Question

22) Which of the following would not increase the supply curve of loanable funds? A) A Federal Reserve purchase does of U.S. Government securities from commercial banks. B) A higher interest rate. C) An increase in the nation's real income D) All of the above shift the supply. 23) In Keynes's liquidity preference framework, A) the demand for bonds must equal the supply of money B) the demand for money must equal the supply of bonds. C) an excess demand for bonds implies an excess demand for money. D) an excess supply of bonds implies an excess demand for money 24) A rise in the price level causes the demand for money to else held constant. and the interest rate to everything B) decrease; increase D) increase; decrease A) decrease; decrease C) increase; increase 25) When the growth rate of the money supply increases, interest rate would end up being permanently lower if A) the expected inflation effect is larger than the liquidity effect B) there is fast adjustment of expected inflation C) there is slow adjustment of expected inflation. D) the liquidity effect is larger than the other effects

Answer 1

22) B

Change in interest rate only causes change in quantity supplied and does not cause a shift.

23) D

In Keynes's liquidity preference framework, if there is excess demand for money, there is an excess supply of bonds.

24) C

Increase in the price level causes the demand for money to increase that further leads to increase in interest rate.

25) D

If liquidity effect is larger than the other effects.