Mod 31 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 during 2007 the interest rate on 1-month Treasury bills was 2.5% and during 2008 the interest rate on 1-month Treasury bills was 2%, one could conclude that:

• the opportunity cost of holding money decreased.

• the opportunity cost of holding money became negative.

• the opportunity cost of holding money increased.

• the opportunity cost of holding money did not change.

• the opportunity cost of holding money is zero both in 2007 and 2008.

The money demand curve shows the relationship between the:

• the money supply and the quantity of money demanded.

• aggregate price level and the nominal quantity of money demanded.

• interest rate and the nominal quantity of money demanded.

• real GDP and the nominal quantity of money demanded.

• inflation rate and unemployment rate.

The money supply curve is:

• downward sloping.

• vertical.

• upward sloping.

• horizontal.

• backward bending.

When the demand for money is greater than the supply of money:

• people offering to sell nonmonetary financial assets will find they must increase the interest rate on these assets pay in order to sell them.

• interest rates will fall.

• the opportunity cost of holding money will fall.

• more people will hold money.

• savings rates will fall as interest rates rise.