What are the factors that determine the amount of money an individual desires to hold?
What will be an ideal response?
Three main factors: first, the expected return the asset offers compared with the returns offered by other assets; second, the riskiness of the asset's expected return; and third, the asset's liquidity.
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Refer to Figure 23-3. Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP1 to GDP2, and this amount is $400 billion. If the MPC is 0
75, then what is the distance between N and L or by how much did government spending change? A) $10 billion B) $100 billion C) $200 billion D) $300 billion
Assuming perfect capital mobility and flexible exchange rates, then
a. monetary policy is ineffective while fiscal policy is highly effective. b. fiscal policy is completely ineffective while monetary policy is highly effective. c. both monetary policy and fiscal policy are effective. d. monetary policy is less effective than fiscal policy.