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A Lower Level of Income Causes the Demand for Money

question 63

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A lower level of income causes the demand for money to ________ and the interest rate to ________,everything else held constant.


Definitions:

Market Risk

The risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates, market interest rates or some other market prices.

Credit Risk

The risk of loss due to a borrower's failure to make payments on any type of debt.

Liquidity Risk

The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Derecognition

The process of removing an asset or liability from a company's balance sheet because it has been disposed of or is no longer expected to provide future economic benefits.

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