An Important Difference Between Keynes's Approach to the Demand for Money

question 68

Multiple Choice

An important difference between Keynes's approach to the demand for money and Friedman's approach is that

• A)there is no role for the opportunity cost of holding money in Friedman's theory.
• B)in Keynes's theory, changes in output have no effect on the demand for money.
• C)in Friedman's theory, money demand responds only slightly to short-run fluctuations in income.
• D)in Keynes's theory, money demand is a function of the real interest rate, rather than the nominal interest rate.

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Definitions:

Budgeted Selling Price

An estimated amount for which a product is expected to be sold, determined during the budgeting process.

Budgeted Unit Sales

The number of units a company anticipates selling in a future period as outlined in its budget.

Cash Collections

The process of receiving and managing the cash a company receives from its customers, sales, or other sources.

Budgeted Sales

The planned or forecasted sales for a future period, often used for planning and control purposes.