Give an example that shows how price level can shift the money demand curve and another that shows how RGDP can shift this curve.
What will be an ideal response?
Examples will vary but should show a thorough understanding of how price level and RGDP can shift the money demand curve. For example, over a 20-year period, the overall prices of goods and services significantly increases. Because of this, consumers would gradually keep more and more money on hand to make sure they have enough to pay for these products. As a result, the overall demand for money increases, and the money demand curve shifts to the right. Also, suppose that over a 20-year period, the quantity of goods and services available for purchase gradually increases. This means that the RGDP would increase, creating a greater quantity of goods and services to purchase. As a result, a person would want more and more money on hand to buy these items. The overall demand for money would increase, again shifting the demand curve to the right.
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The self-interest model of government:
a. suggests that government officials are selfish. b. explains why there are limits on government taxation and spending. c. shows who some government projects take place even if the cost exceeds the benefits. d. All of the above.
Would a law that required the federal government to balance the budget on an annual basis contribute to more or less stability in the economy? Why?
What will be an ideal response?
The law of diminishing returns only applies in cases where:
A. There is increasing scarcity of factors of production B. The price of extra units of a factor is increasing C. There is at least one fixed factor of production D. Capital is a variable input
Refer to the graphs below. Assume that the economy is initially at equilibrium where AD2 and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph 2. A movement from point C to point B in graph 2 would most likely be associated, in graph 1, with a shift of:
A. AD to the right
B. AD to the left
C. AS to the right
D. AS to the left