The equation of exchange indicates that:
A. MV = PQ.
B. other things equal, an increase in the demand for money will increase P and/or Q.
C. the velocity and the supply of money vary directly with one another.
D. MP = VQ.
A. MV = PQ.
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When two goods are perfect substitutes, the marginal rate of substitution
a. is constant along the indifference curve. b. decreases as the scarcity of one good increases. c. increases as the scarcity of one good increases. d. changes to reflect the consumer's changing preferences for the goods.
If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return, then we should expect
A. increased investment by the utility. B. expansion of electric power generating capacity. C. future power shortages. D. excess investment by the electric utility.
Required reserves of banks are a fixed percentage of their
A. loans. B. assets. C. deposits. D. All of these responses are correct.
If the demand for a good decreases because consumer income increases, the good is a(n):
A. inferior good. B. normal good. C. necessity good. D. luxury good.