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Home
—›
Demand for Money
Demand for Money MCQs
?
The price purchasing power of money is defined as
1/ CPI.
1 / Nominal GDP.
1/ Prices.
1/ Real GDP.
?
Real balances are defined as
the change in the money stock divided by GDP
the change in the money stock divided by the price level
the change in the money stock divided by the CPI
the money stock divided a price index.
?
The relevant variables in the demand for money function are
consumption and GDP
consumption and investments
consumption and savings
consumption and nominal interest rates.
?
A _______ in consumption and a _________ in the opportunity costs of holding money will lead to an increase in the demand for money.
rise, rise
rise, fall
fall, fall
fall rise
?
A rise in expected inflation will lead people to _________ their holdings of money.
reduce
increase
holdings of money will remain unchanged.
sometimes increase their holdings only if interest rates increase.
?
If a person is suffering from money illusion when prices increase by 5% then he or she also believes that
a cash increase of 5% is required to maintain their purchasing power.
a cash increase of less than 5% is required to maintain their purchasing power.
a cash increase of more than 5% is required to maintain their purchasing power.
money is frivolous.
?
Assuming a constant rate of spending and a balance of $ at the end of the month, the Tobin-Baumol optimal cash management model predicts that an indiv...
$1000
$2000
$3000
$4000
?
According to the Tobin-Baumol model, if an individual’s monthly nominal income is $4,000, but he is paid on a two-week basis, then his average ...
$1000
$2000
$3000
$4000
?
According to the Tobin-Baumol model, if an individual’s monthly nominal income is $4,000 with half that amount going to pay down is credit card...
$250
$500
$1000
$2000
?
Determining the optimal level of cash holdings for, individuals will help in studying how
the demand for money is affected by changes in GDP.
the demand for money is affected by consumption.
the demand for money is affected by inflation.
the demand for money reacts to changes in the supply of money.
?
From the information in number 7, if the monthly interest rate is 1%, what is the amount of interest lost by holding money in the form of cash given 5...
$2
$3
$4
$5
?
From number 11, what is the value of the interest foregone if the individual decides to make one additional transaction a month?
$0.50
$0.67
$0,80
$1.00
?
What is the marginal cost of holding money in number 12)?
$0.50
$0.67
$0,80
$1.00
?
From 12), what is the optimal number of transactions?
2
3
4
5
?
What is the optimal demand for money from 12?
$100
$200
$300
$400
?
According to the Baumol-Tobin model, higher inflation will ________ the cost of holding idle cash and increase the number of trips to the bank will __...
decrease, decrease.
decrease, increase
increase, increase.
increase, decrease.
?
According to the Quantity Theory of money, if the stock of money is $1,000 billion in the year 2000, the velocity of money is equal to 6, and the pric...
$6,000 billion
$5,000 billion
$4,000 billion
$3,000 billion
?
Which of the following is not a Baumol-Tobin model of the demand for money?
Md= (b/2)1/2 P1/2 y1/2R-1/2
Md= [(b/2) P y]1/2 (1/R1/2)
Md= (b/2)0.5 P0.5 y0.5 R-0.5
Md= (b/2)1/2 P1/2 y1/2R1/2
?
The velocity of circulation can be defined as
the number of times a given quantity of money turns over to produce a given level of spending in the economy.
The volume of purchased goods in the economy in a given period of time.
The dollar value of the amount of money in the economy.
The number of times a currency is goes through the banking system
?
Md= the quantity demanded of money, Ms=the quantity of money in circulation, V=the velocity of circulation, P= the price level, Y= the nominal GNP, an...
MdV=Py
Md/P=1/Vy
MsV=Py
Ms/P=1/VY
