E) an in real GDP 37) If the interest rate rises from 1 percent to 3 percent, th
ID: 1114153 • Letter: E
Question
E) an in real GDP 37) If the interest rate rises from 1 percent to 3 percent, the opportunity cost of holding money A) quantity of money B) quantity of moncy demanded, falls C) quantity of money supplied, rises D) quantity of money supplied, falls E) demand for money, rises 38) The demand for money is A) positively related to the price level B) positively related to the nominal interest rate C) negatively related to the price level. D) negatively related to real GDP. E) positively related to the real interest rate. The demand for result of A) an increase in real GDP B) a decrease in the real interest rate. C) an increase in the use of credit cards D) a decrease in the price level E) a decrease in the nominal interest rate 40) If real GDP decreases, there is A) an upward movement along the demand for money curve and no shift of the curve B) a downward movement along the demand for money curve and no shift of the curve. shift of the for money curve D) a leftward shift of the demand for money curve E) no movement along the demand for money aurve and the curve does not shuift. 41) The supply of money curve is A) upward sloping, showing the influence of the interest rate. vertical because the quantity of money is fixed at any one moment. d controls the quantity of money supplied.Explanation / Answer
First question is answered below
37.
Correct option: (C)
Reason: There exists an inverse relationship between interest rate and money supply, so as interest rate increases, money supply will decrease.
Secondly, interest rates are opportunity costs of holding money, as consumers could have deposited money and made interest income. So an increase in interest rates increase opportunity cost of holding money.
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