Empirical Studies Done on Money Demand Established That

question 19

Multiple Choice

Empirical studies done on money demand established that

• A)the demand for real money balances increases with increases in the interest rate
• B)the effects of income and interest rate changes on the demand for real money balances is more pronounced after a significant lag
• C)real money demand increases proportionately with the level of income
• D)people have money illusion since nominal money demand tends to increase less than proportionately with increases in the price level
• E)people will change their money holdings drastically if they expect a transitory change in interest rates

---

Definitions:

Maslow's Hierarchy

A theory in psychology proposed by Abraham Maslow in 1943, which outlines a five-tier model of human needs, arranged in a hierarchy.

First Level

The initial or elementary stage in a series or categorization system.

Physical and Economic Survival

The requirement for basic necessities that sustain life and the financial means to secure these necessities.

Understanding Others

involves the ability to empathize and comprehend the thoughts, emotions, and behaviors of others, fostering better interpersonal relationships.