Question:

On the financial market an increase in production will?

by  |  earlier

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1-increase money supply

2-decrease the interest rate

3-increase the interest rate

4-decrease the demand for money

5-not affect the demand 4 money

Demand determined money suppy implies that...

1-as the interest rate increases money supply will also increase

2-the supply of money is determined by the demand for money and the interest rate

3-money supply is determined by the central bank

4-money demand is determined by the central bank

5-the money supply curve is perfectly elastic

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  1. #1:

    3-increase the interest rate

    #2:

    3-money supply is determined by the central bank

    but central bank goal is to keep interest rate (equilibrium of uncontrolled demand and controlled supply) - thus money supply curve may be counted as perfectly elastic (option 5) and partially option 1 is true too - because all of options do the same (1, 3, 5) - so I'm not so sure which one is right.

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