If Money Demand Decreases Due to Greater Use of Credit

question 90

Multiple Choice

If money demand decreases due to greater use of credit cards,which of the following would most likely happen under a neutralization policy?

• A) The money supply would decrease,real GDP would not change,and neither would the interest rate.
• B) The money supply would increase,real GDP would not change,and neither would the interest rate.
• C) The money supply would decrease,real GDP would increase,and the interest rate would decrease.
• D) The money supply would increase,real GDP would not change,and the interest rate would decrease.
• E) The money supply would decrease,real GDP would decrease,but the interest rate would not change.

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Definitions:

Stock Dissipation Rate

The rate at which a stock or resource diminishes due to use or other factors.

Net Present Value

A method used in finance to assess the value of an investment by calculating the present value of its expected future cash flows minus the initial investment.

Policy Change

Modifications or adjustments to existing rules, procedures, or regulations within an organization or government.

Mandatory Separation

A policy or regulation requiring a business to divide or split its operations, often for anti-monopoly or regulatory compliance reasons.