Transactions and precautionary demand, Business Economics

1.Classify each of the following as related to the transactions demand, precautionary demand, or asset (speculative) demand for money. Explain:

(a) Rodrigo keeps $200 in cash in case of emergency.

(b) Kay moves her funds to a new bank that offers higher interest rates on bank accounts.

(c) Ned keeps most of his income in cash or in a zero-interest checking account.

2. Why would the money demand curve turn vertical when interest rates are very high and households are holding very small money balances?

3. If equilibrium real GDP is less than full employment real GDP, what should the Fed do

(a) About interest rates?

(b) The reserve requirement?

(c) With securities?

Posted Date: 3/13/2013 6:40:52 AM | Location : United States







Related Discussions:- Transactions and precautionary demand, Assignment Help, Ask Question on Transactions and precautionary demand, Get Answer, Expert's Help, Transactions and precautionary demand Discussions

Write discussion on Transactions and precautionary demand
Your posts are moderated
Related Questions
What are the predictions of Lewis? For Lewis, Harrod Domar is right to emphasise the task of savings and investment although structural change and a new industrial sector are

you are appointed secretary of the treasury of recently indepent country called rugaria

An individual holds B_0 dollars in a saving accountant at t=0 and earns continuously compounded interest at a nominal rate r. Therefore, the nominal value of his savings at time t

QUESTION (a) Explain what factors might determine the level of investment in an economy. (b) ‘If investment increases it will cause an increase in income. If income increase

First-in First-out Method (FIFO) A technique of inventory valuation based on the concept that merchandise is sold in the order of its acknowledgment. In other words, if an elec

Summary Strategy management Variables Rewards

A. CALCUATE THE OPTIOMAL MONEY GROWTH RATE NEEDED FOR THE FED TO HIT ITS INFLATION TARGET RUN

Discuss  the following in relation to China's market reforms: (1)  the political and economic factors on the basis of which China decided to undertake market reforms; (2) how

Things like housing and autos tend to be affected by changes in interest rates due to financing is typically needed to make such purchases. If financing becomes more costly due to

How do institutions influence development? Institutions development influence: Institutions matter since they give opportunities for people and firms to participate into