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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.

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Sonal Bahl
Sonal BahlLv10
5 Oct 2020

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Related questions

1. Open-market operations refer to:

A) purchases of stocks in the New York Stock Exchange.

B) the purchase or sale of government securities by the Fed.

C) central bank lending to commercial banks.

D) the specifying of loan maximums on stock purchases.

Ā 

2. Money functions as

A) a store of value.

B) a unit of account.

C) a medium of exchange

D) all of the above.

Ā 

3. An increase in nominal GDP increases the demand for money because

A)Ā Ā interest rates will rise

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

C)Ā Ā bond prices will fall

D)Ā  the opportunity cost of holding money will decline

Ā 

4. If the economy is operating within the intermediate or vertical range of the aggregate supply curve, an increase in aggregate demand will produce:

A) a decline in real GDP

B) the same sized multiplier as if the economy were in the horizontal range.

C) a larger multiplier than if the economy were in the horizontal range.

D) a smaller multiplier than if the economy were in the horizontal range.Ā 

Ā 

5. Built-in automatic fiscal stabilization means that:

A) an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy

Ā B) with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.

C) Congress will automatically change the tax structure and expenditure programs to correct upswings and downswing

D) government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

6. It is costly to hold money because:

A) deflation may reduce its purchasing power

B) in doing so one sacrifices interest income.

C) bond prices are highly variable.

D) the velocity of money may decline.Ā 

Which of the following is correct?

a. The asset demand for money is downsloping because the opportunity cost of holding money declines as the interest rate declines.

b.Ā The asset demand for money is downsloping because bond prices and interest rates are directly related.

c.Ā The transaction demand for money is downsloping because the opportunity cost of holding money varies inversely with the interest rates.

d.Ā The asset demand for money is downsloping because the opportunity cost of holding money increases as the interest rate rises.Ā 

If the quantity of money demanded exceeds the quantity supplied
Ā 
A. Interest rates will rise.
B. More people will hold money.
C. The opportunity cost of holding will fall.
D. Interest rates will fall.

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