Why is the money demand curve down sloping?
What will be an ideal response?
We know that the transaction demand curve is a vertical line. This occurs because at a certain nominal GDP, transaction demand for money is constant regardless of the interest rate.
With asset demand for money, however, we know that the interest rate and quantity of money are inversely related. This occurs due to the fact that when the interest rate rises there is a higher opportunity cost to holding money, so demand for money decreases. Conversely, when the interest rate is low, there is little opportunity cost to holding money, so demand for money increases. This produces the down sloping characteristic of the total money demand curve.
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In the presence of Regulation Q, when interest rates would rise, _____
a. the transaction demand for money in the economy would increase b. people would invest in the bond markets c. the economy would grow faster d. people would withdraw money from banks seeking higher interest rates elsewhere e. the U.S. dollar would depreciate
Which of the following is true?
A) Managed equity funds merely hold stocks in the same proportion they are represented in a broad stock market index such as the Dow Jones Industrials. B) Indexed equity funds generally have lower management and operating costs than managed funds. C) Managed equity funds generally outperform indexed equity mutual funds. D) Indexed equity funds generally engage in more stock trading than managed funds.