in their portfolios.In addition,the demand for money depends on total wealth because wealth measures the overall size of the porfolio In contrast,transactions theories of money demand stres the role of money as a medium of exchange.These theories stress that people hold money in order to make purchases.The demand for money depends on the cost of holding money(the interestrate)and the benefit(the ease of making transactions).Money demand,therefore. ends atively on the inte st rate and p sitively on inc om 7i what way does the near money complicate the conduct of monetary policy? 7."Near money"refers to nonmonetary assets that have acquired some of the liquid ity of money.For example,it used to be that assets held primarily as a store of value,such as mutual funds,were inconvenient to buy and sell.Today,mutual funds allow depositors to hold ks and bo and make withdrawals simply by writing checks from their accounts.The existence of near money complicates monetary policy by making the demand for money unstable.As a result,velocity of money becomes unstable,and the quantity of money gives faulty signals about aggregate demand. 8.Describe four problems affecting measurement of the government budge deficit. 8.Standard measures of the budget deficit are imperfect measures of fiscal policy for at least four reasons.First,they do not correct for the effects of inflation.The measured deficit should equal the change in the govemment's real debt,not the change in the non nal debt Second,such measures donot offset changes in govemment liabilitie with changes in govemment assets.To measure the govemment's overall indebtedness, we should subtract government assets from government debt Hence the budget deficit should be measured as the change in debt minus the change in assets.Third,standard measures omit some liabilities altogether,such as the pensions of government workers and accumulated future Social Sec urity ben efits.Fourth.they do ect for the effects of the business cycle. 9.One study found that the elderly who do not have children dissave at about the tcae物e predicts? 9.In this chapter,we discussed two explanations for why the elderly do not dissave as rapidly as the life-cvcle model predicts.First because of the possibility of in case they live longer expe d or hav arge me dical bills.Se ond,they ma want to leave bequests to their children,relatives,or charities.so again,they do not dissave all of their wealth during retirement. If the elderly who do not have children dissave at the same rate as the elderly who do have children,this seems to imply that the reason for low dissaving is the in their portfolios.In addition,the demand for money depends on total wealth because wealth measures the overall size of the portfolio. In contrast,transactions theories of money demand stress the role of money as a medium of exchange.These theories stress that people hold money in order to make purchases.The demand for money depends on the cost of holding money(the interestrate)and the benefit(the ease of making transactions).Money demand,therefore, depends negatively on the interest rate and positively on income. 7 in what way does the existence of near money complicate the conduct of monetary policy? 7.“Near money”refers to nonmonetary assets that have acquired some of the liquidity of money.For example,it used to be that assets held primarily as a store of value,such as mutual funds,were inconvenient to buy and sell.Today,mutual funds allow depositors to hold stocks and bonds and make withdrawals simply by writing checks from their accounts.The existence of near money complicates monetary policy by making the demand for money unstable.As a result,velocity of money becomes unstable, and the quantity of money gives faulty signals about aggregate demand. 8.Describe four problems affecting measurement of the government budget deficit. 8.Standard measures of the budget deficit are imperfect measures of fiscal policy for at least four reasons.First,they do not correct for the effects of inflation.The measured deficit should equal the change in the government’s real debt,not the change in the nominal debt.Second,such measures do not offset changes in government liabilities with changes in government assets.To measure the government’s overall indebtedness, we should subtract government assets from government debt.Hence,the budget deficit should be measured as the change in debt minus the change in assets.Third,standard measures omit some liabilities altogether,such as the pensions of government workers and accumulated future Social Security benefits.Fourth,they do not correct for the effects of the business cycle. 9.One study found that the elderly who do not have children dissave at about the same rate as the elderly who do have children.What might this finding imply about the reason the elderly do not dissave as much as the life-cycle model predicts? 9.In this chapter,we discussed two explanations for why the elderly do not dissave as rapidly as the life-cycle model predicts.First,because of the possibility of unpredictable and costly events,they may keep some precautionary saving as a buffer in case they live longer than expected or have large medical bills.Second,they may want to leave bequests to their children,relatives,or charities,so again,they do not dissave all of their wealth during retirement. If the elderly who do not have children dissave at the same rate as the elderly who do have children,this seems to imply that the reason for low dissaving is the