The Value of Money as a Means of Payment

question 84

Multiple Choice

The value of money as a means of payment:

• A) is independent of changes in the amount of money in the economy.
• B) is fixed once relative prices are set.
• C) depends on the amount of money in the economy, among other things.
• D) depends on whether the majority of M1 is in currency or demand deposits.

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Definitions:

Leverage

The use of borrowed funds to increase the potential return of an investment.

Optimal Capital Structure

The best mix of debt, preferred stock, and common equity that maximizes a company’s stock price while minimizing its cost of capital.

Stock Price

The current market price of a company's shares, as bought and sold by investors on stock exchanges.

Cost of Capital

The mandatory rate of gain a business must realize on its investment schemes to maintain its market identity and attract funds.