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Ultimate Flashcard Review
Video
The Money Market
Key Concepts to Understand
Question 1 of 4
The demand curve for money is downward sloping because:
a higher nominal interest rate reduces the purchasing power of money.
the central bank increases the money supply when interest rates are high.
a lower nominal interest rate decreases the opportunity cost of holding money.
a higher price level requires people to hold more money for transactions.
Practice Questions: Test Your Understanding
Apply what you've learned with these practice questions. These questions test your understanding of the key concepts.
Question 1 of 3
If the overall price level in the economy increases, what is the likely short-run impact on the money demand curve and the nominal interest rate, ceteris paribus?
Money demand shifts left, nominal interest rate decreases.
Money demand shifts right, nominal interest rate increases.
Money demand shifts right, nominal interest rate decreases.
Money demand shifts left, nominal interest rate increases.
Money supply shifts right, nominal interest rate decreases.
Key Takeaways
- 📊Master the fundamentals: Understanding these core concepts is essential for success in AP Economics.
- ✅Practice makes perfect: Use the interactive exercises and practice questions to reinforce your understanding.