Describe how financial innovation has affected the demand for money
What will be an ideal response?
Financial innovation is the development by depository institutions of new financial products and changing technology within the banking industry. Examples include daily interest checking deposits, automatic transfers of money between deposits, ATM's and credit cards. In general these innovations have allowed the public to be more flexible in their choices between cash and less liquid assets as banks have delivered greater liquidity without forgoing interest earned. The result has been a large decrease in the demand for M1 and a smaller decrease in the demand for M2.
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When the nominal exchange changes from 120 yen per dollar to 110 yen per dollar, the dollar has:
A. become undervalued. B. become overvalued. C. depreciated. D. appreciated.
When the monopoly insurer cannot observe the care taken by the insured party to avoid an accident, the most profitable contract for it:
a. offers full insurance at a higher price than the full-information policy. b. offers full insurance at a lower price than the full-information policy. c. offers partial insurance at a higher price than the full-information policy. d. offers partial insurance at a lower price than the full-information policy.
All but which of the following is a way for unions to increase the demand for their union labor
a. increase the demand for union-made goods b. improve the working conditions for their labor c. restrict the supply of nonunion-made goods d. increase the productivity of union labor e. featherbedding
Reserves held beyond the required amount are called __________ reserves
A) redundant B) precautionary C) excess D) surplus