Question 1

Keynes's model of the demand for money suggests that velocity is

Accepted Answer

The answer of Keynes's model of the demand for money...

Question 2

Keynes's liquidity preference theory indicates that the demand for money is ________ related to ________.

Accepted Answer

According to Keynes's liquidity preference theory, the demand for money is negatively related to interest rates. As interest rates increase, the opportunity cost of holding money increases, leading to a decrease in the demand for money. Conversely, as interest rates decrease, the opportunity cost of holding money decreases, leading to an increase in the demand for money.

Question 3

The theory of portfolio choice indicates that higher interest rates make money ________ desirable,and the demand for real money balances ________.

Accepted Answer

According to the theory of portfolio choice, higher interest rates make money less desirable as alternative investments such as bonds become more attractive. Therefore, the demand for real money balances falls as people shift their portfolio towards investments with higher returns.

Question 4

Explain the Keynesian theory of money demand.What motives did Keynes think determined money demand? What are the two reasons why Keynes thought velocity could not be treated as a constant?

Accepted Answer

The answer of Explain the Keynesian theory of money demand.What...

Question 5

As interest rates rise,the expected absolute return of money ________,money's expected return relative to bonds ________.

Accepted Answer

As interest rates rise, the expected absolute return of money does not change because the return on holding money (not investing it) is essentially zero. However, money's expected return relative to bonds decreases because bonds, which pay interest, become more attractive as their yields increase with rising interest rates.

Question 6

Keynes's model of the demand for money suggests that velocity is ________ related to ________.

Accepted Answer

The answer of Keynes's model of the demand for money...

Question 7

The Keynesian demand for real balances can be expressed as

Accepted Answer

The Keynesian demand for real balances considers both interest rates (i) and income (Y) as factors affecting the demand for money, thus it is expressed as Md/P = f(i,Y).

Question 8

Keynes's liquidity preference theory indicates that the demand for money is

Accepted Answer

According to Keynes's liquidity preference theory, people demand money for both transactional purposes and precautionary reasons. The demand for money for these purposes is inversely related to interest rates, meaning that as interest rates increase, people will hold less money and seek higher returns elsewhere. Therefore, choice C is the best answer.

Question 9

Because interest rates have substantial fluctuations,the ________ theory of the demand for money indicates that velocity has substantial fluctuations as well.

Accepted Answer

The liquidity preference theory of the demand for money developed by John Maynard Keynes focuses on the desire of individuals to hold money as a store of value in addition to its medium of exchange role. According to this theory, the demand for money is a function of the interest rate, income level, and the degree of uncertainty in the economy. Therefore, if interest rates have substantial fluctuations, the demand for money will also fluctuate, leading to substantial changes in velocity. The classical and Cambridge theories of the demand for money are more focused on the transactional role of money and assume a stable velocity of money. The Pigouvian theory is related to externalities and does not directly apply to the demand for money.

Question 10

The portfolio theories of money demand state that when income (and therefore,wealth)is higher,the demand for the money asset will ________ and the demand for real money balances will be ________.

Accepted Answer

According to portfolio theories of money demand, as income (and thus wealth) increases, individuals are likely to hold a larger portion of their wealth in liquid form (money), leading to a higher demand for the money asset and consequently, a higher demand for real money balances.

Question 11

Keynes's theory of the demand for money is consistent with ________ movements in ________.

Accepted Answer

The answer of Keynes's theory of the demand for money...

Question 12

Keynes's theory of the demand for money implies that velocity is

Accepted Answer

According to Keynes's theory, the demand for money is influenced by interest rates. As interest rates change, people will hold more or less money and thereby influence the velocity of circulation. Therefore, velocity is not constant but fluctuates with movements in interest rates.

Question 13

According to Keynes's theory of liquidity preference,velocity increases when

Accepted Answer

The answer of According to Keynes's theory of liquidity preference,velocity...

Question 14

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to ________ so the quantity of money demanded would ________.

Accepted Answer

Keynes argued that when interest rates are low, people expect them to rise in the future, which would decrease bond prices (since bond prices move inversely to interest rates). Therefore, anticipating lower bond prices, people would demand more money (liquidity preference) instead of holding bonds, leading to an increase in the quantity of money demanded.

Question 15

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

Accepted Answer

According to Keynes, when interest rates are high relative to some normal value, people will expect bond prices to fall, which means they will want to sell their bonds. In order to sell their bonds, they will need to have cash on hand, which means they will want to increase the quantity of money demanded. Therefore, the correct answer is B.

Question 16

Keynes's liquidity preference theory indicates that the demand for money

Accepted Answer

According to Keynes's liquidity preference theory, the demand for money is a function of both income and interest rates. As income increases, so does the demand for money as individuals have more funds to save and hold in the form of money. Similarly, as interest rates increase, the opportunity cost of holding money increases, leading to a decrease in the demand for money. Therefore, both income and interest rates have an effect on the demand for money.

Question 17

The portfolio theories of money demand state that the demand for real money balances is ________ related to income and ________ related to the nominal interest rate.

Accepted Answer

The portfolio theories of money demand suggest that as income increases, individuals demand more real money balances for transactions and other purposes, indicating a positive relationship. Conversely, as the nominal interest rate increases, holding money becomes more costly (since individuals forego interest they could earn on other assets), leading to a negative relationship between the demand for real money balances and the nominal interest rate.

Question 18

The theory of portfolio choice indicates that factors affecting the demand for money include

Accepted Answer

The theory of portfolio choice suggests that people hold money to be able to exchange it for other assets, such as stocks or bonds, when they become available at favorable prices. The factors affecting the demand for money include income (as higher income increases the demand for money), nominal interest rates (as higher interest rates decrease the demand for money), and liquidity of other assets (as more liquid assets decrease the demand for money). Therefore, all of the above choices are correct.

Question 19

The theory of portfolio choice indicates that factors affecting the demand for money include

Accepted Answer

The theory of portfolio choice suggests that the demand for money is influenced by factors such as income (as higher income means a greater demand for money), nominal interest rate (as higher interest rates mean a lower demand for money), and the riskiness of money (as greater perceived risk means a lower demand for money). Therefore, all of the above options are correct.

Question 20

Keynes's theory of the demand for money is consistent with

Accepted Answer

The answer of Keynes's theory of the demand for money...

Quiz 19: Quantity Theory, inflation and the Demand for Money

Keynes's model of the demand for money suggests that velocity is

Keynes's liquidity preference theory indicates that the demand for money is related to .

The theory of portfolio choice indicates that higher interest rates make money desirable,and the demand for real money balances .

Explain the Keynesian theory of money demand.What motives did Keynes think determined money demand? What are the two reasons why Keynes thought velocity could not be treated as a constant?

As interest rates rise,the expected absolute return of money ,money's expected return relative to bonds .

Keynes's model of the demand for money suggests that velocity is related to .

The Keynesian demand for real balances can be expressed as

Keynes's liquidity preference theory indicates that the demand for money is

Because interest rates have substantial fluctuations,the ________ theory of the demand for money indicates that velocity has substantial fluctuations as well.

The portfolio theories of money demand state that when income (and therefore,wealth) is higher,the demand for the money asset will and the demand for real money balances will be .

Keynes's theory of the demand for money is consistent with movements in .

Keynes's theory of the demand for money implies that velocity is

According to Keynes's theory of liquidity preference,velocity increases when

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to so the quantity of money demanded would .

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ,so the quantity of money demanded would .

Keynes's liquidity preference theory indicates that the demand for money

The portfolio theories of money demand state that the demand for real money balances is related to income and related to the nominal interest rate.

The theory of portfolio choice indicates that factors affecting the demand for money include

The theory of portfolio choice indicates that factors affecting the demand for money include

Keynes's theory of the demand for money is consistent with

Quiz 19: Quantity Theory, inflation and the Demand for Money

Keynes's model of the demand for money suggests that velocity is

Keynes's liquidity preference theory indicates that the demand for money is ________ related to ________.

The theory of portfolio choice indicates that higher interest rates make money ________ desirable,and the demand for real money balances ________.

Explain the Keynesian theory of money demand.What motives did Keynes think determined money demand? What are the two reasons why Keynes thought velocity could not be treated as a constant?

As interest rates rise,the expected absolute return of money ________,money's expected return relative to bonds ________.

Keynes's model of the demand for money suggests that velocity is ________ related to ________.

The Keynesian demand for real balances can be expressed as

Keynes's liquidity preference theory indicates that the demand for money is

Because interest rates have substantial fluctuations,the ________ theory of the demand for money indicates that velocity has substantial fluctuations as well.

The portfolio theories of money demand state that when income (and therefore,wealth) is higher,the demand for the money asset will ________ and the demand for real money balances will be ________.

Keynes's theory of the demand for money is consistent with ________ movements in ________.

Keynes's theory of the demand for money implies that velocity is

According to Keynes's theory of liquidity preference,velocity increases when

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to ________ so the quantity of money demanded would ________.

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

Keynes's liquidity preference theory indicates that the demand for money

The portfolio theories of money demand state that the demand for real money balances is ________ related to income and ________ related to the nominal interest rate.

The theory of portfolio choice indicates that factors affecting the demand for money include

The theory of portfolio choice indicates that factors affecting the demand for money include

Keynes's theory of the demand for money is consistent with

Keynes's liquidity preference theory indicates that the demand for money is related to .

The theory of portfolio choice indicates that higher interest rates make money desirable,and the demand for real money balances .

As interest rates rise,the expected absolute return of money ,money's expected return relative to bonds .

Keynes's model of the demand for money suggests that velocity is related to .

The portfolio theories of money demand state that when income (and therefore,wealth) is higher,the demand for the money asset will and the demand for real money balances will be .

Keynes's theory of the demand for money is consistent with movements in .

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to so the quantity of money demanded would .

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ,so the quantity of money demanded would .

The portfolio theories of money demand state that the demand for real money balances is related to income and related to the nominal interest rate.