"The demand for money is infinite since everyone wants more money." Do you agree or disagree with this statement? Why?
What will be an ideal response?
Disagree. The demand for money does not refer to the desire to have more wealth or income. It is a demand to hold money balances so that one can purchase goods and services. Therefore, the demand for money is not infinite, but is downward sloping with respect to the cost of holding money balances—the interest rate.
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A monopolist in the radio industry has two radio-making plants. The marginal cost of radio production by Plant A is $4Q (where Q is the number of radios produced) and the marginal cost of radio production by Plant B is always $16. If the demand curve for radios is downward sloping, the monopolist will
A. never produce radios at Plant A. B. always produce four times as many radios at Plant B as at A. C. never produce more than four radios at Plant A. D. produce radios at Plant A only as a last resort.
If a profit-maximizing firm's fixed cost of producing widgets falls,
a. its total cost curve is unaffected. b. its marginal cost curve shifts down. c. the firm will produce more widgets. d. the firm's average profit per widget produced rises.
If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980, while the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2001, then
a. real rates were higher in 2001. b. real rates were higher in 1980. c. credit was more expensive in 1980. d. credit was cheaper in 2001 because the nominal rate was lower.
Education yields positive externalities. For example, a more educated population
a. may increase the pace of technological advances, leading to higher productivity and wages for everyone. b. leads to more informed voters, resulting in better government for everyone. c. tends to result in lower crime rates. d. All of the above are correct.