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If people expect nominal interest rates to be lower in the future, the expected return on bonds
____, and the demand for money ____.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
Answer: B
Diff: 2 Type: MC Page Ref: 534 - 535
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
Keynes argued that when interest rates were low relative to some normal value, people
would expect bond prices to ____ so the quantity of money demanded would ____.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Answer: C
Diff: 2 Type: MC Page Ref: 534 - 535
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
Keynes argued that when interest rates were high relative to some normal value, people
would expect bond prices to ____ , so the quantity of money demanded would ____.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
Answer: B
Diff: 2 Type: MC Page Ref: 535
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
According to Keynes's theory of liquidity preference, velocity increases when ____.
A) income increases
B) wealth increases
C) brokerage commissions increase
D) interest rates increase
Answer: D
Diff: 2 Type: MC Page Ref: 534 - 535
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money