According to Keynes, the Demand for Real Balances Is Best

question 20

Multiple Choice

According to Keynes, the demand for real balances is best expressed by which of the following equations?

• A)M/P = (1/V)Y
• B)M/P = L(Y, i)
• C)M/P = L(Y, i - ⁱM, π^e - ⁱM )
• D)M/V = PY

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Definitions:

Government Spending

The total amount of money spent by the government on various sectors including public services, welfare, defense, and infrastructure.

Industry Regulation

The imposition of rules by a government, along with mechanisms for their enforcement, designed to modify behaviors within specific industries.

Reserve Requirement

A regulation set by central banks determining the minimum amount of reserves that must be held by a commercial bank.

Credit Availability

Credit availability refers to the ease with which individuals and businesses can obtain loans or credit from financial institutions, which can significantly affect economic activity by influencing spending and investment.