Investment demand is downward sloping because
A) an increase in investment demand causes interest rates to fall.
B) at lower interest rates, firms will undertake more investment.
C) at lower interest rates, firms will undertake less investment.
D) None of the above.
B
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Input choices in the present are often affected by past decisions.
Answer the following statement true (T) or false (F)
Suppose at present people hold a quantity of money equal to 80% of nominal GDP. What happens to velocity if people wish to increase their money holdings to 85% of nominal GDP?
A) Velocity can increase or decrease depending on people's tastes and preferences toward money. B) Velocity is unaffected. C) Velocity increases. D) Velocity decreases.
(Consider This) Unlike newspaper dispensing devices, soft drink dispensing machines do not permit people to take more than one can or bottle with each payment. The reason is that the:
A. opportunity cost of additional cans or bottles of a soft drink increase very rapidly. B. marginal utility of extra soft drink cans or bottles declines slowly, particularly because they are storable and can be consumed later. C. marginal utility of extra soft drink cans or bottles declines quite rapidly. D. opportunity cost of additional cans or bottles of soft drink increases very slowly.
Compared with a low benefit reduction rate, a relatively high benefit reduction rate in a cash assistance program:
A. reduces the incentive to work. B. increases the incentive to work. C. does not affect the incentive to work. D. will reduce the incentive to work through the substitution effect but will increase the incentive to work through the income effect.