According to the "square-root rule" of the transactions demand for money, the demand for money would
A) vary inversely with the interest rate.
B) be zero if there were no costs to switching between money and interest-earning assets.
C) vary less than proportionately with income.
D) All of the above are correct.
D
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What is meant by market failure?
What will be an ideal response?
The sum of public and private saving in an economy is equal to
A) T - TR - G. B) I - C - G. C) Y - C - T. D) Y - C - G.
A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely
A. increase the purchase of meals by 10 percent. B. increase the purchase of meals by less than 10 percent. C. decrease the purchase of meals by more than 10 percent. D. decrease the purchase of meals by less than 10 percent.
What is the marginal rate of substitution?
A) the rate at which the consumer is willing to trade one good for another without any loss in utility B) the rate at which the consumer is willing to trade one good for another so that she increases her utility C) the price ratio D) the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market