As the level of interest rates in the economy falls, the demand for money, ceteris paribus:

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Question:
As the level of interest rates in the economy falls, the demand for money, ceteris paribus:

1.Will remain unchanged

2.Could move in either direction depending on other factors

3.Increase

4.Will fall more or less in line with the change in interest rates

Posted Date:-2021-11-29 04:06:27

More MCQS Questions and answers

  1. By taking out insurance cover an individual:
  2. 'Accrued interest' is:
  3. 'Reinsurance' refers to the practice by insurance companies of:
  4. A 'pay as you go' pension system is unsuitable for a private firm because:
  5. A 'Pay-As-You-Go' pension is one in which:
  6. A 'positive term premium' means:
  7. A bank with cash of 5, deposits at the central bank of 3, investments of 20, advances of 22 and customer deposits of 50 has a reserve ratio of:
  8. A bank's risk:asset ratio compares its capital with its:
  9. A belief that expectations were exogenous could lead one to the view that judgements about the future were likely to be based on:
  10. A bond issued in July 1997 will mature in July 2013 for £100. In July 2003, its original maturity and residual maturity would be (respectively):
  11. A central bank which sets the short-term rate of interest must:
  12. A central bank wishes to indicate that its official interest rate will be 4.5% from tomorrow. What repurchase price should it set for 28 day repo deals in government bonds valued at £1m?
  13. A company has just declared a dividend of 8p per share on shares current valued at £1.50. Dividends have been growing steadily at 5 per cent p.a. The dividend yield on these shares is is:
  14. A corporate bond paying an annual coupon of £9 matures for £100 on 30 September 2011. What is its price on 1 October 2008 if interest rates are 8.5 per cent?
  15. A downward sloping yield curve most likely indicates:
  16. A firm announces that its next dividend payment will be 12p per share. The shares are currently priced at £1. The firm's earnings have recently grown at a rate of 9 per cent per year and this is expected to continue. The total annual return on these shares is:
  17. A government sale of treasury bills to the central bank is the nearest thing in a modern economy to:
  18. A mutual fund manager shifts part of his portfolio from long-dated bonds to money market instruments even though yields are unchanged. Most likely he is expecting:
  19. A retirement annuity is particularly attractive to someone who has:
  20. A share with a β-coefficient of 0.9 has a rate of return of 16%, when the whole market return is 17%. What return should it produce if the risk free rate rises from 7% to 8%, ceteris paribus.
  21. A sudden demand by depositors for notes and coin is an example of:
  22. A treasury bill which matures in 62 days for £250,000 is currently trading at 248,000. The rate of discount on this bill is:
  23. A unit trust fund is established with assets of £200m divided into 150m units. The value of the underlying assets rises to £250m. The value of each unit is:
  24. According to the Fisher hypothesis, the nominal rate of interest consists of:
  25. According to the liquidity preference theory of interest, an increase in uncertainty, other things being equal, will:
  26. According to the policy irrelevance theorem, why is policy irrelevant?
  27. According to the rational expectations hypothesis:
  28. All demand for money functions that are tested are macroeconomic relationships between the aggregate demand for money and other economic variables because:
  29. An 'open-end' investment fund is one which:
  30. An 'overdraft' economy is one in which:
  31. An airline expands its fleet of planes just before a serious accident reduces the demand for its flights. This is an example of:
  32. An asset began the year with a price of £2.50. It paid income of 30p and finished the year at a price of £2.75. Over the year its rate of return was:
  33. An increase in (i) the price level and (ii) the rate of inflation:
  34. As the level of interest rates in the economy falls, the demand for money, ceteris paribus:
  35. Asset A has a variance of 25 while asset B has a variance of 9. The covariance of returns is -15. The proportion of a two asset portfolio that would have to be invested in A in order to create a perfectly riskless portfolio is:
  36. Assume that a central bank is willing to buy 14 day repos for $1m, with a repurchase price of $1,002,000. What rate of interest is the central bank charging?
  37. Assume that the central bank's main responsibility is to minimise the rate of inflation. A release of economic data suggests that inflationary pressure is increasing. In the circumstances the yield curve is likely to:
  38. Bank deposit insurance was set up:
  39. Because their flows of funds are largely contractual, life assurance companies can hold:
  40. Corporate bonds have higher yields than government bonds because:
  41. Diversification is one way in which insurance companies can protect themselves against:
  42. Five assets have expected mean returns and variances as follows: (A) 8% 15; (B) 12% 18; (C) 11% 18; (D) 15% 20; (E) 11% 17. Which of these assets will be rejected by all rational risk-averse investors?
  43. Given a current rate of inflation of 3 per cent, and an expected rate of inflation next year of 5 per cent, what increase in nominal wages will workers seek in order to increase their real wage by 2 per cent:
  44. Given a fall in interest rates, the largest price change will occur in:
  45. Government appointed members of the Monetary Policy Committee of the Bank of England are appointed:
  46. If a firm has one million shares in issue, earns profits of £200,000 and operates a retention ratio of 0.4, the dividend per share will be:
  47. If asset A has a variance of 49 while asset B has a variance of 36 while the correlation coefficient of their returns is 0.75, the covariance of the returns of the two assets is:
  48. If interest rates rise, the present value of any future earnings is bound to:
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