Interest rates are typically ______, e.g. they increase in _____ and fall in ___

Question

Interest rates are typically ______, e.g. they increase in _____ and fall in _______

A) anticyclical; recessions; expansions C) random; profit; loss

B) procyclical; expansions; recessions D) procyclical; panics; manias

Suppose that County A has a money demand function given by Md= 50 + 2Y - 5r, while Country B has a money demand function given by Md = 50 + 2Y -25r. From this, we can conclude that

A) the LM in A is steeper than in B
B) the LM in B is steeper than in A
C) the LM in A is vertical while the LM in B is horizontal

D) Country A is more "Keynesian" whereas Country B is more "classical" in structure.

Explanation / Answer

1: D

2: B

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