Why does a high interest rate discourage people from holding their money in cash?
(A) They are fearful of inflation.
(B) They cannot be sure that cash will hold its value.
(C) They are more concerned that it will be stolen.
(D) They can earn interest on the cash if it is invested.
Ans: (D) They can earn interest on the cash if it is invested.
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Monetary policy credibility has the benefit of ________
A) stabilizing inflation in the short run when faced with positive demand shocks B) stabilizing economic activity in the short run when faced with positive demand shocks C) transmitting the effect of aggregate demand shocks onto short-run aggregate supply D) enhancing the job opportunities of Federal Reserve officials after they leave the central bank
If the percentage increase in nominal wage rates is less than the percentage increase in the price level, then:
a. real wage rate rises and the unemployment rate falls. b. both real wage rate and the unemployment rate rises. c. both real wage rate and the unemployment rate falls. d. real wage rate rises and the unemployment rate remains unchanged. e. both real wage rate and the unemployment rate remains unchanged.