Of all the components of the M1 and M2 measures of the money supply, the largest is savings deposits
Indicate whether the statement is true or false
TRUE
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Consider the utility function 
. (Explain all your answers.)
a. Derive the function for the marginal rate of substitution.
b. Do the tastes represented by this utility function satisfy diminishing MRS?
c. The marginal utility of a good is defined as the change in utility from additional consumption of that good (holding all else constant). Derive the marginal utility of 
and 
.
d. Why does an ordinal approach to utility theory not any attention to what you derived in (c)?
e. Why does an ordinal approach to utility not treat the marginal rate of substitution the way it treats the marginal utility concept?
What will be an ideal response?
When the credit spread rises, an effective policy response might be to ________
A) lower the real interest rate on safe assets B) prevent the real federal funds rate from falling below zero C) pursue nonconventional monetary policies to restore the functioning of financial markets D) announce swift and stern action against those responsible for the financial disruption
Continuing with the same family from the preceding question, suppose a risk neutral insurance company exists to provide vacation insurance. Suppose further that each vacation day requires a constant expenditure, and this expenditure is standard across everybody. This allows us to simplify the problem by considering all payments to be in terms of vacation days. What is the least the insurance
company would charge (in terms of vacation days)? a. 1 b. 2 c. 3 d. 4
The longest period of deflation in the U.S. in the 20th century was during World War II
Indicate whether the statement is true or false