"Since Checking Accounts Now Pay Interest They Should Not Be

question 12

Multiple Choice

"Since checking accounts now pay interest they should not be included in the money supply." Given that checks are the major medium of exchange,this statement is false because

• A)checking accounts are primarily used for savings in the current year.
• B)the interest rate on checking accounts is lower than on other accounts.
• C)the demand for real balances is negatively related to interest rates.
• D)money is money.

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Definitions:

Cash Payback

A method of evaluating an investment by determining the amount of time it will take to recoup the initial investment from its cash flows.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the organization's goal of wealth maximization.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by discounting all expected future cash flows to their present value using a specific discount rate.

Annual Rate of Return Technique

A method of evaluating investments by calculating the expected annual rate of profit or loss.