Suppose the central bank increases the rate of growth of the money supply. What effect will this increase in money growth have on seignorage in: (1 ) the short run; and (2 ) the medium run? Explain
What will be an ideal response?
Seignorage equals the rate of growth of H times real money balances. In the short run, the increase in money growth will likely cause an increase in seignorage as long as H/P does not change or does not fall significantly. H/P is a function of real income and the nominal interest rate. In the short run, Y will rise and i will likely fall so H/P will increase. In the medium run, Y will not change. The increased money growth will cause an increase in inflation and an increase in the nominal interest rate causing H/P to fall. Therefore, the effects of an increase in money growth on seignorage are ambiguous.
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Gold is an example of
A) commodity money. B) fiat money. C) barter money. D) M1.
Use the following table to answer the question below. Cloe is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents each and hard candies cost 80 cents each. The marginal utilities derived from the consumption of each product are as shown in the following table.Number of ItemsMarginal Utility of ChocolatesMarginal Utility of Hard Candies160150250140340120430100520806107075508020If Cloe buys either chocolates or hard candies one piece at a time, what will be her first two purchases?
A. a chocolate, followed by another chocolate B. a hard candy, followed by another hard candy C. a hard candy, followed by a chocolate D. a chocolate, followed by a hard candy
The Fed conducts open market operations with the primary goal of
A) affecting the federal funds rate. B) affecting the discount rate. C) stabilizing the foreign-exchange market. D) adjusting reserve requirements.
Which of the following sets of circumstances is likely to provide the best evidence in support of the theory of efficiency wages?
a. Workers in the market are unskilled and not represented by a union, and their wage exceeds both the equilibrium wage and the minimum wage. b. Workers in the market are highly skilled and not represented by a union, and their wage exceeds the minimum wage. c. Workers in the market are highly skilled and represented by a union, and their wage exceeds the equilibrium wage. d. Employers in the market are known for reducing the workers' wage whenever they get an opportunity to do so.