If an individual moves money from a savings deposit account to a money market deposit account
A) M1 decreases and M2 stays the same.
B) M1 stays the same and M2 increases.
C) M1 stays the same and M2 stays the same.
D) M1 increases and M2 decreases.
C
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Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500. Using the midpoint method, the elasticity of demand equals
A) 2.10. B) 1.11. C) 0.90. D) 0.72. E) None of the above answers is correct.
Some economists have argued that path dependence and switching costs can lead to market failure. Which of the following is an example of this argument?
A) VHS video recorders became more popular with consumers than Sony Betamax recorders even though the Betamax recorders embodied a superior technology. B) A consumer who won a lottery for a Super Bowl ticket refuses to sell it for $3,000 even though he would not have paid $3,000 for a ticket if he had not won the lottery. C) Costly celebrity endorsements lead many consumers to buy a product even though it is more expensive or less effective than a product that is not endorsed by a celebrity. D) While playing the ultimate game, an allocator decides to share $20 equally with a recipient rather than keep the $20 for herself.
Nontariff measures are generally much more difficult to eliminate than tariffs and quotas because they are embedded more deeply in national economic policies
Indicate whether the statement is true or false
Gordon believes that the new Keynesian approach as opposed to other business cycle theories is preferred because
A) it explains information barriers and sticky wages. B) it explains how workers are "fooled." C) it explains wage and price stickiness assuming rational firms and workers. D) it identifies the source of supply side shocks and slow SAS adjustment.