CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

What factor will increase the quantity of real money that people plan to hold?

I. A rise in the nominal interest rate
II. A drop in the nominal interest rate
III. A rise in the price level
IV. A drop in the price level
Correct Answer: II

Similarly, a rise in the nominal interest rate on other assets decreases the quantity of real money that people plan to hold.

A rise in the price level increases the quantity of nominal money but doesn't change the quantity of real money that people plan to hold.

User Contributed Comments 5

User Comment
pepper tricky question, miss out on the 'real' part
prajacti me too!!
Gooner7 agree good question
bundy isn't real money = nominal money/P so if P increases the Q of real money demanded decreases?
pbielstein @bundy: The assumption is that if P increases, nominal demand for money will increase in the same proportion so that real money demanded remains the same.
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