I need help with these questions: 1) People tend to hold more money as A) the pr
ID: 1100747 • Letter: I
Question
I need help with these questions:
1) People tend to hold more money as
A) the price level rises and credit availability rises.
B) the price level rises and credit availability falls.
C) the price level falls and credit availability falls.
D) the price level falls and credit availability rises.
2) Statement I: As interest rates rise, in the long run people tend to hold less money. Statement II: As the rate of inflation rises in the long run, people tend to hold more money.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false
C) Both statements are true.
D) Both statements are false.
3) Which of the following is not a component of M1?
A) Currency
B) Passbook savings account
C) Checking accounts
D) Traveler's checks issued by non-banks
4) Statement I: Our money supply is backed by gold. Statement II: Our money supply consists almost entirely of paper currency; the rest is coins.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
5) The precautionary demand for money arises
A) because people feel relatively certain what the future will bring.
B) because individuals are uncertain about the future.
C) when nominal income exceeds potential income.
D) as important exceptions to the Keynesian model.
E) because the transaction demand for money is never adequate to absorb the money supply.
6) In the early 1980s the savings and loan associations started making _____ loans and paying their shareholders _____ interest rates.
A) riskier, higher
B) riskier, lower
C) less, risky; higher
D) less, risky; lower
7) Banks can increase the supply of money
A) only by increasing the currency in the hands of the public.
B) only by increasing the checking deposits held by the public.
C) by increasing both the currency and the checking deposits in the hands of the public.
D) neither by increasing the currency nor the checking deposits in the hands of the public.
Explanation / Answer
1.C) the price level falls and credit availability falls.
2.B) Statement II is true and statement I is false
3.C) Checking accounts
4.D) Both statements are false.
5.B) because individuals are uncertain about the future.
6.C) less, risky; higher
7.A) only by increasing the currency in the hands of the public.