Why is the money demand curve down sloping?
What will be an ideal response?
We know that the transaction demand curve is a vertical line. This occurs because at a certain nominal GDP, transaction demand for money is constant regardless of the interest rate.
With asset demand for money, however, we know that the interest rate and quantity of money are inversely related. This occurs due to the fact that when the interest rate rises there is a higher opportunity cost to holding money, so demand for money decreases. Conversely, when the interest rate is low, there is little opportunity cost to holding money, so demand for money increases. This produces the down sloping characteristic of the total money demand curve.
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
David Card and Alan Krueger conducted a study of fast-food restaurants in New Jersey and Pennsylvania. The study found that
A) the earned income tax credit is more effective in raising the incomes of low-skilled workers than increases in the minimum wage. B) increases in the minimum wage had a very small impact on employment. C) there was a large reduction in employment of low-skilled workers when the minimum wage was raised in these states. D) increases in the prices of food have a greater effect on wage increases in New Jersey than in Pennsylvania.
There is concern among economists who favor free trade that some regional agreements may promise free trade, but actually act as a way for the countries within the regional agreement to try to ________ trade from anywhere else.
a. support b. encourage c. eliminate d. limit
What information will police applicants not need to furnish during recruitment?
A) drug history B) criminal activity C) political affiliation D) past traffic violations