Why do people demand money balances (i.e., hold currency and checking account balances) as a way of holding their wealth, rather than, financial investments?
a. Some amount of money is demanded for everyday market transactions like parking fees, lunch, and buying groceries.
b. Money balances generally earn a higher return than other financial investments.
c. Holding money balances serves as a way of protecting one's assets from the effects of inflation.
d. People demand money balances to increase money supply in the economy.
a
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John and Sally have identical preferences except that Sally's utility is exactly 10 times John's for each basket of goods. If they have the same income and face the same prices
A) Sally will consume 10 times the amount that John consumes. B) Sally will receive 1/10 the satisfaction of John. C) both will consume the same amount of all goods. D) John and Sally will have equal total utility.
Based on Table 3.1, the pre-trade relative price of a computer in Mexico is
A) three pairs of shoes. B) one pair of shoes. C) one-half pair of shoes. D) one-third pair of shoes. E) None of the above.
Jim is planning on attending a football game. He paid $40 for the ticket. He will have to take the day off losing 8 hours of work. His hourly wage is $10 . He estimates it will cost him around $20 for gas and parking at the game. Jim's accounting (out of pocket) cost of attending the game equals
a. $80 b. $40 c. $60 d. $140
Suppose the federal government wants to encourage businesses to increase investment spending. Which policy may be the most effective?
a. an increase in corporate income taxes b. an increase in real interest rates c. an increase in warnings of a coming recession d. an increase in tax deductions for investment spending