A financial innovation, such as the introduction of money market mutual funds, which increases the liquidity of alternatives to money, would
A. increase money demand, shifting the LM curve up and to the left.
B. increase money demand, shifting the LM curve down and to the right.
C. decrease money demand, shifting the LM curve up and to the left.
D. decrease money demand, shifting the LM curve down and to the right.
Answer: D
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Which of the following is true of banks? a. Banks reduce the opportunity cost of holding idle cash
b. Banks act as intermediaries between the government and private investors. c. Banks can reduce risk by lending to rich borrowers. d. Banks reduce the transaction costs of borrowing and lending money. e. Banks can reduce risks by extending more loans.
As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become
A) less wealthy and they buy less. B) more wealthy and they buy more. C) less wealthy and they buy more. D) more wealthy and they buy less.