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Under specified assumptions, derive the square-root formula of the Baumol-Tobin's inventory model of transactions demand for money and briefly describe the effect of a one period increase in the price level on the demand for money. How would your answer change if real transaction costs decrease simultaneously with the one-period increase in the price level? Explain carefully and illustrate your answers with a diagram.
The monetarists have demonstrated that the early Keynesians were wrong in saying that money doesn't matter at all to economic activity. Therefore, we should accept the monetarist position that money is all that matters". Do you agree? Why? Why not?
When measuring price levels in the economy (such as when calculating the CPI index), why is a weighted average used? Because we require giving greater emphasis to prices at whi
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The Hypothesis of Rational Expectations : In the General Theory (Keynes, 1936) we noted that the state of expectations was taken as given. There was, in addition, explici
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given the cost function as C=0.3Q3-2Q2+13Q+25,find the supply function
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The Law for Diminishing Marginal Returns - As use of an input increases in equal increments, a point will be approched at which the resulting additions to output decreases
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