The interest rate on securities affects the demand for money because: A. The interest rate is...
The interest rate on securities affects the demand for money because:
| A. |
The interest rate is the opportunity cost of holding money. |
|
| B. |
The interest rate is the reward for lending money. |
|
| C. |
The interest rate is both the cost of borrowing money and the reward for lending money. |
|
| D. |
The interest rate is the cost of borrowing money. |
|
| E. |
The interest rate influences how much we consume and save. |
Homework Answers
Ans. - (A)
Sincet Interest rate is the opportunity cost of holding money, so it affects the demand for money .
If you have any doubt feel free to ask
Add Answer to:
The interest rate on securities affects the demand for money
because:
A.
The interest rate is...
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...
The money demand curve is: O Upward sloping because the opportunity cost of holding money rises...
The money demand curve is: O Upward sloping because the opportunity cost of holding money rises with the interest rate. O Downward sloping because the opportunity cost of holding money is inversely related to the interest rate. Downward sloping because the opportunity cost of holding money rises as the interest rate falls. O Downward sloping because the opportunity cost of holding money rises as the interest rate rises.
Use the graph to illustrate the effects of inflation on the money market. The interest rate...
Use the graph to illustrate the effects of inflation on the money market. The interest rate is the opportunity cost of holding money. What happens to the opportunity cost of holding money 10 Money supply when inflation occurs? 8 The opportunity cost of holding money decreases. 7 The opportunity cost of holding money increases 6 The opportunity cost of holding money is constant 5 The opportunity cost of holding money increases 4 but then decreases. Money demand 2 1 250...
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...
Below is some data concerning the money market. Rate of Interest Asset Demand for Money $75...
Below is some data concerning the money market. Rate of Interest Asset Demand for Money $75 5% National income $740 720 700 680 660 6% 65 7% 8% 35. Refer to the information above to answer this question. If the transactions demand for money is 10 percent of national income and the supply of money is $135 then what would be the equilibrium interest rate? A) 4%. B) 5%. C) 6%. D) 7%. E) 8%. 36. Refer to the information...
3. Explain how an increase in government spending affects real interest rate, money demand and the...
3. Explain how an increase in government spending affects real interest rate, money demand and the general price level in the long run.
Money Demand According to Liquidity Preference Theery, why is the Money Demand curve downwaed sloping? a...
Money Demand According to Liquidity Preference Theery, why is the Money Demand curve downwaed sloping? a because interest rates rise as the Bank of Canada reduces the quantity of money demanded b. because interest rates fall as the Bank of Canada reduces the Money Supply c because people will want to hold less money as the cost of doing so fals d. because people will want to hold more money as the cost of doing so falls Money Demand and...
Interest Rate MS 4% 3% 2% d Money Demand Quantity of Money At an interest rate...
Interest Rate MS 4% 3% 2% d Money Demand Quantity of Money At an interest rate of 4 percent, there is an excess Select one: a. supply of money equal to the distance between points a and c. b. demand for money equal to the distance between points a and b. C. demand for money equal to the distance between points b and c. d. supply of money equal to the distance between points a and b. Assume that the...
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...
a) what is the market rate of interest? (Hint: The new market interest rate line EF...
a) what is the market rate of interest?
(Hint: The new market interest rate line EF is
parallel to AH.)
b) What is the NPV at point D?
c) c. If Jane wishes to consume the same
quantity in each period, how much should she consume in period 0?
Assume the investment represented by point D is undertaken.
(Round the final answer to 2 decimal places.)
The following figure depicts the financial situation of Jane Fawn. In period O, her...
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...
The money demand curve is: O Upward sloping because the opportunity cost of holding money rises with the interest rate. O Downward sloping because the opportunity cost of holding money is inversely related to the interest rate. Downward sloping because the opportunity cost of holding money rises as the interest rate falls. O Downward sloping because the opportunity cost of holding money rises as the interest rate rises.
Use the graph to illustrate the effects of inflation on the money market. The interest rate is the opportunity cost of holding money. What happens to the opportunity cost of holding money 10 Money supply when inflation occurs? 8 The opportunity cost of holding money decreases. 7 The opportunity cost of holding money increases 6 The opportunity cost of holding money is constant 5 The opportunity cost of holding money increases 4 but then decreases. Money demand 2 1 250...
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...
Below is some data concerning the money market. Rate of Interest Asset Demand for Money $75 5% National income $740 720 700 680 660 6% 65 7% 8% 35. Refer to the information above to answer this question. If the transactions demand for money is 10 percent of national income and the supply of money is $135 then what would be the equilibrium interest rate? A) 4%. B) 5%. C) 6%. D) 7%. E) 8%. 36. Refer to the information...
3. Explain how an increase in government spending affects real interest rate, money demand and the general price level in the long run.
Money Demand According to Liquidity Preference Theery, why is the Money Demand curve downwaed sloping? a because interest rates rise as the Bank of Canada reduces the quantity of money demanded b. because interest rates fall as the Bank of Canada reduces the Money Supply c because people will want to hold less money as the cost of doing so fals d. because people will want to hold more money as the cost of doing so falls Money Demand and...
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a) what is the market rate of interest?
(Hint: The new market interest rate line EF is
parallel to AH.)
b) What is the NPV at point D?
c) c. If Jane wishes to consume the same
quantity in each period, how much should she consume in period 0?
Assume the investment represented by point D is undertaken.
(Round the final answer to 2 decimal places.)
The following figure depicts the financial situation of Jane Fawn. In period O, her...
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