How have depository institutions made innovations that have ...

[lracut11]

How have depository institutions made innovations that have influenced the composition of money?
 
  What will be an ideal response?

Question 2

Using Figure 15.1, identify which demand curve would belong to that of a purely competitive firm and which would belong to a monopolistically competitive firm and explain your reasoning.
 
  What will be an ideal response?

[Jsherida]

Answer to Question 1

Checking deposits at thrift institutions such as S&L's savings banks, and credit unions are examples of deposits that were created by innovations in the 1980s and 1990s. These deposits have become an increasingly large percentage of M1 . Savings deposits have decreased as a percentage of M2, while time deposits and money market mutual funds have increased, and checking deposits at commercial banks have become a decreasing percentage of M1 .

Answer to Question 2

The demand curve that a monopolistic competitor faces is likely to be less elastic than the demand curve that a perfectly competitive firm faces. Demand is more elastic than the demand curve that a monopolist faces because close substitutes for the products of a monopolistic competitor are available. Therefore D1 belongs to the purely competitive firm and D2 belongs to the monopolistically competitive firm.

[lracut11]

TYSM

[bblaney]

Gracias!