11) When the nominal interest rate rises, the
A) quantity of money demanded decreases.
B) demand for money decreases.
C) demand for money increases.
D) quantity of money demanded increases.
12) The opportunity cost of holding money balances rather than other assets is
A) the nominal interest rate.
B) the price level.
C) forgone consumption.
D) forgone liquidity.
13) The opportunity cost of holding money is the
A) nominal interest rate on assets other than money.
B) price of goods and services.
C) level of wage and rental income.
D) ease with which an asset can be converted into a means of payment.
14) The opportunity cost of holding money is
A) the price level.
B) real GDP.
C) the inverse of the price level multiplied by the nominal interest rate.
D) the nominal interest rate.
15) The demand for money is ________ related to the nominal interest rate.
A) positively
B) negatively
C) not
D) None of the above answers is correct because the relationship between the demand for money and the nominal interest rate changes with the inflation rate.
16) The opportunity cost of holding money increases when
A) the purchasing power of money rises.
B) the nominal interest rate rises.
C) the price level falls.
D) consumers’ real incomes increase.
17) A decrease in the nominal interest rate ________ the opportunity cost of holding money.
A) increases
B) decreases
C) can increase or decrease
D) None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money.
18) The opportunity cost of holding money refers to
A) the service fees charged to withdraw currency from an ATM.
B) the price level.
C) the interest that could have been earned if the money balances had been changed into an interest-bearing asset.
D) the pleasure that would have been received if the money balances had been used to buy a good or service.
19) The demand for money is ________ related to the nominal interest rate.
A) positively
B) negatively
C) not related
D) None of the above answers is correct because the relationship between the demand for money and the interest rate varies with the inflation rate.
20) When the nominal interest rate rises, the opportunity cost of holding money
A) rises and people hold more money.
B) falls and people hold less money.
C) falls and people hold more money.
D) rises and people hold less money.
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