Money Demand and Interest Rates Quiz

Government regulations do not typically affect money demand as other factors do.

Money demand decreases when interest rates rise according to the liquidity preference theory.

There is a positive relationship between money demand and economic activity.

Money demand increases when income levels increase according to Keynesian economics.

Nominal interest rates increase when inflation increases according to the Fisher effect.

The transaction motive for holding money refers to holding it for day-to-day transactions.

Money serves various functions including medium of exchange, store of value, and unit of account.

Corporate bonds are not considered as part of the money supply M2 in the United States.

In classical economics, interest rates are not considered as the sole determinant of money demand.

The opportunity cost of holding money is the interest that could have been earned from investments.

The Federal Reserve regulates the money supply to influence money demand and interest rates.

Velocity of money refers to the speed at which money circulates in the economy.

An increase in transaction costs leads to a decrease in money demand according to the Baumol-Tobin model.

Precautionary demand for money refers to holding money to cover unexpected expenses.

There is an inverse relationship between money demand and the speculative motive.

The Baumol-Tobin model suggests that people hold money because it is less risky than other assets.

Expectations regarding future interest rates refer to predictions about future monetary policy.

Fees charged by banks for account maintenance are an example of a transaction cost associated with holding money.