Explain why one can write the demand for money as the price level times a function of the interest rate and real income as follows: = PxL (R, Y)
What will be an ideal response?
The aggregate money demand is proportional to the price level. Imagine that all prices in an economy doubled, but the interest rate and everyone's real incomes remained unchanged. Then, the money value of each individual's average daily transactions would simply double, as would the amount of money each wishes to hold.
You might also like to view...
The demand for labor reflects the point that the
A) lower the real wage rate, the greater the quantity of labor demanded. B) higher the real wage rate, the greater the quantity of labor demanded. C) nominal wage rate and not the real wage rate determines the quantity of labor demanded. D) real wage rate does not affect the quantity demanded of labor. E) demand for labor depends on the supply of labor.
All else constant, so long as it is negative, as the cross price elasticity of demand between a firm's product and those of its competitors increases, so does the market power possessed by the firm
Indicate whether the statement is true or false
If children go to school and become productive members of society,
A) a negative externality is created by the schools. B) a positive externality is created by the schools. C) no externality is created by the schools. D) an externality is created that may be positive or negative.
On a certain date the banking system had $2 billion in excess reserves. The legally required reserve ratio was 12.5 percent. Potentially, if these funds were fully loaned out, the banking system as a whole could increase the money supply by a maximum of: a. $0.25 billion. b. $2.5 billion
c. $12.5 billion. d. $16 billion