The Transactions Demand for Money

question 152

Multiple Choice

The transactions demand for money

• A) varies inversely with the precautionary demand for money.
• B) varies directly with the rate of interest.
• C) is a function of nominal Gross Domestic Product (GDP).
• D) is determined by the Federal Reserve System.

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Definitions:

Off the Books

Financial transactions or employment that are not officially recorded or declared, often to avoid taxes or adhere to regulations.

Inefficiently High Quality

A form of inefficiency in which sellers offer high-quality goods at a high price even though buyers would prefer a lower quality at a lower price; often the result of a price floor.

Government Imposes

Actions undertaken by a government to enforce regulations, taxes, or penalties on individuals or organizations.

Binding Price Floor

A price floor set above the equilibrium price, causing a surplus because the quantity supplied exceeds the quantity demanded.