Answer the following statements true (T) or false (F)
1. The transactions demand for money will decrease when income decreases, but it is not much affected by interest rates.
2. Holding money as an asset presents a risk of capital loss.
3. There is an asset demand for money because households and business firms use money as a store of value.
4. A decrease in the nominal GDP, other things remaining the same, will decrease both the total demand for money and the equilibrium rate of interest in the economy.
5. If nominal GDP is $2,000 billion and the amount of money demanded for transactions purposes is $500 billion, then on average each dollar will be spent about four times a year.
1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. TRUE
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If the government keeps the price of bread low through subsidies, and farmers consequently buy bread to feed to their pigs, we can infer that
A) pigs are more valuable than people. B) pork is more valuable than people. C) the farmers find it efficient to feed bread to pigs. D) the market system is not working. E) waste is occurring because marginal benefit is less than marginal cost.
External benefits are the extra
A) benefits a consumer gets from consuming a good. B) costs a producer creates in producing a good. C) benefits that accrue to people other than the consumers. D) costs a producer bears for producing a polluting good. E) benefits a producer obtains for reducing production of a polluting good.
An increase in the value of the U.S. dollar will
A) increase Canadian demand for winter homes in Florida. B) increase the cost of homes in Florida for American buyers. C) reduce Canadian demand for winter homes in Florida. D) reduce the cost of homes in Florida for Canadian buyers.
One reason why critics argue that large firms should not be broken up is that in some cases
A. large firms have a concentration of economic power. B. large firms are less-efficient producers. C. many smaller firms would be less-efficient producers. D. there is no economic reason to break up large firms that may have some control over the market.