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MCQ 1 (a,b)

clipped from

Money: Demand for money

Q1. Which of the following events will lead to an increase in the demand for money?

(Select one answer)

(a) * An increase in the level of aggregate output

(b) * A decrease in the price level

(c) * An increase in the interest rate

(d) * An increase in the supply of money

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Q2. Which one of the following statements about the demand for money is incorrect?

(Select one answer)

(a) * the amount of money that people hold is negatively related with the interest rate

(b) * as the level of national income rises, the amount of money balances that individuals hold decreases

(c) * both the level of national income and the interest rate affect the demand for money balances

(d) * other things constant, an increase in the real interest rate reduces the demand for real money balances
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