The correct option that defines the reason for an increase in
Answer to Problem 20MCQ
Option b is correct.
Explanation of Solution
Explanation for the correct option:
b.
Demand for money increases when there is an increase in real
Explanation for incorrect options:
a.
Demand for money increases if there is an increase in the
c.
Demand decreases with the new technologies that allow the person to convert wealth into money more easily. Therefore, option c is incorrect.
d.
Open market operations refer to the buying or selling of T-bills or government securities takes place. It is regulated by Fed when there is a requirement to control excess money. Therefore, option d is incorrect.
e.
If the demand for money increases, then the interest rates also increase to regulate the increasing demand. Therefore, option e is incorrect.
Federal Reserve System: It is a central bank that looks after the banking system of the country along with the control of its monetary base. The monetary base is the sum of circulating currency and the reserves in the bank.
Chapter 5R Solutions
Krugman's Economics For The Ap® Course
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