The Theory of Asset Demand Suggests That the Most Important

question 30

Multiple Choice

The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign deposits is

• A) the level of trade and capital flows.
• B) the expected return on these assets relative to one another.
• C) the liquidity of these assets relative to one another.
• D) the riskiness of these assets relative to one another.

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Definitions:

Excess Burden

The cost to society created by market inefficiency, typically due to taxes or other government policies disrupting the equilibrium.

Tax

A mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Diet Pepsi

A low-calorie carbonated soft drink produced by PepsiCo, branded as a healthier alternative to regular Pepsi.

Beverages

Drinkable liquids excluding water, such as tea, coffee, soda, and alcohol.