A major point of the Baumol-Tobin model of the transactions demand for money is that they show that the
A) demand for money is related to income.
B) velocity of money is constant.
C) fraction of income that people wish to hold in the form of money is constant.
D) interest sensitivity of the demand for money is based on a transactions motive shared by most people.
D
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If both producers and consumers believe that a product's price will rise in the future, then at the present, demand ________ and supply ________
A) decreases; decreases B) decreases; increases C) does not change; does not change D) increases; decreases E) increases; increases
Refer to Scenario 14-2. As a result of Kristy's deposit, Bank A can make a maximum loan of
A) $2,000. B) $8,000. C) $10,000. D) $50,000.
Answer the following statements true (T) or false (F)
1) Each time a manager changes the conditions of a sale, they must consider the problem of adverse selection. 2) The lemons problem is an extreme case of moral hazard. 3) A well-known company's trademark is an example of a signal. 4) In general, moral hazard occurs at the time of the transaction and adverse selection occurs after the participants have already entered into the contract or agreement. 5) The incentive for a cost-plus-award-fee contract are less specific than a cost-plus-incentive-fee contract.
In the short run, the firm's average fixed costs
a. always increase as output increases. b. always decline as output increases. c. equal zero. d. remain constant as output expands.