What is liquidity? Why is money the most liquid of all assets? What is the cost of this liquidity?
What will be an ideal response?
Liquidity is the degree to which an asset can be acquired or disposed of without much danger of any loss in nominal value and with small transaction costs. Money is the most widely and readily accepted asset that can be exchanged for other goods and services, so it is the most liquid asset. The cost of this liquidity is the interest yield given up that was available by holding another asset.
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If disposable income increases from $5 trillion to $6 trillion and, as a result, consumption expenditure increases from $7 trillion to $7.8 trillion, the MPC is
A) 1.0. B) 6 ÷ 7 = 0.86. C) 6 ÷ 7.8 = 0.77. D) 5 ÷ 7 = 0.71. E) 0.8.
If a firm sells more than the break-even quantity,
a. It will make a profit b. It will only cover the variable costs c. It will make a loss d. A firm is unable to sell above the break-even quantity
Everything else being equal, one can expect the euro to appreciate relative to the dollar if
a. Americans decrease their travel to Germany. b. the Germans add to their holdings of U.S. Treasury bills. c. Americans purchase land in Germany and build factories. d. American exports to Germany increase.
If mining companies are indifferent between operating and not operating a quarry, that quarry is
A. discounted. B. usurious. C. marginal. D. nonexcludable.