If There Is a Financial Panic and Increased Uncertainty About

question 41

Multiple Choice

If there is a financial panic and increased uncertainty about the returns in the stock market and bond market,what is the likely effect on money demand?

• A)Money demand declines first, then rises when inflation increases.
• B)Money demand rises.
• C)The overall effect is ambiguous.
• D)Money demand declines.

---

Definitions:

Hydraulic Model

A theory suggesting that emotional pressure builds up within individuals and must be released to avoid psychological issues, akin to the way hydraulic pressure builds and must be released.

Cathartic Therapies

Psychological treatments that encourage patients to express their feelings and emotions as a way of reducing stress and improving mental health.

Descriptive Norm

The perception of what is commonly done or typical behavior within a specific context or group of people.

Relational Aggression

A form of aggression in which harm is caused through manipulation or damage to someone's relationships or social status.