When nominal interest rates on financial assets are low, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________.

When nominal interest rates on financial assets are low, the opportunity cost of holding money is , so the quantity of money demanded by households and firms will be .

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter7: Inflation

Section: Chapter Questions

Problem 16SQ

See similar textbooks

Similar questions

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. the quantity demanded of financial capital at any given interest rate will remain unchanged. the quantity demanded of financial capital at any given interest rate will shift to the left. the quantity demanded of financial capital at any given interest rate will shift to the right. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.
When consumers and businesses have greater confidence that they will be able to repay loans in the future: The quantity supplied of financial capital at any given interest rate will shift to the right The quantity demanded of financial capital at any given interest rate will shift to the right The quantity demanded of financial capital at any given interest rate will shift to the left The quantity supplied of financial capital at any given interest rate will shift to the left
Total demand for money (Dm) = Transactions demand (D;) + Asset demand for money (Da) (a) Assume that each dollar held for transactions purposes is spent on the average five times per year to buy final goods and services. If the nominal GDP is $10,000 billion ($10 trillion), what is the transaction demand (Di)? $ billion, because (b) The table below shows the asset demand at certain rates of interest. Using your answer to part (a) complete the table to show the total demand for money at various rates of interest. Interest rate Asset demand Total demand (in %) (billions), (Da) (billions), (Dm) 10 $ 30 $. 8 60 6 90 4 120 (c) If the money supply is $2,060 billion, what will be the equilibrium rate of interest? money supply (Sm) is equal to total demand (Dm). (d) If the money supply rises, the equilibrium rate of interest will (rise, fall, stay the same ). (e) If GDP rises, the equilibrium rate of interest will ( rise, fall, stay the same ). %, where
Consider this frugal ungoverned closed economy with a money market. C = 100 + 0.3Y Id = 700 – 200r MD 500 – 800r MS = 380 What is the equilibrium level of aggregate output/income (Y) for this economy?
If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.
Which of the following statements concerning the demand for money is false? The speculative demand for money varies directly with the level of national income. The transactions, precautionary, and speculative demands for money all vary inversely with the level of interest. The transactions demand for money is influenced by both the level of income and the interest rate.
Assuming that GDP is fixed, fill in the missing values for Total Amount of Money Demanded Transactions demand = 1,050 Money Supply 1 (Ms1) = 2,850 Money Supply 2 (Ms2) = 2,250 Money Demanded for Total Amount of Rate of Interest Asset Purposes Money Demanded 18% 600 Number 16% 1,200 Number 14% 1,800 Number 12% 2,400 Number 10% 3,000 Number At money supply Ms1, the equilibrium interest rate is Number At money supply Ms2, the equilibrium interest rate is Number
If nominal GDP is $1,200 billion and, on average, each dollar is spent three times in the economy over a year, then the quantity of money demanded for transactions purposes will be Multiple Choice 3,600 1,200 800 400 600
The economy of Dream Island, which is isolated from the rest of the world, has the supply of loanable funds schedule and the demand for loanable funds schedule shown in the table below. As it happens, all of the supplies of loanable funds are from households' savings and the entre demand for loanable funds is from firms' investment demand. Real interest rate (percent per year) Supply of loanable funds (2005 dollars) Demand for loanable funds (2005 dollars) 5 2,000 5,000 7 3,000 4,000 9 4,000 3,000 11 5,000 2,000 a) Draw the demand and supply curves.
Which answer do you guys think is the correct one?
In the United States, corporate profits tend to move _____. This means that when the economy is experiencing -- corporate profits decrease.
The following table shows a money demand schedule, which is the quantity of money demanded at various price levels ( P ).Fill in the Value of Money column in the following table.Price Level (P) Value of Money (1/P) Quantity of Money Demanded (Billions of dollars)1.00 ______ 1.51.33 _______2.02.00 _______3.54.00 _______ 7.0Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits.Assume that the Fed initially fixes the quantity of money supplied at $3.5 billion.Use the orange line (square symbol) to plot the initial money supply ( MS1 ) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve.