21. The transactions demand for money is least likely to be a function of the: P
ID: 1207200 • Letter: 2
Question
21. The transactions demand for money is least likely to be a function of the:
Price level
Frequency of wage and salary payments
Level of national income
Interest rate
1 rubber band
1/4 rubber band
2 rubber bands
1/2 rubber band
Price of a pound will increase to $3
Price of a dollar will increase to 3 pounds
Shortage equal to ab would be met using international monetary reserves
Payment deficit will cause changes in domestic price and income levels, shifting demand to the left, supply to the right, and reestablishing the original exchange rate
Decrease aggregate demand by increasing the interest rate
Make no change in the interest rate
Increase aggregate demand by increasing the interest rate
Increase aggregate demand by decreasing the interest rate
$8.00
$7.00
$6.00
$9.00
26. Comparing what the United States owes to other nations against what other nations owe to the United States, the United States is currently a(n):
International banking liability
International banking asset
Net debtor
Net creditor
27. The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically-produced product which is now:
Higher in price because import competition has declined
Higher in price because import competition has risen
Lower in price because import competition has risen
Lower in price because import competition has declined
28. The crowding-out effect suggests that:
Increases in government spending may reduce private investment
High taxes reduce both consumption and saving
Increases in consumption are always at the expense of saving
Increases in government spending will close a recessionary expenditure gap
29. When a bank accepts a checkable deposit from a customer, its deposits will increase and its excess reserves will:
Increase by less than the deposits
Decrease
Increase by the same amount as deposits
Increase by more than the deposits
30. An inflation rate of 8% would erode the purchasing power of the dollar by:
8.0 percent
7.4 percent
4.4 percent
12.5 percent
Explanation / Answer
21. Frequency of wage and salary payments. Transaction demand for money is a function of income.
22. 1/2 rubber band ( 40 / 80)
23. Price of a pound will increase to $3 ( See on Y axis)
24. Make no change in the interest rate.
AD associated with Qf requires investment spending of $90 which is achieved at 6% on Investment Demand curve at Point C.
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