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mario62 [17]
3 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]3 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]3 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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Answer:

Option (B) is correct.

Explanation:

Amount of which adjusting entry required:

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= ($200,000 × 4%) - $2,000

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Bad debt expense A/c      Dr.  $6,000

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(To record the bad debt expense)

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Answer:

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Explanation:

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A standard "money demand" function used by macroeconomists has the form ln( ) = + ln( ) + m β , 0 β1 GDP β2R Where m is the quan
kvasek [131]

Answer:

1.The money demand will rise by 1.154%

2. The money demanded will fall and for a 1% increase in interest , the money demanded will fall by 0.38%

Explanation:

1. Money demand function

ln(m) = β0 +β1 ln(GDP)+β2R

Suppose β1 = 1.5 , β2 = −0.04 , GDP = $ 100 & R = 3%

ln(m) = 1.5 ln ($100) - 0.04 X 0.03

ln(m) = 6.91

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Suppose the GDP increases by 1%; the new GDP will be = $ 101  

ln(m) = 1.5 ln ($101) - 0.04 X 0.03

ln(m) = 6.92

m = 1013.81

If the GDP increases by 1% ,the money demand will rise by 1.154%

2.

If the interest rate increases from 3% to 4%

ln(m) = 1.5 ln ($100) - 0.04 X 0.04  

ln(m) = 6.906155

m = $ 998.400

If the interest rate rises from 3% to 4% , the money demanded will fall and for a 1% increase in interest , the money demanded will fall by 0.38%

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Imagine that a small manufacturing company decides to invest in a materials resources planning (MRP) system. This is a computeri
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The correct answer to this open question is the following.

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Answer:

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