According to Baumol and Tobin, the Transactions Demand for Money

question 81

Multiple Choice

According to Baumol and Tobin, the transactions demand for money is

• A)negatively related to market interest rates, but the velocity of money is positively related to market interest rates.
• B)positively related to market interest rates, but the velocity of money is negatively related to market interest rates.
• C)negatively related to market interest rates, as is the velocity of money.
• D)positively related to market interest rates, as is the velocity of money.

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Definitions:

Commercial Banks

Financial institutions that accept deposits, offer checking and savings accounts, and provide loans, thereby playing a crucial role in the financial system.

Central Bank

Is the primary financial institution of a country, responsible for issuing currency, managing the money supply, regulating banks, and implementing monetary policy to achieve economic stability.

Foreign Exchange Rate

The price at which one currency can be exchanged for another currency in the foreign exchange market.

World Market

The global marketplace where goods, services, and financial products are bought and sold across borders.