Javier Has Been Thinking About Purchasing a Bond but Is

question 239

Multiple Choice

Javier has been thinking about purchasing a bond but is afraid that the bond will lose value. He has decided to hold money instead. This is known as the

• A) precautionary demand for money.
• B) transactions demand for money.
• C) asset demand for money.
• D) money balance demand for money.

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Definitions:

Recessionary Gap

The difference between the actual output of an economy and its potential output if all resources were employed at their maximum efficiency during a recession.

Equilibrium GDP

The level of gross domestic product at which aggregate supply equals aggregate demand, indicating a balance in the economy without any external pressures to change.

Full Employment GDP

The maximum level of output (GDP) an economy can achieve when utilizing all its resources fully and efficiently, without triggering inflation.

Fiscal Policy

Government policies related to taxation and spending to influence the economy.