Holding money provides an benefit because it is a means of payment because its o

Question

Holding money provides an benefit because it is a means of payment because its opportunity cost is low. Which is constant no matter how much money is held The opportunity cost of holding money is determined by the inflation rate is zero because money earns no interest equals the nominal interest rate on bonds equals the real interest rate on bonds The quantity of money demanded increases if. the supply of money increases the nominal interest rate falls banks increase the interest rate on deposits the price of a bond falls If the Fed increases the quantity of money, people will be holding too much money, so they buy bonds and the interest rate rises too much money, so they buy bonds and the interest rate falls the quantity of money they demand and banks will hold more more money and will increase their demand for money In the long run, money market equilibrium determines the real interest rate price level nominal interest rate economic grow the rate If the quantity theory of money is correct and other things man inmost in the quantity of money increases

Explanation / Answer

1. A. because it is a means of payment

2. C. equals the nominal interest rate on bonds

3. B. the nominal interest rate falls as now people earn less interest on their deposits

4. D. more money and will increase their demand for money because increase in money supply increases the price of commodities.

5. B. Price level

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