Module 28

Question 1

marginal opportunity cost of cash

Answer 1

cash doesn’t earn interest, and checking accounts earn less interest than illiquid assets

Question 2

short term interest rates

Answer 2

interest rates on financial assets that mature within less than a year

Question 3

long term interest rates

Answer 3

interest rates on financial assets that mature a number of years in the future
diff from short term interest rates, does not effect money supply

Question 4

the money demand curve

Answer 4

relationship between the quantity of money demanded and the interest rate

Question 5

causes of shifts in the MD curve

Answer 5

1) changes in aggregate price level
2) changes in real GDP
3) changes in technology
4) changes in institutions

Question 6

liquidity preference model

Answer 6

interest rate is determined by the supply and demand for money

Question 7

money supply curve

Answer 7

shows how the quantity of money supplied by the fed varies with interest rate