When the Money Market Is Depicted in a Diagram with the Value

question 48

Multiple Choice

When the money market is depicted in a diagram with the value of money on the vertical axis, in which of the following situations does the value of money increase?

• A)if either money demand or money supply shifts right
• B)if either money demand or money supply shifts left
• C)if money demand shifts right or money supply shifts left
• D)if money demand shifts left or money supply shifts right

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Definitions:

Required Rate

The minimum return or yield an investment must offer to be considered viable, often referred to as the required rate of return.

Compound Interest

A way of computing interest wherein the initial amount of the loan or deposit and all the interest that has accrued in former periods are included in the calculation.

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, calculated as the discount rate that makes the net present value of all cash flows equal to zero.

Present Value

The present financial value of a future money amount or stream of cash flows, calculated using a specific rate of return.