In what ways have financial innovations affected the demand for money?
What will be an ideal response?
People hold money in order to pay for the goods and services they consume. This is referred to as the transactions demand for money. Financial innovations such as ATMs and automatic funds transfers have allowed people to limit the amount of money they hold. Financial innovations that lower the cost of shifting money between bonds (or other investments) and checking accounts also result in lower money holdings at every level of income.
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Classical economists believed that production could be stuck below its full employment level for a long period of time
a. True b. False
Which term do economists use to refer to a difference in wages that arises from nonmonetary characteristics of different jobs?
a. non-pecuniary differentials b. compensating differentials c. fundamental differences d. idiosyncratic differences
If the opportunity cost of producing a good domestically exceeds the opportunity cost of purchasing it on the world market, a country can gain by
A. decreasing production and increasing imports. B. increasing production and decreasing imports. C. decreasing production and increasing exports. D. increasing production and decreasing exports.
If you were told the MPC was = 0.75 and the government engaged in a tax decrease of $400B, then the initial change in GDP would be:
A. $300B. B. $400B. C. $1600B. D. $1200B