Question

Which of the following will be affected if consumers take money out of checking accounts to pay their credit cards?

A. M1
B. M2
C. M3
D. M4

What is exchanged in the financial sector?
A. Money only
B. Goods and services
C. All financial assets
D. Only assets with a money price

The interest rate is the price paid for the use of a:
A. real liability.
B. real asset.
C. financial liability.
D. financial asset.
20. The short-term interest rate is determined in the:
A. loanable funds market.
B. stock market.
C. exchange rate market.
D. money market.

Answer 1

1.

A.M1

Deposits in checkable account is the part of M1 money. So, decrease in checkable account will lead to decrease in M1 money.

2.

C. All financial assets

There are different financial instruments in the form of assets that can be exchanged in the financial sector.

3.

D.Financial Asset

The interest rate is used to calculate the price is paid in the form of interest amount for the money as a financial asset.

20.

D. Money market

Money market is for the short term borrowings. So, It is the market that decides the short term interest rates.