One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called:
A. transactions demand.
B. precautionary demand.
C. speculative demand.
D. noncyclical demand.
Answer: B
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Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair
When asked by her boss, Mme. Ramotswe, why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior A) supports the endowment effect which states that ownership of an item makes it more valuable. B) is rational because the more you pay for an item the more valuable it is. C) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not. D) is rational: she should not discard a valuable item.
Firms in monopolistic competition and oligopoly depend on some degree of brand loyalty. Which goods are able to command the most brand loyalty?
a. facial tissues b. cola drinks c. shampoo d. cigarettes e. toothpaste
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible 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 real risk-free interest rate rises, and real GDP rises. b. The real risk-free interest rate falls, and real GDP rises. c. The real risk-free interest rate rises, and real GDP remains the same. d. The real risk-free interest rate and real GDP remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
“Fiscal policy” is the federal government’s plan for
A. international trade, designed to balance exports and imports. B. spending and taxes, designed to influence the level of aggregate demand. C. manipulating the money supply and the control of interest rates. D. All of the above are correct.