Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the
horizontal axis of the money demand curve.
The money demand curve has a negative slope. An increase in the interest rate, the variable on the vertical axis, causes a decrease in the quantity of money demanded, the variable on the horizontal axis, because an increase in the interest rate increases the opportunity cost of holding money. Money earns little or no interest, so an increase in the interest rate induces people to reduce their holdings of money and switch into interest-bearing financial assets.
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Joe is maximizing utility by consuming three colas at $2 apiece and four hot dogs at $3 apiece. The last cola gave him 200 units of utility. How many units of utility did the last hot dog give him?
A. 300 B. 133.33 C. 600 D. 10
Studies of U.S.-Canadian free trade have concluded that the number of new jobs created in Canadian manufacturing were _________ the number of jobs lost elsewhere in Canadian manufacturing due to free trade.
a. less than b. equal to c. greater than d. substantially greater than
If Congress passed a tax increase at the request of the president to reduce the budget deficit, but the Fed held the money supply constant, then the two policies together would generally lead to ______ income and a ______ interest rate.
Fill in the blank(s) with the appropriate word(s).
If goods are complements, then their
A) cross elasticities are positive. B) income elasticities are positive. C) income elasticities are negative. D) cross elasticities are negative.