Which of the following might break the link in the Keynesian transmission mechanism between the expansionary monetary policy and the goods-and-services market?
A) a downward-sloping investment demand curve
B) a vertical money supply curve
C) a belief on the part of individuals that bond prices are extraordinarily low
D) all of the above
E) none of the above
E
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The quantity of real balances demanded varies ____ with the nominal rate of interest because ________.
A) directly; at higher interest rates people want more money B) inversely; at lower interest rates people want less money C) inversely; when people hold more money, they forego interest on other assets D) directly; real balances are independent of inflation and would not be affected by it
The Lucas Wedge is estimated to
A) total over $406,000 per person as a result of the slowdown in the growth rate of real GDP. B) be positive in some years and negative in others. C) be about 2 percent of real GDP per year. D) be negative due to the severe recession in 2008-2009. E) have reached about $13,000 per person in the last year.