An increase in the real value of stock prices, which is independent of a change in the price level, would best be an example of the:
a. Foreign purchases effect
b. Wealth effect
c. Interest-rate effect
d. Real-balances effect
Answer: b. Wealth effect
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Explain why the availability of resources affects the elasticity of supply
What will be an ideal response?
A good measure of a country's level of economic integration with a currency area is
A) the intersection of DD and GG. B) the country's price level. C) the compatibility of economic policies. D) the intersection of AA and GG. E) the extent of trade between the joining country and the currency area and the ease with which labor and capital can migrate between the joining country and the currency area.
Suppose a monopolist is considering starting a $500,000 advertising campaign. The current demand for its product is given by
p = 150 - 3Q where Q is the quantity of output in thousands. If the monopolist undertakes the advertising campaign, it expects demand to increase to p = 200 - 4Q The (non-advertising) cost for the monopolist is C(Q) = 30Q. a. Determine whether the monopolist should undertake the advertising campaign assuming that it is correctly anticipating the potential increase in demand. b. What is the most the monopolist will invest towards this advertising campaign?
When the interest rate falls,
a. the opportunity cost of holding money rises. b. people shift out of holding interest-yielding bonds into holding money. c. the quantity of money people will hold decreases. d. investment spending decreases. e. real GDP will decrease.