The benefit of holding money is ________, while the opportunity cost of holding money is ________.
A. its usefulness in carrying out transactions; the nominal interest rate
B. increased income; lost purchasing power
C. the nominal interest rate; the fees charged by banks
D. the nominal interest rate; its usefulness in carrying out transactions
Answer: A
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A new technology is discovered that results in all new cars producing 50 percent less pollution. The technology costs nothing to produce and cars do not change in price
As a result of the technology, there is a reduction in the number of visits people make to the doctor to complain of breathing difficulties. Which of the following is true? A) Real GDP decreases as a result of fewer doctor services being provided. B) Real GDP is not affected. C) Nominal GDP increases to reflect the improvement in the health of the population. D) Real GDP decreases to reflect the decrease in pollution. E) Nominal GDP does not change and real GDP increases.
In 2008, the wealth of U.S. households fell by ________
A) $11 million B) $11 billion C) $11 trillion D) $11 gajillion
The liquidity trap
A. Refers to the possibility that interest rates may not respond to changes in the money supply. B. Occurs when people wish to hold more and more money as interest rates fall. C. Refers to the vertical portion of the money demand curve. D. Implies that people are willing to hold very limited amounts of money at low interest rates.
What is the likely result from a depreciation of a nation's currency when its economy is already operating at its full-employment level of output?
A. Net exports fall and contribute to demand-pull inflation B. Net exports rise and contribute to demand-pull inflation C. Net exports fall, but equilibrium GDP rises D. Net exports rise, but equilibrium GDP falls