What are the main factors that determine aggregate money demand?
What will be an ideal response?
The three main factors are interest rate, the price level and real national income. A rise in the interest rate causes individuals in the economy to reduce their demand for money. If the price level rises, individual households and firms will spend more money than before. When real national income (GNP) rises the demand for money will also rise.
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Supply curves
A) slope upward. B) slope downward. C) are horizontal. D) can have many shapes.
Consider the game between the teens from the previous question. Instead of being a simultaneous game, suppose it is sequential, with teen A moving first. What is the subgame-perfect equilibrium of this new game?
a. Both Declare. b. Both Ignore/Rebuff. c. It is a mixed strategy equilibrium. d. Teen A Declares and Teen B follows A's action.