Name and explain the three reasons for holding money balances.
What will be an ideal response?
One reason to hold money balances is to facilitate everyday market transactions. This is known as the transactions demand for money. Another reason is to handle unexpected market transactions such as emergencies, known as the precautionary demand for money. The third reason to hold money balances is for future financial opportunities, which are referred to as the speculative demand for money.
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Maintaining the growth of the money supply at a constant rate is an example of
A) an inflation targeting rule. B) a nominal GDP targeting rule. C) discretionary policy. D) a money demand rule. E) a money targeting rule.
Answer the following statements true (T) or false (F)
1. Derived demand for a resource stems from the demand for the good or service it produces. 2. The MRP is the additional revenue obtained by producing one more unit of output. 3. In perfect product competition, the output price is fixed to the firm. 4. MRP declines because MP declines. 5. Firms hire workers up to the point where MRP = the wage rate.
If the price elasticity of demand is equal to zero and the price was to rise, the quantity demanded would:
A. decrease slightly. B. fall to zero. C. not change. D. increase.
Payments for capital include interest and credit.
Answer the following statement true (T) or false (F)