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 is the difference between wealth and income? Difference between wealth and income: • Wealth , which is a stock value that is the current value of assets for example b


Mercier Corporation's stock is selling for $95. It has just paid a dividend of $5 s share. The expected growth rate in dividends is 8 percent. a. What is the needed rate of retu

I am given that demand formula P=150-3Q, am told I only have 40 tickets to sell and that the MC=0 and I am suppose to figured out how many tickets to sell to maximize total welfare

Question 1: Poverty reduction is generally influenced by changes in average income and income redistribution. Thus, in practice it is hard to adjust to the right balance betwee

There are three industrial firms in a quaint town of South Orange where the municipal government wants to reduce pollution to 120 units from uncontrolled level of 210 units. Three

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

Assume  that national income is initially at its equilibrium level when desired investment falls. We would expect an enhance in national income by an amount equal to the decreasing