What factors determine the demand for money in the Baumol-Tobin analysis of transactions demand for money? How does a change in each factor affect the quantity of money demanded?
What will be an ideal response?
The factors are real income, the price level, interest rates, and the brokerage cost of shifting between money and bonds. Increases in real income increase money demand less than proportionately, since the model predicts scale economies in transactions demand. Increases in prices increase money demand proportionately, since the demand is for real balances. The quantity of money demanded varies inversely with interest rates, since interest is the opportunity cost of holding money. The brokerage fee is the cost of converting other assets (bonds) into money. An increase in this cost increases money demand.
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Which of the following is an example of price discrimination?
A) Increasing the price of a product when demand for the product increases. B) Charging different prices for a product in different regions of the country due to differences in transportation costs. C) Bundling complementary products to attract additional sales. D) Reducing the price of a product to reduce excess inventory.
When a person bases her future expectations for the economy on all available current data and her own judgment about future policy effects, this is known as
A) the policy irrelevance proposition. B) rational expectations. C) irrational expectations. D) the new classical theory.
A price discriminating monopolist charges a very high price to the consumers with high price elasticity of demand
a. True b. False Indicate whether the statement is true or false
John Steinbeck's Cannery Row describes a character who takes his own life because of poor job prospects. If he was an unemployed person who gave up looking for work, he would be considered
a. chronically unemployed b. a discouraged worker c. a member of the labor force d. a Bureau of Labor Statistics economic casualty e. cyclically unemployed