At higher nominal rates of interest, the demand for real balances is:
a. higher because savers can earn higher returns.
b. lower because the opportunity cost of holding those funds is higher.
c. invariant with respect to the nominal interest rate.
d. inversely related to the price level.
Ans: b. lower because the opportunity cost of holding those funds is higher.
You might also like to view...
If the marginal propensity to consume is very close to zero, then the multiplier
A) cannot be calculated. B) is very close to one. C) is very large. D) is very close to zero. E) might be negative if the marginal tax rate is large enough.
If there are externalities present in a market, resources are allocated efficiently when marginal social cost equals marginal social benefit
Indicate whether the statement is true or false
Financial contributions to the campaigns of members of Congress, state legislators, and other elected officials by firms that seek special interest legislation that make the firms better off are
A) illegal. B) the result of the voting paradox. C) irrational because elected officials will almost always act in the interest of the voters who have to pay the cost of the legislation. D) examples of rent seeking.
Which of the following is not an effort by McDonald's to cope with diseconomies of scale?
a. being exposed to country and regions risk, such as environmental protests b. putting mini-restaurants in airports, gas stations, and Wal-Marts c. allowing managers in each region of the U.S. more leeway in pricing and promotion d. reducing product development time e. closing unprofitable restaurants