In the Money Market, in the Short Run If the Quantity

question 217

Multiple Choice

In the money market, in the short run if the quantity of money exceeds the quantity of money demanded, then to achieve equilibrium the

• A) supply of money increases.
• B) nominal interest rate falls.
• C) inflation rate increases.
• D) demand for money increases.
• E) price level rises.

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Definitions:

Nonrecourse Basis

A financing arrangement where the lender can only seize the collateral securing a loan and cannot seek further compensation from the borrower, even if the collateral does not cover the full value of the defaulted amount.

Sale and Leaseback

Sale and leaseback is a financial transaction where one sells an asset and leases it back for the long-term; thereby, one continues to use the asset without owning it.

Financial Lease

A type of lease in which the lessee has use of an asset through most of its useful life and the lease payments cover the original cost of the asset plus interest, resembling a loan purchase.

Lessor

The party in a lease agreement who owns the leased asset and grants the lease to the lessee in exchange for periodic payments.