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Under specified assumptions, derive the square-root formula of the Baumol-Tobin's inventory model of transactions demand for money and briefly describe the effect of a one period increase in the price level on the demand for money. How would your answer change if real transaction costs decrease simultaneously with the one-period increase in the price level? Explain carefully and illustrate your answers with a diagram.
The monetarists have demonstrated that the early Keynesians were wrong in saying that money doesn't matter at all to economic activity. Therefore, we should accept the monetarist position that money is all that matters". Do you agree? Why? Why not?
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What are the three major types of unemployment? a) Frictional b) Structural and c) Cyclical unemployment. Cyclical unemployment is broadly spread by an economy durin
Suppose that investment spending increases by $10 million, shifting up the aggregate expenditure line and increasing GDP from GDP1 to GDP2. If the MPC is 0.9, then what is the chan
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Ways in which the markets fail and discuss why government intervention is justified and whether government intervention works or not.
Production Function Models
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