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An increase in the money supply decreases the interest rate in the short run.
An increase in the money supply decreases the interest rate in the short run.
- False
- True (correct)
- It depends on the level of government debt
- It depends on the type of monetary policy
An increase in interest rates implies a higher opportunity cost of holding money.
An increase in interest rates implies a higher opportunity cost of holding money.
- It depends on the level of inflation
- False
- It depends on the level of government spending
- True (correct)
If the Fed buys bonds in the open market, the money supply decreases.
If the Fed buys bonds in the open market, the money supply decreases.
- It depends on the level of government intervention
- False (correct)
- True
- It depends on the level of consumer spending
The money multiplier equals 1/(1 - R), where R represents the reserve ratio.
The money multiplier equals 1/(1 - R), where R represents the reserve ratio.
Monetary policy becomes ineffective as interest rate reaches zero.
Monetary policy becomes ineffective as interest rate reaches zero.
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