Question : 11) The lower the nominal interest rate, the A) greater the : 1238100

11) The lower the nominal interest rate, the

A) greater the demand for money.

B) greater the quantity of money demanded.

C) greater the quantity of money supplied.

D) smaller the demand for goods and services.

E) smaller the quantity of money demanded.

12) The ________ the nominal interest rate, the ________ is the quantity of money demanded.

A) lower; greater

B) lower; smaller

C) higher; greater

D) more variable; smaller

E) None of the above because the nominal interest rate does not influence the quantity of money demanded.

13) Mary has $1,000 and is considering purchasing a $1,000 bond that pays 7 percent interest per year. Mary decides not to buy the bond and holds the $1,000 as cash. If the inflation rate is 4 percent, the opportunity cost of holding the $1,000 as money is

A) $30.00.

B) $40.00.

C) $70.00.

D) $110.00.

E) $100.00.

14) Suppose you can earn 5 percent on your savings account if you deposit $500 in it. The inflation rate is 3 percent. The opportunity cost of holding the $500 as money is

A) $25.

B) $100.

C) $80.

D) $525.

E) $30.

15) The relationship between the nominal interest rate, the real interest rate, and the inflation rate is that the

A) real interest rate is equal to the nominal interest rate plus the inflation rate.

B) nominal interest rate is equal to the real interest rate plus the inflation rate.

C) real interest rate is equal to the nominal interest rate multiplied by the inflation rate.

D) nominal interest rate is equal to the real interest rate divided by the inflation rate.

E) nominal interest rate is equal to the real interest rate minus the inflation rate.

16) The real interest rate equals the

A) nominal interest rate – inflation rate.

B) (nominal interest rate ÷ inflation rate) × 100.

C) inflation rate – nominal interest rate.

D) (nominal interest rate × inflation rate)/100.

E) nominal interest rate ÷ inflation rate.

17) The difference between the nominal interest rate and the real interest rate is the

A) inflation rate.

B) unemployment rate.

C) GDP growth rate.

D) money growth rate minus the growth rate of real GDP.

E) price level.

18) In the long run, the nominal interest rate is

A) negatively related to the price level.

B) positively related to the price level.

C) negatively related to the inflation rate.

D) positively related to the inflation rate.

E) not related to the price level or the inflation rate.

19) You have a $500 saving bond. The nominal interest rate is 10 percent, and the inflation rate is 4 percent. After a year, in real terms you have earned

A) $70.

B) $40.

C) $50.

D) $30.

E) $510.

20) You have a $500 saving bond. If the nominal interest rate is 10 percent, then the inflation rate must be

A) zero, otherwise you would sell the bond.

B) 10 percent if in real terms you earned $200.

C) 4 percent if in real terms you earned $70.

D) 4 percent if in real terms you earned $30.

E) 10 percent if in real terms you earned $100.