What is money? Explain in terms of the functions of money.
What will be an ideal response?
Money is whatever performs the three basic functions of money: It is a medium of exchange for buying and selling goods and services. It serves as a unit of account for measuring the monetary cost of goods and services. It is a store of value so people can transfer purchasing power from the present to the future.
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Answer the following statements true (T) or false (F)
1) If a firm purchases an input that is jointly produced with another good, changes in the demand for the other good will have no effect on the price of the input. 2) It is profit-maximizing for managers to locate their stores close together in areas that are frequented by low-income consumers. 3) Stores that are located in areas that offer a low transaction cost to consumers are more likely to be able to charge higher prices than stored located in areas with high transaction costs. 4) To maximize profit, a manager of a large chain of stores that are located throughout the United States needs to determine the average value of their consumers' time and transportation costs and locate each store in areas based on the average value. 5) A consumer's total transportation costs do not include the time the consumer spends in the store.
Bankers' business decisions effect the money supply because bankers
a. are respected men and women. b. have the ability to create money. c. use a special accounting system developed by the Federal Reserve Board. d. All of the above are correct.
Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded
a. rise, and investment spending rise. b. rise, and investment spending fall. c. fall, and investment spending rise. d. fall, and investment spending fall.
A reasonable dynamic assumption for the IS-LM model is that
A) the economy is always on both the IS and LM curves. B) the economy is always on the IS curve, but moves only slowly to the LM curve. C) the economy is always on the LM curve, but moves only slowly to the IS curve. D) the money market is quick to adjust, but the bond market adjusts more slowly. E) adjustment to the new IS-LM equilibrium is instantaneous after an LM shift, but not after an IS shift.