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There are ____ factors that affect the demand for money.
A) three
B) five
C) six
D) seven
Answer: D
Diff: 1 Type: MC Page Ref: 535
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
Describe the factors that affect the demand for money.
Answer: The demand for money using Keynesian and portfolio theories indicates that seven
factors affect the demand for money. These are interest rates, income, payment technology,
wealth, riskiness of other assets, inflation risk, and liquidity of other assets.
Diff: 1 Type: SA Page Ref: 534 - 535
Skill: Recall
Objective List: 21.1 Describe how the demand for money is determined
21.5 Empirical Evidence on the Demand for Money
The evidence on the interest sensitivity of the demand for money suggests that the demand for
money is ____ to interest rates, and there is ____ evidence that a liquidity trap exists.
A) sensitive; substantial
B) sensitive; little
C) insensitive; substantial
D) insensitive; little
Answer: B
Diff: 2 Type: MC Page Ref: 536
Skill: Recall
Objective List: 21.3 Present empirical evidence on how the demand for money is affected by
changes in interest rates and the level of income
In a liquidity trap, monetary policy has ____ effect on aggregate spending because a
change in the money supply has ____ effect on interest rates.
A) no; no
B) no; a large
C) no; a small
D) a large; a large
Answer: A
Diff: 2 Type: MC Page Ref: 536
Skill: Recall
Objective List: 21.3 Present empirical evidence on how the demand for money is affected by
changes in interest rates and the level of income