In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?
What will be an ideal response?
The interest rate is determined in the money market by the interaction of the demand for money and the supply of money. If the interest rate is less than the equilibrium, there is an excess demand for money. In order to increase the quantity of money they hold, people sell bonds and other financial assets. As a result, the price of financial assets falls and the interest rate rises. People continue to sell assets and the interest rate continues to rise until it reaches its equilibrium.
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If the demand for a good is determined to be "unit elastic," then the elasticity measure
A) is greater than 1.0. B) is equal to 1.0. C) is less than 1.0. D) is infinite.
Refer to the table. At the $8 wage, labor cost per unit of output is:
A. $1.25.
B. $1.50.
C. $2.00.
D. $1.67.