Answer the following statements true (T) or false (F)
1. The transactions demand for money will decrease when income decreases, but it is not much affected by interest rates.
2. Holding money as an asset presents a risk of capital loss.
3. There is an asset demand for money because households and business firms use money as a store of value.
4. A decrease in the nominal GDP, other things remaining the same, will decrease both the total demand for money and the equilibrium rate of interest in the economy.
5. If nominal GDP is $2,000 billion and the amount of money demanded for transactions purposes is $500 billion, then on average each dollar will be spent about four times a year.
1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. TRUE
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What will be an ideal response?
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