the economics of money, banking, and financial markets

132 #

© 2014 Pearson Canada Inc.#

7. 
   

   The opportunity cost of holding money is ____.
   A) the level of income
   B) the price level
   C) the interest rate
   D) the discount rate
   Answer: C
   Diff: 1 Type: MC Page Ref: 100
   Skill: Recall
   Objective List: 5.4 Understand how equilibrium interest rates change

   
   


8. 
   

   An increase in the interest rate ____.
   A) increases the demand for money
   B) increases the quantity of money demanded
   C) decreases the demand for money
   D) decreases the quantity of money demanded
   Answer: D
   Diff: 1 Type: MC Page Ref: 100
   Skill: Applied
   Objective List: 5.4 Understand how equilibrium interest rates change

   
   


9. 
   

   If there is an excess supply of money ____.
   A) individuals sell bonds, causing the interest rate to rise
   B) individuals sell bonds, causing the interest rate to fall
   C) individuals buy bonds, causing interest rates to fall
   D) individuals buy bonds, causing interest rates to rise
   Answer: C
   Diff: 1 Type: MC Page Ref: 101
   Skill: Applied
   Objective List: 5.4 Understand how equilibrium interest rates change

   
   


10. 
    

    When the interest rate is above the equilibrium interest rate, there is an excess ____
    money and the interest rate will ____.
    A) demand for; rise
    B) demand for; fall
    C) supply of; fall
    D) supply of; rise
    Answer: C
    Diff: 1 Type: MC Page Ref: 101
    Skill: Applied
    Objective List: 5.4 Understand how equilibrium interest rates change