Question Details

Lower inflation means lower interest rates because 



1. "In his eyes the battle is between the rate-lowering effect of the recession and the high rate of inflation. That sums up the problem now facing the interest rate forecasters." A recession tends to lower the interest rate because 
a) the Fed may lower interest rates to fight the recession 
b) the government may increase spending to fight the recession 
c) income falls in a recession causing the demand for money to fall 
d) both a) and c) above 
2. "In one camp are those who think interest rates will either stabilize or move up because the economic outlook is improving and will rebound from the paltry 0.7 percent real growth in the gross domestic product in the first quarter. Moreover, they argue, growth in money supply has been way above the Fed's target." Interest rates are expected to rise for all of the following reasons except 
a) inflation expectations should increase b) the demand for money should increase 
c) the Fed should tighten monetary policy 
d) bond prices should rise as the economy recovers 
3. "In economic theory, money is a commodity that responds to the law of supply and demand. When the supply of money rises, the price - the interest rate - should drop. But the market for money is perverse. When lenders see the money supply increasing, they think ......" Complete this clipping. 
a) inflation will increase b) the real interest rate will increase 
c) the nominal interest rate will fall d) demand for money must have increased 
4. "The past few years have been, in effect, a crash course in basic economics for investors and others with a hand in the game. They're much harder to fool now with actions that seem to improve the situation in the short run but make it worse in the long run." An example of a policy action that improves the situation in the short run but makes it worse in the long run is 
a) a supply-side policy which lowers the price level in the short run but increases it in the long run 
b) a decrease in taxes which increases disposable income in the short run but decreases it in the long run 
c) an increase in the money growth rate which lowers the interest rate in the short run but raises it in the long run 
d) an increase in government spending which lowers unemployment in the short run but increases it in the long run 
5. "The principal power of the central bank to lower interest rates lies in its ability to contribute to a lower rate of inflation and that takes time." Lower inflation means lower interest rates because 
a) money supply is higher b) money demand is lower 
c) expected inflation is lower d) investment demand is lower



Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help