15 Questions
Speculative motive exists when people choose to hold money without any interest rate or invest it to get more income.
True
People will buy bonds when they expect the interest rate to decrease and the price to increase in the future.
True
The demand for money increases when the income level decreases.
False
An increase in the price level causes the demand for money to decrease.
False
The supply of money is controlled by the central bank.
True
An expansionary monetary policy implemented by the government leads to a decrease in the money supply.
False
During a business cycle expansion, income is rising, which leads to a decrease in the demand for money.
False
When the price level rises, people want to hold more money.
True
An increase in the money supply leads to a decrease in the equilibrium interest rate.
True
The demand curve for money shifts rightward when government implements contractionary monetary policy.
False
What is the speculative motive for holding money?
To earn profit by buying shares and bonds
How does an increase in income affect the demand for money?
Causes an increase in demand for money as income rises
What effect does an increase in the price level have on the demand for money?
Causes the demand for money to increase
How does an expansionary monetary policy implemented by the government affect the money supply?
Increases the money supply
What happens to the equilibrium interest rate when the money supply increases?
It decreases
Test your knowledge about the factors that influence the demand and supply curves of loanable funds, leading to changes in the equilibrium interest rate. Learn about the impact of wealth, expected returns, risk, and more on the interest rate.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
