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• 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.

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manhokwe tawanda
manhokwe tawandaLv10
26 Feb 2021

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Related questions

• 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.

• When the Fed conducts open market operations, the Fed buys and sells government securities to:

A) the private sector. B) foreign countries only. C) state and local government agencies only. D) the U.S. Treasury.

An open-market purchase of government bonds by the Fed results in ________ in bank reserves and ________ in the supply of money.

A) an increase; a decrease B) a decrease; a decrease C) an increase; an increase D) a decrease; an increase •

A decrease in the required reserve ratio:

A) will increase the money supply. B) will decrease the money supply. C) will not change the money supply. D) will decrease the discount rate.

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

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

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

A. Match the correct motive (Precautionary Demand for money / Speculative Demand for money / Transactional Demand for Money) for holding money to the following definitions:

1. The stock of money people hold to take advantage of future changes in the prices of financial assets other than money.

2. The stock of money people hold to pay unpredictable expenses.

3. The stock of money people hold to pay everyday predictable expenses.

 

B. Identify the motive for holding money in the following scenario:

Musashi moves to a smaller apartment. Because of the lower monthly rent, he places a larger share of funds from his paycheck in a retirement fund and a smaller share in his savings account. This is an example of a decrease in Musashi's ____________________ demand for money.

C. Complete the following statement about the relationship between the interest rate and speculative balances.

As the interest rate rises, the opportunity cost of holding money _______________  and people ______________ their speculative balances. 

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