- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 4. Monetary Policy
- Subject 1. Role of Central Banks
CFA Practice Question
Which would cause people to hold more money on hand?
II. Lower nominal interest rates
III. A higher real GDP
I. A higher price level of goods and services
II. Lower nominal interest rates
III. A higher real GDP
Correct Answer: I, II and III
A higher price level or an expansion of real GDP will require greater money balances to conduct the same level of transactions, thus increasing the demand for money. Lower interest rates reduce the opportunity cost of holding money balances and will increase the quantity of money demanded.
User Contributed Comments 5
| User | Comment |
|---|---|
| danlan | I and III cause a curve shift to the right. II causes a shift along the curve. |
| cfashark | which curve? |
| MaiHuong | Demand curve |
| MMattioli | demand curve for money |
| choas69 | change in interest and quantity demanded for money causes a movement along the line. other factors will cause a shift. |