The Demand for Reserves Increases as the Price Level Rises

question 9

Multiple Choice

The demand for reserves increases as the price level rises because

• A)people want money to buy goods that will appreciate with inflation.
• B)people need more money to finance transactions.
• C)the opportunity cost of holding money increases.
• D)higher prices reduce the value of dollar assets.

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Definitions:

Surety

A financial guarantee by a third party (the surety) to cover a debtor's obligations in case of default.

Rights to Collateral

Legal entitlements of a secured creditor to seize and sell the collateral if the debtor fails to fulfill the obligations of the loan or debt agreement.

Loan Due

The date by which a borrower is expected to repay the borrowed amount in full to the lender.

Rights in Bankruptcy

Legal protections and claims a debtor or creditor has during the bankruptcy process, including claims to assets and discharge of debts.