M1 differs from M2 in that:
A. M2 includes savings deposits, small-denomination time deposits, and money market mutual funds that are not included in M1.
B. M1 includes currency and balances held in checking accounts, which are not included in M2.
C. the assets in M2 are more liquid than the assets in M1.
D. M1 is a broader measure of the money supply than M2.
Answer: A
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A bank that mismatches its asset and liability maturities is
A) trying to reduce credit risk. B) willingly accepting greater credit risk. C) essentially engaging in interest-rate speculation. D) trying to protect itself against interest rate movements.
In the year that a bakery buys a new $100,000 oven by borrowing at a real interest rate of 5 percent, the oven adds $22,000 to bread sales, depreciates by $8000, and requires $3000 in natural gas and maintenance
Since the MPK is ________ the user cost of capital, the bakery should ________. A) above, shut down the oven B) above, consider buying more ovens C) below, shut down the oven D) below, consider buying more ovens