What factors can cause the portfolio demand for money to increase?
What will be an ideal response?
The portfolio demand for money arises because money is an asset which can be substituted with other assets in a portfolio. There are five factors that affect the portfolio demand for money; an increase would occur due to (1) an increase in wealth; (2) a lower return on alternative assets; (3) higher expected future interest rates; (4) rising risk of alternative assets; and (5) a decrease in the liquidity of alternative assets.
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What was not a significant cause of the Great Depression?
a. Bank failures b. Stock market crash c. Government fiscal and monetary policy d. Large increase in imports that took jobs away from American workers
Which of the following is NOT a true statement about capital controls?
A) Countries are more able to prevent capital inflows than they were in the 1970s. B) Capital controls may reduce world welfare by preventing capital from moving to its most valuable use. C) It is unclear whether it is best to limit capital inflows, capital outflows, or both. D) Restricting the movement of capital cannot stop a crisis once it has begun.
Which of the following usually leads to currency appreciation?
A. Galloping inflation B. Relatively low interest rates C. Declining real GDP D. Fixed exchange rates
The concept of opportunity cost only applies to societies that operate in a market-based economy.
Answer the following statement true (T) or false (F)