Friedman-Lucas money surprise model
A) reduces aggregate output, raises the price level, and reduces the real interest rate. B) increases aggregate output, reduces the price level, and reduces the real interest rate. C) increases aggregate output, raises the price level, and reduces the real interest rate. D) reduces aggregate output, raises the price level, and raises the real interest rate.
According to the classical model
A) long-term unemployment is unavoidable. B) unemployment is a temporary phenomenon. C) unemployment only exists during periods of war. D) the natural rate of unemployment is zero.