36. According to liquidity-preference theory, why is the g? money-demand curve downward slopin a. because interest...
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...
2. The theory of liquidity preference and the
downward-slopingaggregate demand curve
The following graph shows the money market in a hypothetical
economy. The central bank in this economy is called the Fed. Assume
that the Fed fixes the quantity of money supplied.
Suppose the price level increases from 90 to 105.
Shift the appropriate curve on the graph to show the impact of
an increase in the overall price level on the market for money.
After the increase in the...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual sell bonds causing interest rates to fall B. Individuals sell bonds causing interest rates to rise C. Individuals buy bond causing interest rates to fall D. Individuals buy bonds causing interest rates to rise 31. If the money demand curve shifts to the left. Interest rates ----and bond prices A. Fall; rise B. Fall; fall C. Rise; rise D. Rise;fall 32. When the growth...
True of False.c) According to the theory of liquidity preference, interest rates should go up when there is a decrease in money supply. d) Credit Cards are considered money because they are a medium of exchange. e) Gold is an example of fiat money.
7. According to the theory of liquidity preference, decreasing the money supply will nominal interest rates in the short run, and, according to the Fisher effect, decreasing the money supply will nominal interest rates in the long run. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase 8. If neither investment nor consumption depends on the interest rate, then the IS curve is , and_ policy has no effect on output. A) vertical; monetary B) horizontal; monetary...
The implication of theory of liquidity preference on the interest rate explains the downward sloping money demand curve. Analyse this using an appropriate diagram.
Compare quantitiy theory of money and liquidity preference theory in terms of determinants of money demand, interest elasticity and transmission mechanism
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...
Generally, when economists talk of the interest rate what are
they talking about?
For the CPI, what is the base year? a. It is the year the CPI first appeared. O b. It is the benchmark against which other years are compared, and it changes each year. O c. It is the year prior to the year for which the CPI is calculated. O d. It is the benchmark against which other years are compared, and it changes occasionally. Price...
If expected inflation is constant, then when the nominal interest rate falls, the real interest rate O A. falls by more than the change in the nominal interest rate. falls by the change in the nominal interest rate. Oc rises by the change in the nominal interest rate. OD.rises by more than the change in the nominal interest rate. QUESTION 15 According to liquidity preference theory, if there were a surplus of money, then O A. the interest rate would...