1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
NemiM [27]
3 years ago
5

According to the liquidity preference model: a. an increase in the money supply lowers the equilibrium rate of interest. b. a de

crease in the money supply lowers the equilibrium rate of interest. c. the money supply curve is a horizontal line. d. the demand for money curve is a vertical line.
Business
2 answers:
Gnom [1K]3 years ago
8 0

Answer:

The correct answer is a. an increase in the money supply lowers the equilibrium rate of interest.

Explanation:

The preference for liquidity is a recurring expression in the study of economics, especially important in Keynesian theory and which assumes that people consider it better to have their savings in liquid form, that is, as money.

This concept, very recurrent in macroeconomics, assumes the existence of an outstanding trend in human and rational behavior whereby individuals prefer to have their assets in an accessible and liquid way compared to other possibilities. Originally, the definition of liquidity preference was coined by Keynes when explaining the concept of monetary demand and its mode of action.

This theory suggests that there is a direct relationship between interest rates or rates and people's preferences in terms of liquidity, since both keeping money effectively and not doing so carry certain costs for them. In other words, saving money can translate into financial gain.

For Keynes, there were three reasons why the individuals who make up the money demand opt for liquidity and money: transactions, caution and speculation.

Zigmanuir [339]3 years ago
3 0

Answer:

A) an increase in the money supply lowers the equilibrium rate of interest.

Explanation:

The liquidity preference theory states that investors, companies or even common individuals will require a higher return rate from long term investments or projects since they all prefer liquidity. In order to offset the preference for liquidity, higher returns must be obtained. This concept is based on the premise that investors are risk adverse, and liquid investments will always be much safer than illiquid investment which carry much higher risks. Therefore, illiquid investments must yield higher returns in order to a tract investors.

An increase in the money supply will always decrease the price of money (interest rate) simply because a higher supply lowers the equilibrium price. If investors hold too much cash, they will not face risks, but they will also not be earning significant profits. So they have to balance out the risks of investing and the safety of cash or near cash investments. The more cash available, the lower the interest rate, and the more long term riskier investments will be made.

You might be interested in
Sage Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $384,300. The estimated fair val
maria [59]

Answer: See explanation

Explanation:

The following can be calculated from the information given:

Total Asset Fair Value which will be:

= Land + Building + Equipment

= 73200 + 268400 + 97600

= $439200

Recorder Amount will now be:

Land = 73200 / 439200 × 384300

Land = 64050

Building = 268400 / 439200 × 384300

Building = 234850

Equipment = 97600 / 439200 × 384300

Equipment = 85400

3 0
3 years ago
Where could an identity theft access your personal information?
lisov135 [29]
C is correct answer ......
6 0
3 years ago
, suppose the book value of the debt issue is $70 million. In addition, the company has a second debt issue on the market, a zer
vlada-n [284]

Answer: See explanation

Explanation:

a. The company's total book value of debt will be:

= Value of debt + Value of zero coupon bonds

= $70 million + $100 million

= $170 million

b. The market value will be:

= Quoted price × Par value

= ($70 × 1.08) + ($100 × 0.61)

= $75.6 + $61

= $136.6 million

c. The aftertax cost of debt will be:

= (1 - Tax rate) × Pre tax cost of debt

= (1 - 35%) × 5.7%

= 65% × 5.7%

= 3.7%

5 0
3 years ago
Patagonia, a California-based clothing company, is deeply committed to the environment. The company makes fleece jackets out of
velikii [3]

Answer: Sustainable marketing                    

 

Explanation: In simple words, sustainable marketing refers to the process in which an organisation markets its product in such a way that demands of the current consumers could be satisfied to an appropriate extent and the future generations too get their fair share of the product.

Firms doing such marketing focuses on making their image of an environment friendly organisation and wants to attract customers on the basis of their sustainable view towards growth.

In the given case, company is using Eco-friendly processes in their production and is also adverting their product by sending a message of being Eco- friendly. Hence we can conclude that the company is involved in sustainable marketing.        

8 0
3 years ago
Cambridge Co. uses the allowance method. During January 2019, Cambridge writes off a $640 customer account balance when it becom
julia-pushkina [17]

Answer:

A. not affect expenses in 2019.

Explanation:

Using the allowance method, when the amount is written off , the account receivable account is credited whereas the allowance for doubtful debts is debited

Moreover, it does not affect the income statement as there is no expenses incurred or no revenue earned is recorded

So, in this case, there is no affect on expenses account

8 0
3 years ago
Other questions:
  • What is the difference between a checking account debit card and a gift card?
    9·1 answer
  • On december 1, 2016, escobar consulting, which uses a calendar year as its fiscal year, signs a $4,000, 12%, four-month note pay
    12·1 answer
  • Shenshen Zhongxing Telecom (ZTE) is a Chinese company that is the only telecommunications company in China that produces and mar
    5·1 answer
  • _____ occurs when investors earn interest in the current time period on interest earned in previous time periods.
    5·1 answer
  • An agency coupled with an interest means: Select one: a. either party may terminate the agency at any time. b. the agency may no
    15·1 answer
  • Which is not an intensity level of distribution?
    14·1 answer
  • How does the book value of shares of stock differ from the market value of shares of stock? Use a real-world example in your ans
    7·1 answer
  • John, who has just completed his first finance course, is unsure whether he should take a course in business analysis and valuat
    9·1 answer
  • You are the manager of a firm that manufactures front and rear windshields for the automobile industry. Due to economies of scal
    13·1 answer
  • In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!