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mario62 [17]
2 years ago
13

According to the theory of liquidity preference, if the supply of real money balances exceeds the demand for real money balances

, individuals will: Group of answer choices sell interest-earning assets in order to obtain non-interest-bearing money. purchase interest-earning assets in order to reduce holdings of non-interest-bearing money. purchase more goods and services. be content with their portfolios. PreviousNext
Business
2 answers:
harkovskaia [24]2 years ago
4 0

Answer:

According to the theory of liquidity preference, if the supply of real money balances exceeds the demand for real money balances, Individuals will purchase interest-earning assets in order to reduce holdings of non-interest-bearing money.

Explanation:

Liquidity preference theory states that securities with longer maturity dates should accrue higher interest or premium.

this theory was postulated by Keynes in support of his idea that the demand for liquidity holds speculative power. Therefore, investments that are more liquid are easier to cash in for full value.

Based on the foregoing, if the supply of real money balances exceeds the demand for real money balances, Investors will purchase interest-earning assets in order to reduce holdings of non-interest-bearing money.

Sedbober [7]2 years ago
3 0

Answer:

Sell interest-earning assets in order to obtain non-interest-bearing money

Explanation:

The liquidity preference theory states that investors prefer cash or highly liquid assets to long term assets that carry high risk.

When investors obtain long term assets the charge higher interest rates or premium in order to mitigate associated risk.

In this scenario when the supply of money is higher than demand, there is abundance of non interest bearing money that is highly liquid.

According to the liquidity preference theory investors will sell their interest bearing assets and go for assets with high liquidity (non Interest bearing money)

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Kyle is a strict boss. He is more concerned about the successful execution of tasks than the wellbeing of his employees. As a re
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The answer is option (C) authority-compliance style.

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2 years ago
A competitive firm currently produces and sells 7,500 units of output at a price of $2.50 per unit. The firm's average fixed cos
saveliy_v [14]

Answer:

A. $-2,250

B. The firm should continue to operate in the short run because price is greater than average variable cost

C.The firm should exit in the long run because it is making losses

D. In the long run, prices would increase because in a competitive firm, price must equal average cost. As firms exit the industry, supply would fall and this would lead to an excess of demand over supply. As a result, price would rise

Explanation:

A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.

In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.

Profit = Total revenue - Total cost

( $2.50 -  $2.80) × 7,500 = $-2,250

The firm is earning a loss

A firm should shutdown in the short run if price is less than average variable cost.

Average variable cost = average total cost- average total cost

 $2.80 - $0.75 = $2.05

2.50 > 2.05 so the firm should continue to operate in the short run.

The firm should exit in the long run because it is making losses

In the long run, prices would increase because in a competitive firm, price must equal average cost

I hope my answer helps you.

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