The transactions demand for money exists because households
A. do not receive their incomes at the same time they wish to make purchases.
B. do not like the fact that money is a liquid asset.
C. must save for unexpected emergencies.
D. are insensitive to interest rate changes.
Answer: A
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Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?
What will be an ideal response?
In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, a ________ in the reserve requirement decreases the demand for reserves, ________ the federal funds interest rate,
everything else held constant. A) rise; lowering B) decline; raising C) decline; lowering D) rise; raising
According to classical economists, inflation occurs when the annual rate of growth in the money supply
a. exceeds the annual rate of growth of full-employment real GDP b. equals the annual rate of growth of full-employment real GDP c. exceeds the annual rate of growth of money velocity d. is less than the annual rate of growth of money velocity e. is less than the annual rate of growth of full-employment nominal GDP
The Taylor rule is a:
A. Strictly passive approach to monetary policy B. Strictly activist approach to monetary policy C. Combined passive and activist approach to monetary policy D. Coordination directive for monetary and fiscal policy