Monetary Economics Quiz 10

What is the average cash holdings of someone who visits the ATM once every 8 days and spends $25 on a daily basis?

$100

The income effect refers to the situation when a higher nominal interest rate results from a(n)

increase in income that increases the demand for money.

The ____________ relationship between the money supply and the nominal interest rate is referred to as the _____________.

inverse; liquidity effect

The model in which money demand and supply determine the nominal interest rate is known as the

liquidity-preference model

In the liquidity-preference model, the slope of the money supply curve implies that

nominal interest rate has no effect on the money supply

In the ATM model, if the nominal interest rate declines, then the

number of days between visits to the ATM and the quantity of money demanded both rise.

In the ATM model of money, the opportunity cost of holding money is determined by

the nominal interest rate

In the ATM model, the demand for money depends on

the nominal interest rate, the cost of obtaining cash, the probability of loss or theft, and the amount of spending

In the ATM model, if the cost of going to an ATM increases,

both the number of days between visits to the ATM and the quantity

In the ATM model, if the probability of loss or theft decreases, then

both the number of days between visits to the ATM and the quantity of money demanded rises