Question

Which of the following events will lead to a decrease in the equilibrium interest rate?

a. a sale of government securities by the Federal Reserve

b. a decrease in Aggregate Expenditures

c. an increase in the discount rate

d. an increase in required reserve ratio

Which of the following, most likely, leads to an increase in the interest rate?

a. a decrease in Aggregate Expenditures

b. a purchase of government securities by the Fed

c. a decrease in the discount rate

d. an increase in the required reserve ratio

If the expected future earnings of a company goes down, you would expect the price of its stock to

a. fall.

b. fall to zero.

c. rise.

d. be unaffected.

Answer 1

question 1) answer is option B because erase in aggregate expenditure means lower IS curve will shift left given the LM curve . this will cause a decrease in the equilibrium interest rate

question 2) option B purchase of government securities by fed by leading to increase in demand for securities will cause the interest rate to increase .

question 3) option A because if earning are expected to fall , then less people are likely to buy its stock so prices will fall .