Assume That the Stock of Money Is Determined by the Federal

question 307

Multiple Choice

Assume that the stock of money is determined by the Federal Reserve and does not change when the interest rate changes. This situation means that the

• A) supply of money curve is vertical.
• B) supply of money curve is horizontal.
• C) demand for money curve is directly related to the interest rate.
• D) supply of money curve is inversely related to the interest rate.

---

Definitions:

Collection Delay

The time lag between when a sale is made or service rendered and when the payment is actually received.

Cash Balance

The amount of cash a company has on hand at any given time, which includes currency, coins, and balances in checking and savings accounts.

Market Rate of Return

The average return that investors expect to earn from a particular investment, based on historical or anticipated performance.

Trading Costs

Trading costs are the expenses incurred in buying and selling financial instruments, including commissions, spreads, and slippage.