Author Question: The opportunity cost of holding money is measured by A) the interest yield that could have been ... (Read 75 times)

chads108 · **on:** Jun 30, 2018

The opportunity cost of holding money is measured by

A) the interest yield that could have been earned by holding some other asset.
B) the liquidity of interest-bearing assets.
C) the price of government bonds.
D) a dollar.

Question 2

Why do policymakers sometimes use policies to limit growth?

What will be an ideal response?

jennafosdick · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

Policymakers sometimes use policies to limit growth because factors such as irrational optimism about the economy lead to unsustainable expansion. Left alone, unsustainable expansions can subsequently lead to very severe downturns because irrational optimism can implode suddenly and severely due to multiplier effects. Contractionary policy attempts to reduce this risk of a sudden and extreme contraction by putting gradual left ward pressure on the labor demand curve when policymakers think it is moving too quickly to the right.