Friedman's theory of money demand differs from Keynes' in that
a. Friedman assumes that the demand for money is highly elastic while Keynes assumes money demand is inelastic.
b. Friedman assumes that the money demand function is highly stable while Keynes assumes it is unstable.
c. Friedman assumes that there is only a speculative demand for money while Keynes also considers the precautionary and transactionary demands for money.
d. Friedman assumes that the proportion of income held in the form of money is constant while Keynes believes it varies.
e. both b and d.
E
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If a firm wants to borrow $10 million and the real interest rate increases from 5 percent to 6 percent, then the cost of the investment has increased by
A) $6 million per year. B) $100,000 per year. C) $1 million per year. D) $600,000 per year. E) nothing because the real interest rate is the return the firm will earn on its investment.
According to the efficient markets hypothesis, who should earn the highest risk-adjusted return on stocks?
A) a financial expert who can devote considerable time to research B) the average investor who doesn't do too much research C) someone throwing darts at possible stock picks D) all of the above should earn the same average return