Mod 28 Quiz

Generally, the more liquid an asset is:

• the lower its purchasing power.

• the lower its rate of return.

• the higher its capacity to store value over time.

• the higher its rate of return.

• the more difficult it is to convert to cash.

If a checking account has an interest rate of 1% and a government Treasury bill has an interest rate of 3%, the opportunity cost of holding cash in your wallet is:

• zero.

• 0.02%.

• 1%.

• 2%.

• 3%.

If inflation increases from 2% to 5%, the money demand curve will:

• remain constant, but the quantity of money demanded will increase.

• remain constant, but the quantity of money demanded will decrease.

• shift to the left.

• shift to the right.

• be unaffected.

A decrease in the demand for money would result from:

• an increase in income.

• a decrease in real GDP.

• an increase in the price level.

• an increase in nominal GDP.

• an increase in the supply of money.

If the federal reserve wants to lower the interest rate, it will:

• decrease the money supply.

• increase the money supply.

• Increase the money demand.

• mandate a lower interest rate.

• decrease the money demand.