Otis transfers $200 from his savings account to his money market fund. This transaction will
A. decrease M2 and increase M1.
B. decrease M1 and increase M2.
C. decrease both M1 and M2.
D. leave M1 and M2 unchanged.
Answer: D
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The less interest-sensitive is money demand, the
A) more effective is fiscal policy relative to monetary policy. B) more effective is monetary policy relative to fiscal policy. C) steeper is the IS curve. D) flatter is the LM curve.
A bank provides:
A. liquidity; that is, access to cash when and where you want it. B. liquidity; that is, it connects buyers to sellers to ease saving and borrowing. C. risk diversification; that is, access to cash when and where you want it. D. risk diversification; that is, connecting buyers and sellers to ease saving and borrowing.
Amy can produce either 5,000 pounds of cheese or 20 cars per year. Mike can produce either 5,000 pounds of cheese or 10 cars per year. By the principle of comparative advantage, Mike should specialize in producing
A. neither cheese nor cars. B. cars. C. both cheese and cars. D. cheese.
In the long run, an expansionary monetary policy will lead to _____
Fill in the blank(s) with the appropriate word(s).