If you were going to write a function for money demand, you would say that the demand for money holdings:
A. varies inversely with both the nominal interest rate and nominal income.
B. varies inversely with nominal income and directly with the nominal interest rate.
C. varies inversely with the nominal interest rate and directly with nominal income.
D. varies directly with both the nominal interest rate and nominal income.
Answer: C
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If we read that the CPI had value of 120 in 2005, we would know that
a. the typical market basket in 2005 was 20 percent more expensive than in the previous year b. the typical market basket in 2005 was 120 percent more expensive than in the base year c. the typical market basket in the base year was 120 percent more expensive than in 2005 d. the typical market basket in 2005 was 20 percent more expensive than in the base year e. the cost of a loaf of bread is higher now than it has been during the past ten years
The circular-flow diagram
a. is an economic model. b. incorporates two types of decision makers: households and firms. c. represents the flows of inputs, outputs, and dollars. d. All of the above are correct.
The national debt is unlikely to cause national bankruptcy because the federal government can:
a. All of the answers are correct. b. refinance its debt. c. raise taxes. d. print money.
Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?
a. The economy responds very quickly to changes in the interest rate and changes in economic conditions are easy to predict. b. The economy responds very quickly to changes in the interest rate and changes in economic conditions are nearly impossible to predict. c. The economy responds to changes in the interest rate with a lag and changes in economic conditions are easy to predict. d. The economy responds to changes in the interest rate with a lag and changes in economic conditions are nearly impossible to predict.