The Keynesian Theory of Money Demand Emphasizes the Importance of

question 29

Multiple Choice

The Keynesian theory of money demand emphasizes the importance of

• A)a constant velocity.
• B)irrational behavior on the part of some economic agents.
• C)interest rates on the demand for money.
• D)expectations.

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Definitions:

Income Elasticity

A measure of how much the demand for a good or service changes in response to a change in consumers’ income.

Normal Good

A type of good for which demand increases as consumer income rises, and decreases as consumer income falls.

Income Elasticity

Income elasticity of demand measures how much the quantity demanded of a good changes as consumer income changes.

Low-quality Beef

This refers to beef that does not meet certain standards of texture, flavor, or nutritional value.