Suppose Individuals Decide to Reduce Their Holdings of Money Market

question 12

Multiple Choice

Suppose individuals decide to reduce their holdings of money market funds.Further assume that these decisions put funds into checkable deposits.Given this information,we know that

• A)the demand for M1 would increase and the demand for M2 would decrease.
• B)the demand for M1 would decrease and the demand for M2 would decrease.
• C)the demand for M1 would increase and the demand for M2 would increase.
• D)the demand for M1 would decrease and the demand for M2 would increase.
• E) none of the above

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Definitions:

Earnings Before Interest

Earnings Before Interest, often abbreviated as EBI, refers to a company's profit before any interest expenses are deducted. It shows the financial performance from operational activities.

CCA Class

Refers to a classification under the Canadian Capital Cost Allowance that groups assets of a similar nature for depreciation purposes.

Net Working Capital

The gap between a business's current resources and its present debts, showcasing its financial stability in the near term.

Net Present Value

A valuation method that calculates the present value of all future cash flows of a project or investment, net of the initial investment cost.