Fluctuations in the relative demand for stock market mutual funds versus money-market mutual funds causes instability in the overall demand for
A) M1 but not M2.
B) M2 but not M1.
C) M2 and M1.
D) neither M1 nor M2.
B
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Suppose the demand curve for a good is given by the equation P = 200 - 1/2 Q and the supply curve is given by the equation P = 50 + 1/4 Q, where P represents the price of the good (measured in dollars per unit) and Q represents the quantity of the good (measured in units per week).
(i) Find the equilibrium price and quantity for this market. (ii) Suppose the government imposes a sales tax of $9 per unit on this good. Find the new formula for the demand curve, the new equilibrium quantity, the post-tax price received by suppliers, and the post-tax price paid by demanders. (iii) What fraction of the economic burden of this tax is borne by demanders and what fraction is borne by suppliers?
The advantage of forward contracts over future contracts is that they
A) are standardized. B) have lower default risk. C) are more liquid. D) are more flexible
Suppose the plant owners design an incentive scheme for the plant manager in which the feasible production level is set equal to output from the previous quarter. The bonus payment is determined by the formula B = 0.2Qf + 0.2(Q - Qf)
What potential problems can arise with this scheme? A) If Qf is unusually large, then the manager has little incentive to work hard during the following quarter because Q will likely fall back below Qf. B) If Qf is unusually small, then the manager will receive a small bonus regardless of their efforts during the current quarter. C) The manager has an incentive to underperform and generate a small Q during the current quarter in order to provide a smaller benchmark for performance in the next quarter. D) The incentive scheme only depends on current output and does not measure performance relative to feasible production.
Housing is a normal good. That means
a. that most people prefer to purchase their housing rather than rent it b. that most people tend to purchase more housing if its price falls. c. that people tend to purchase more housing if their income increases d. that most people live in houses e. the people tend to purchase more housing if its price rises