Explain what effect changes in each of the following variables has on the demand for central bank money: (1 ) the interest rate, i; and (b) real income, Y
What will be an ideal response?
Interest rate. A reduction in the interest rate will cause an increase in money demand (movement along the demand curve). This will cause an increase in the demand for currency that will cause an increase in the demand for central bank money. The increase in the demand for money will also cause an increase in the demand for deposits and, therefore, an increase in banks' demand for reserves. This will also cause an increase in the demand for central bank money. In this case, we only move along the demand curve.
Real income. An increase in Y will cause an increase in money demand and, as described above, an indirect increase in the demand for currency and reserves. So, this increase in Y will cause an increase in the demand for central bank money and a shift in the curve.
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Tony's Italian Ice is a monopolistically competitive firm. If Tony's earns a profit in the short run, which of the following is most likely to occur?
A) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the right. B) New firms that sell Italian ice will enter the market and Tony's demand curve will become more inelastic. C) New firms that sell Italian ice will enter the market and Tony's cost curves will shift to the left. D) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the left.
Value added taxes _____
a. have the same tax base as a consumption tax b. have the same tax base as an estate tax c. have the same tax base as a retail sales tax d. have the same tax bas as an income tax
Because of the Great Recession of 2008, the trade deficit in 2009 relative to the trade deficit in 2006 was?
A. twice. B. three times. C. one fourth. D. one half.
When the minimum efficient scale occurs at a high level of industry output
A. the firms in the industry will be producing in the diseconomies of scale portion of the curve. B. there will only be a few firms in the industry. C. there will be a lot of firms in this industry. D. the government will have to take over the production of the good since it will be unprofitable for firms.