On a diagram where the interest rate and the quantity of money demanded are show

Question

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the transactions demand for money can be represented by:
A. a line parallel to the horizontal axis.
B. a vertical line.
C. a downsloping line or curve from left to right.
D. an upsloping line or curve from left to right.


Banks create money when they:
A. allow loans to mature. C. buy government bonds from households.
B. accept deposits of cash. D. sell government bonds to households.


If the price index rises from 200 to 250, the purchasing power value of the dollar:
A. may either rise or fall. C. will fall by 25 percent.
B. will rise by 25 percent


Stock market price quotations best exemplify money serving as a(n):
A. store of value.
B. unit of account.
C. medium of exchange.
D. index of satisfaction.

Explanation / Answer

1) C. a downsloping line or curve from left to right. 2)D. sell government bonds to households. 3)C. will fall by 25 percent. d)C. medium of exchange.

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