Author Question: Phil and Kelly have always wanted to take a cruise. Although willing to pay 5,000 for a Caribbean ... (Read 74 times)

Sufayan.ah · **on:** Jun 30, 2018

Phil and Kelly have always wanted to take a cruise. Although willing to pay 5,000 for a Caribbean cruise for two, they were able to purchase a cruise vacation for two for 3,500 . Their total consumer surplus amounted to:
a. 750.
b. 5,000.
c. 1,500.
d. 3,500.

Question 2

Describe what happens to nominal and real interest rates, investment and aggregate demand when money supply shifts right or left, other things equal. When money demand shifts right or left.

nhea · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

c

Answer to Question 2

Whenever nominal interest rates increase in the money market, for given inflationary expectations, it will also increase real interest rates and decrease investment and aggregate demand. That would happen with either a decrease in the money supply curve or an increase in the money demand curve.

Whenever nominal interest rates decrease in the money market, for given inflationary expectations, it will also decrease real interest rates and increase investment and aggregate demand. That would happen with either an increase in the money supply curve or a decrease in the money demand curve.