1) Assume that velocity (how many times a dollar is used in a given period) stays the same, and that GDP does not change. If the money supply doubles, what will happen to the general price level in the economy according to the quantity equation? A) The inflation rate will double. B) The price level will fall by a half. C) The price level will double. D)The price level will not change either.
1) Assume that velocity (how many times a dollar is used in a given period) stays the same, and that GDP does not change. If the money supply doubles, what will happen to the general price level in the economy according to the quantity equation?
A) The inflation rate will double.
B) The price level will fall by a half.
C) The price level will double. D)The price level will not change either.
2) During the financial crises and recession of 2007-09, the Fed lowered the federal funds rate target to 0-0.25%. However, long-term interest rates, like mortgage rates, were still fairly high. One thing the Fed did to lower long-term rates was that the Fed :
A) bought long-term bonds
B) lowered the long-term interest rates by lowering the reverse repo rate
C) lowered the long-term interest rates by lowering the discount rate
D) sold long-term bonds
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