Which of the following is the opportunity cost of money? A) money is a means of

Question

Which of the following is the opportunity cost of money?
A) money is a means of payment
B) the trouble of having to get money out of the bank
C) the interest forgone by holding money
D) the ability to purchase things at a moment's notice
E) commissions paid to brokers
12.
The money supply curve is vertical because
A) real income does not influence the quantity of money supplied
B) the price level does not influence the level of spending
C) only the interest rate influences the quantity of money supplied
D) the Federal Reserve sets the money supply
E) nominal income does not influence the quantity of money supplied
13.
When there is an excess supply of money in the economy,
A) there is also an excess demand for money
B) there is also an excess demand for bonds
C) there is also an excess supply of bonds
D) the interest rate will rise
E) the Fed must intervene to restore equilibrium
14.
When the price of bonds rises,
A) the Fed will decrease the money supply
B) the Fed will increase the money supply
C) the interest rate will rise
D) the interest rate will fall
E) inflation must be accelerating
15.
Suppose that the equilibrium interest rate is 8 percent, but the actual interest rate is 5 percent. Very quickly,
A) bond prices fall
B) bond prices will rise
C) the interest rate will begin to fluctuate until bondholders reduce their demand for money
D) the primary bond market will start its adjustment process
E) the supply and demand for money will both increase
16.
When the Fed conducts open market sales, we should expect to see the money supply
A) decrease, the interest rate increase, autonomous consumption decrease, business investment decrease, and real GDP decrease
B) increase, the interest rate decrease, autonomous consumption decrease, business investment decrease, and real GDP decrease
C) increase, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP increase
D) decrease, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP decrease
E) decrease, the interest rate increase, autonomous consumption increase, business investment increase, and real GDP increase
17.
Open market purchases of bonds by the Federal Reserve eventually
A) reduce the pressures on bond markets
B) increase real GDP
C) lead to open market sales of bonds
D) increase the interest rate
E) encourage tax increases
18.
In the long run, the crowding-out effect of an increase in government purchases is
A) more complete than in the short run
B) canceled out by increases in infrastructure spending
C) less complete than in the short run
D) canceled out by improved consumer confidence
E) a multiple of the initial change in spending
19.
What will be the effects of a decrease in government spending?
A) an increase in equilibrium GDP, a decrease in money demand, a decrease in the interest rate, and an increase in investment spending
B) a decrease in equilibrium GDP, a decrease in money demand, an increase in the interest rate, and a decrease in investment spending
C) an increase in equilibrium GDP, an increase in money demand, an increase in the interest rate, and an increase in investment spending
D) a decrease in equilibrium GDP, a decrease in money demand, a decrease in the interest rate, and an increase in investment spending
E) an increase in equilibrium GDP, an increase in money demand, an increase in the interest rate, and a decrease in investment spending

Explanation / Answer

B) the trouble of having to get money out of the bank

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