the economics of money, banking, and financial markets

133 #

© 2014 Pearson Canada Inc.#

11. In the market for money, an interest rate below equilibrium results in 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: A
    Diff: 1 Type: MC Page Ref: 101
    Skill: Applied
    Objective List: 5.4 Understand how equilibrium interest rates change

5.5 Changes in Equilibrium Interest Rates in the Liquidity Preference Framework

1. 
   

   In the Keynesian liquidity preference framework, an increase in the interest rate causes the
   demand curve for money to ____, everything else held constant.
   A) shift right
   B) shift left
   C) stay where it is
   D) invert
   Answer: C
   Diff: 1 Type: MC Page Ref: 101
   Skill: Applied
   Objective List: 5.5 Examine supply and demand for money using the liquidity preference
   framework

   
   


2. 
   

   A lower level of income causes the demand for money to ____ and the interest rate to
   ____, everything else held constant.
   A) decrease; decrease
   B) decrease; increase
   C) increase; decrease
   D) increase; increase
   Answer: A
   Diff: 1 Type: MC Page Ref: 101
   Skill: Applied
   Objective List: 5.5 Examine supply and demand for money using the liquidity preference
   framework