What factors affect the demand for money?
What will be an ideal response?
Four factors influence the demand for money. First is the price level. An increase in the price level increases the nominal demand for money. Second is the interest rate. An increase in the interest rate raises the opportunity cost of holding money and decreases the quantity of money demanded. Third is real GDP. An increase in real GDP increases the demand for money. Fourth is financial innovation. Innovations that lower the cost of switching between money and other assets decrease the demand for money.
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A decline in real mortgage rates will lead, other things the same, to ________
A) lower demand for housing B) tighter financing constraints C) an increase in residential investment D) a lower relative price of housing
Aiden must decide whether or not to go to law school. He knows that he can earn $50,000 per year with his bachelor's degree, but he expects to earn a minimum of $58,000 per year with the law degree. An economist would advise him to
a. take the job that just requires the bachelor's degree. b. go to law school, but only if he can finish within 3 years. c. go to law school. d. consider costs, revenues, and any nonmonetary job considerations he might have also.