SOLVED

1) The liquidity preference theory distinguishes between ________. A) nominal and real quantities B) money and financial assets C) buying goods and earning interest income D) all of the above E) none of the above 2) “Real money balances” refers to ________. A) the quantity of goods and services that money can buy B) gold and silver C) money that is actually available to be spent D) all of the above E) none of the above 3) The liquidity preference theory ________. A) distinguishes between nominal and real quantities B) shows that demand for real balances depends on real income C) shows that demand for real balances depends on the nominal interest rate D) all of the above E) none of the above 4) ________ is a good measure of the opportunity cost of holding money. A) The real interest rate B) Liquidity preference C) Real income D) The inflation rate E) none of the above 5) Demand for real money balances depends on ________. A) the price level B) the real interest rate C) the opportunity cost of holding money D) all of the above E) none of the above 6) According to liquidity preference theory, as real income increases, so does ________. A) the supply of real money balances B) the demand for real money balances C) the real interest rate D) all of the above E) none of the above 7) According to liquidity preference theory, an increase in the price level would ________. A) decrease the demand for real money balances B) increase the supply of real money balances C) decrease the real interest rate D) all of the above E) none of the above 8) According to liquidity preference theory, an increase in the price level would ________. A) increase the demand for real money balances B) decrease the supply of real money balances C) decrease the real interest rate D) all of the above E) none of the above 9) The endogenous variable in the liquidity preference function is ________. A) demand for real money balances B) the nominal interest rate C) real income D) the price level E) none of the above 10) The liquidity preference function shows that as ________. A) real income decreases, so does the demand for real money balances B) the nominal interest rate increases, so does the demand for real money balances C) real income decreases, so does the real interest rate D) all of the above E) none of the above