The Precautionary Demand for Money

question 28

Multiple Choice

The precautionary demand for money:

• A) varies inversely with the income level.
• B) varies inversely with the price level.
• C) is used as an insurance agent against unexpected needs.
• D) states that nominal income must exceed real income.

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Definitions:

Notes Payable

A financial liability on a company's balance sheet representing promissory notes that require future payments of principal and possibly interest.

Maturity Value

The amount due to the owner of a financial instrument at its maturity date, including principal and interest.

Default

Failure of maker to pay the maturity value of a note when due.

Account Receivable

Debts incurred by customers for receiving goods or services from a business, which remain unpaid.