Which of the Following Is the Most Likely Explanation for the Causes

question 88

Multiple Choice

Which of the following is the most likely explanation for the causes behind the fall in the demand for M1 in the 1970s?

• A)Higher prices in the 1970s reduced the demand for money.
• B)Government deficits increased the demand for money,draining it out of the private sector.
• C)Financial innovations,such as money market mutual funds,changed the demand for narrow definitions of money such as M1.
• D)Increases in Eurodollar deposits drew money out of the banking system.