Homework Answers
18. The choice to hold money in the form of cash results in foregone interest. Hence, option(B) is correct.
19. Lower interest rates causes the opportunity cost of holding money in the form of cash to decrease . Hence, option(A) is correct.
20. The cost of holding money in the form of cash is equal to whatever interest you would have received at the bank or other investment alternatives. Hence, option(C) is correct.
21. The choice about how and where to hold idle funds is the portfolio decision. Hence, option(D) is correct.
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18) The choice to hold money...
1.5 The ________ demand for money arises out of the need to hold money as a...
1.5 The ________ demand for money arises out of the need to hold money as a medium of exchange. This demand for money is a function of ________. a) precautionary; interest rates b) transactions; national income c) speculative; interest rates d) speculative; national income e) transactions; interest rates
50. Ceteris paribus, the total demand for money curve will increase (shift rightward): A. if interest...
50. Ceteris paribus, the total demand for money curve will increase (shift rightward): A. if interest rates increase. B. if nominal GDP decreases. C. if the price level decreases. D. if nominal GDP increases. 51. Ceteris paribus, the total demand for money curve will decrease (shift leftward): A. if interest rates increase. B. if nominal GDP decreases. C. if the price level increases. D. if nominal GDP increases. 52. Which of the following is correct? A. The asset (speculative) demand...
(Spring 2015 Prelim 2) Which of the following argument is correct? (a) The opportunity cost of...
(Spring 2015 Prelim 2) Which of the following argument is correct? (a) The opportunity cost of holding money increases as the holding return on bonds fall. (b) The price of bonds and interest rate are positively related. (c) Speculative motive of holding bonds refers to the investors' motivation to hold bond when interest rate are high, because they can earn higher interest rate on the bond. (d) Change in real income will shift the money demand curve to the right....
QUESTION 1 0.5 poir The demand for money is mainly influenced by three variables: r (the...
QUESTION 1 0.5 poir The demand for money is mainly influenced by three variables: r (the short-term interest rate), Y (real GDP), and P (the aggregate Price level). Suppose r rises, but Y and P are unchanged. What happens to the quantity of money demanded? r is both the opportunity cost of holding money and the reward for holding bonds. Thus, an increase in r causes people to want to hold of their wealth in the form of money and...
Which of the following explains why the demand for money curve has an inverse relationship between...
Which of the following explains why the demand for money curve has an inverse relationship between the interest rates and the quantity of money demanded? a. As the interest rate falls, the opportunity cost of holding money rises, and people respond by converting cash or checking account balances into interest-bearing financial investments. b. As the interest rate rises, the demand for money curve shifts outward to the right. c. As the interest rate rises, people find it advantageous to borrow...
just the answers please 4. In the market for money, when the Fed decreases the money...
just the answers please
4. In the market for money, when the Fed decreases the money stock, the money supply curve shifts to the and the interest rate , everything else held constant. A) right; rises B) right; falls C) left; falls D) left; rises Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the effect A) liquidity B) price level C) expected-inflation D) income Questions based on "06 Financial Markets -...
1) The time value of money is created by: a) the elimination of the opportunity cost...
1) The time value of money is created by: a) the elimination of the opportunity cost as a consideration b) the fact that the mere passing of time increases the value of money c) the fact that saving money is better than spending it d) the existence of profitable investment alternatives and interest rates 2) In an amortization schedule for a six-year loan with equal annual principal repayments,__. a) the annual payment stays the same b) amount of principal repaid...
the coupon payments on your bond will fall b. the market price of your bond will...
the coupon payments on your bond will fall b. the market price of your bond will rise the market price of your bond will fall d. the par value of your bond will rise. 5. Assets with greater risk Usually go unsold relative to those with lower risk a. b. are generally tax-free to compensate for the increased risk. Tend to have higher yields to compensate for the increased risk. c. Are avoided by rational people. d. Assets with greater...
decided with an adel 14. The endogenous variable in the liquidity preference model is a money...
decided with an adel 14. The endogenous variable in the liquidity preference model is a money supply bmoney demand. price level d. velocity of money. • e interest rate.. 15. In developing countries, financial markets are not developed as the developed countries. Honce most businesses depend on funding from banks. So developing countries depend mostly on .a. indirect finance. b direct finance. c. non-intermediary finance d. government finance. Figure 3-2 QoFM 16. The graph above shows the liquidity preference model....
I. Multiple Choice: Choose the alternative that best completes the statement or answers the question. 1....
I. Multiple Choice: Choose the alternative that best completes the statement or answers the question. 1. Production possibilities frontiers are typically concave (bowed out) from the origin because of the law of supply b. a. there is usually a one-for-one trade-off in resources used in production economies of scale enable firms to reduce the average costs of production as output rises d. c. the opportunity cost of a good rises as the quantity of the good produced increases e. resources...
50. Ceteris paribus, the total demand for money curve will increase (shift rightward): A. if interest rates increase. B. if nominal GDP decreases. C. if the price level decreases. D. if nominal GDP increases. 51. Ceteris paribus, the total demand for money curve will decrease (shift leftward): A. if interest rates increase. B. if nominal GDP decreases. C. if the price level increases. D. if nominal GDP increases. 52. Which of the following is correct? A. The asset (speculative) demand...
(Spring 2015 Prelim 2) Which of the following argument is correct? (a) The opportunity cost of holding money increases as the holding return on bonds fall. (b) The price of bonds and interest rate are positively related. (c) Speculative motive of holding bonds refers to the investors' motivation to hold bond when interest rate are high, because they can earn higher interest rate on the bond. (d) Change in real income will shift the money demand curve to the right....
QUESTION 1 0.5 poir The demand for money is mainly influenced by three variables: r (the short-term interest rate), Y (real GDP), and P (the aggregate Price level). Suppose r rises, but Y and P are unchanged. What happens to the quantity of money demanded? r is both the opportunity cost of holding money and the reward for holding bonds. Thus, an increase in r causes people to want to hold of their wealth in the form of money and...
just the answers please
4. In the market for money, when the Fed decreases the money stock, the money supply curve shifts to the and the interest rate , everything else held constant. A) right; rises B) right; falls C) left; falls D) left; rises Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the effect A) liquidity B) price level C) expected-inflation D) income Questions based on "06 Financial Markets -...
the coupon payments on your bond will fall b. the market price of your bond will rise the market price of your bond will fall d. the par value of your bond will rise. 5. Assets with greater risk Usually go unsold relative to those with lower risk a. b. are generally tax-free to compensate for the increased risk. Tend to have higher yields to compensate for the increased risk. c. Are avoided by rational people. d. Assets with greater...
decided with an adel 14. The endogenous variable in the liquidity preference model is a money supply bmoney demand. price level d. velocity of money. • e interest rate.. 15. In developing countries, financial markets are not developed as the developed countries. Honce most businesses depend on funding from banks. So developing countries depend mostly on .a. indirect finance. b direct finance. c. non-intermediary finance d. government finance. Figure 3-2 QoFM 16. The graph above shows the liquidity preference model....
I. Multiple Choice: Choose the alternative that best completes the statement or answers the question. 1. Production possibilities frontiers are typically concave (bowed out) from the origin because of the law of supply b. a. there is usually a one-for-one trade-off in resources used in production economies of scale enable firms to reduce the average costs of production as output rises d. c. the opportunity cost of a good rises as the quantity of the good produced increases e. resources...
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