The Money Demand Curve Is Downward Sloping Because Lower Interest

question 95

Multiple Choice

The money demand curve is downward sloping because lower interest rates:

• A)lower the opportunity cost of holding money and cause households and firms to switch from money to financial assets.
• B)lower the opportunity cost of holding money and cause households and firms to switch from financial assets to money.
• C)raise the opportunity cost of holding money and cause households and firms to switch from money to shares.
• D)raise the opportunity cost of holding money and cause households and firms to switch from money to bonds.

---

Definitions:

Unearned Fees

Income received for services that have not yet been performed or delivered.

Monthly Salary

A fixed amount of payment received by an employee from an employer on a monthly basis.

Unused Supplies

Supplies that have been purchased but not yet used in the operation of a business.

Prepaid Insurance

An asset account on the balance sheet that represents a payment made for insurance services that have not yet been received or used up within the period of the insurance contract.