Question

1. Which of the following factors affect the cost of money?

		Time preference for consumption
		Inflation
		Risk
		Production Opportunities
		All of the above
		Choice 1, 2 and 3 only.

2. Which of the following would cause the interest rates to increase in the near future

		The government doubles the amount of money added to the economy.
		The economy starts to slide into a recession.
		Concern increases regarding the national security of the US (i.e. the risk associated with investing in the US economy).
		A large demographic shift occurs in which people retire and live off their savings (this will increase the time preference for consumption).
		Choice 1, 3, and 4 are correct.
		All of the above are correct.

Answer 1

Hello Sir/ Mam

Q - 1 - YOUR REQUIRED ANSWER IS OPTION E : ALL OF THE ABOVE

All of these effects cost of money :

1. production opportunities
2. time preferences for consumption
3. risk
4. inflation

Q - 2 - YOUR REQUIRED ANSWER IS OPTION D : HIGHER TIME PREFERENCE

• A larger money supply lowers interest rates.
• Recession lowers interest rates.

I hope this solves your doubt.

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