At higher interest rates the $1)\_\_\_\_\_\_\_$

A$)$ quantity of money demanded is lower. B$)$ money supply is indeterminate.

C$)$ money supply is higher. D$)$ quantity of money demanded is higher.

$2)$ Violet's income is $$3,200$ a month. She deposits $$600$ in a saving account, buys $$700$ worth of

government securities$,$ and leaves the rest for daily transactions. Violet's money demand is

$2)\_\_\_\_\_\_\_$

A$)$ $$1,900.$ B$)$ $$2,500.$ C$)$ $$2,600.$ D$)$ $$4,500.$

$3)$ The interest rate paid on bonds decreases from $6\%$ to $2\%.$ This will cause $3)\_\_\_\_\_\_\_$

A$)$ the optimal balance to increase because it lowers the opportunity costs of holding money.

B$)$ the optimal balance to decrease because it raises the opportunity cost of holding money.

C$)$ the optimal balance to increase because it reduces the opportunity cost of holding money.

D$)$ no change in the optimal balance because checking deposits don't earn interest.

$4)$ The opportunity cost of holding money is $4)\_\_\_\_\_\_\_$

A$)$ the return that could have been earned from holding wealth in other assets.

B$)$ heavy and awkward.

C$)$ the ease of conducting everyday business.

D$)$ the probability of theft or loss.

$5)$ The demand for money and the interest rate are $5)\_\_\_\_\_\_\_$

A$)$ negatively related.

B$)$ not related.

C$)$ positively related.

D$)$ sometimes positively related and other times negatively related, depending on the bond

payments.

$6)$ As the interest rate rises, people hold $\_\_\_\_\_\_\_\_$ money instead of bonds because the opportunity

cost of holding money has $\_\_\_\_\_\_\_\_.$

$6)\_\_\_\_\_\_\_$

A$)$ less; risen B$)$ more; fallen C$)$ less; fallen D$)$ more; risen

$7)$ If interest rates decrease to a very low level, people will most likely hold $7)\_\_\_\_\_\_\_$

A$)$ more bonds and less cash. B$)$ less bonds and less cash.

C$)$ more bonds and more cash. D$)$ less bonds and more cash