The transactions demand for money
A. is determined by the Federal Reserve System.
B. is a function of nominal Gross Domestic Product (GDP).
C. varies directly with the rate of interest.
D. varies inversely with the precautionary demand for money.
Answer: B
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In Keynes' concept of the liquidity trap,
A) monetary policy becomes more effective as interest rates fall below normal. B) people wish to hold more bonds as interest rates fall below normal. C) people wish to hold fewer bonds as interest rates fall below normal. D) there is a need for more liquidity in the banking system.
A likely result of the September 11, 2001 terrorist attacks was ________
A) weaker consumer confidence B) lower business confidence C) a leftward shift of the AD curve D) all of the above E) none of the above