While the classical economists believe that the only demand for money is the transactions demand, the Keynesians believe that there is also a
a. precautionary demand and a speculative demand for money
b. precautionary demand and a velocity demand for money
c. speculative demand and a velocity demand for money
d. speculative demand and a quantity demand for money
e. precautionary demand and a spending demand for money
A
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Which of the following is an important difference between police protection and food and explains why one is commonly provided by government while the other is not?
A) Food can easily be withheld from people who don't pay for it. B) Food is not a traditional concern of government. C) Food is too vital to be entrusted to government. D) Food producers form a powerful political lobby. E) Food provided through government would be inefficient.
Exhibit 20-6 Money, investment and product markets
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In Exhibit 20-6, if the Fed believes the economy is at AD3, how might it engineer a decline in the price level?
A. By decreasing the money supply, the interest rate falls, investment rises, and aggregate demand falls, causing the price level to fall. B. By decreasing the money supply, the interest rate rises, investment rises, and aggregate demand rises, causing the price level to fall. C. By decreasing the money supply, the interest rate rises, investment falls, and aggregate demand falls, causing the price level to fall. D. By increasing the money supply, the interest rate rises, investment rises, and aggregate demand falls, causing the price level to fall.