ECON-002 Lecture Notes - Federal Funds Rate, Liquidity Preference, Demand Curve

• In terms of the demand for money, the interest rate is:

A) the price of borrowing money.

B) the return on money that is saved for the future.

C) the rate at which current consumption can be exchanged for future consumption.

D) the opportunity cost of holding money.

An increase in nominal GDP increases the demand for money because:

A. interest rates will rise.

B. more money is needed to finance a larger volume of transactions.

C. bond prices will fall.

D. the opportunity cost of holding money will decline.

An increase in nominal GDP increases the demand for money because:

A. interest rates will rise.

B. more money is needed to finance a larger volume of transactions.

C. bond prices will fall.

D. the opportunity cost of holding money will decline