According to liquidity preference theory, the opportunity cost of holding money is
a. the interest rate on bonds.
b. the inflation rate.
c. the cost of converting bonds to a medium of exchange.
d. the difference between the inflation rate and the interest rate on bonds.
a
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A firm is generating detrimental externalities when
A. MSC is less than MPC. B. MSC is the same as MPC. C. MSC is greater than MPC. D. MPC includes some incidental costs.
If the Fed sells foreign assets, the monetary base will
A) fall by the amount of the sale, only if the Fed buys domestic bank deposits with the proceeds. B) fall by the amount of the sale, only if the Fed buys domestic currency with the proceeds. C) fall by the amount of the sale, whether the Fed buys domestic bank deposits or domestic currency with the proceeds. D) rise by the amount of the sale.
The concept of "lender of last resort" is that when
a. lending decreases, the Fed will be the last to resort to higher interest rates. b. borrowing increases, the Fed will be the last to increase lending. c. commercial banks are hesitant to lend, the Fed will step in and increase reserves. d. a borrower has tried everyone else, the Fed will lend directly to them.
Which of the following is a main factor that explains the differences in the incomes of U.S. households?
A. inheritances B. luck and misfortune C. discrimination D. All of these