How does the liquidity approach to measuring the money supply differ from the transaction approach?
What will be an ideal response?
The liquidity approach focuses on assets that can be converted into money quickly and without loss of nominal value while the transaction approach only looks at assets that are used as a medium of exchange. People can earn some interest with these assets and still convert them to money easily and cheaply.
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What impact does an increase in the price level in the United States have on net exports and why?
A) An increase in the price level decreases net exports by increasing the relative cost of American goods. B) An increase in the price level increases net exports because higher prices decrease American spending on imports. C) An increase in the price level decreases net exports because higher prices decrease the value of the dollar. D) An increase in the price level increases net exports because higher prices lower the value of the dollar.
A leftward shift of the demand curve results in: a. increase in equilibrium price
b. increase in quantity. c. decrease in both equilibrium price and quantity. d. decrease in quantity and an indeterminate equilibrium price.
Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model? a. The nominal exchange rate remains the same and monetary base rises
b. The nominal exchange rate remains the same and monetary base falls. c. The nominal exchange rate and monetary base fall. d. The nominal exchange rate and monetary base remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Suppose that you consume only pizza, which costs $4 per slice, and Diet Pepsi, which costs $2 each. The table above gives your utility from consuming these two goods. If your income is $20, which of the following consumption combinations will you choose?
A. 2 slice of pizza and 6 Diet Pepsis B. 3 slices of pizza and 4 Diet Pepsis C. 5 slices of pizza and no Diet Pepsi D. 4 slices of pizza and 2 Diet Pepsis