To say an asset is liquid implies that: a. We are only considering U.S. currency b. We are considering any asset that can be sold c. We are focusing on a category of assets that are in a physically liquid form, like oil d. We are considering assets that may be readily converted into a means of payment

To say an asset is liquid implies that: a. We are only considering U.S. currency b. We are considering any asset that can be sold c. We are focusing on a category of assets that are in a physically liquid form, like oil d. We are considering assets that may be readily converted into a means of payment

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 4P

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9. How would you incorporate security considerations/costs into the transactions demand model? What would this imply for the demand for currency in a relatively insecure urban environment (a) compared with a relatively safe one, (b) when owner-identiﬁed smart cards become available? Do these factors affect the demand for demand deposits? How would the proportion of currency to demand deposits be affected in these cases? 10. Can the transactions demand model be used to explain why ﬁnancial innovations in recent decades have reduced the transactions demand for M1? 11. Are transactions demand models useless, as Sprenkle (1969) argued? If they are, how would you explain the demand for M1 or just for demand deposits in the economy?
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