If the economy is located at point 2 in figure 23 4

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145) If the economy is located at point 2 in Figure 23-4, then (a) aggregate output is below the level of planned spending. (b) aggregate output is below the equilibrium level of output. (c) there is an unplanned decline in inventories. (d) all of the above. (e) only (a) and (b) of the above. Answer: D Question Status: Previous Edition Chapter 23 The Keynesian Framework and the ISLM Model 853 146) If the economy is located at point 2 in Figure 23-4, then 147) The money market is in equilibrium 148) The _____ describes the combinations of interest rates and aggregate output for which the quantity of money demanded equals the quantity of money supplied. 149) In the Keynesian model the quantity of money demanded is _____ related to income and _____ related to the interest rate. (a) positively; positively (b) positively; negatively (c) negatively; negatively (d) negatively; positively Answer: B Question Status: Revised 150) According to the liquidity preference theory, the demand for money is _____ related to aggregate output and _____ related to interest rates.
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854 Frederic S. Mishkin • Economics of Money, Banking, and Financial Markets, Seventh Edition 151) As interest rates rise, the opportunity cost of holding money _____ and the demand for money _____. 152) As aggregate output rises, the demand for money _____ and the interest rate _____, so that money demanded equals money supplied and the money market is in equilibrium. Figure 23-5 153) If the economy is located at point 2 in Figure 23-5, then (a) the interest rate is above the equilibrium level. (b) people are holding more money than they desire. (c) people will purchase bonds. (d) all of the above. Answer: D Question Status: Previous Edition
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