Money Market

Money market instruments are typically characterized by which of the following?

• High risk and high return

• Low risk and low return

• Long-term investment horizons

• High liquidity and short maturities

Which of the following is a common feature of money market funds?

• They have no minimum investment requirement

• They provide liquidity and safety

• They aim for capital appreciation

• They invest primarily in stocks

Which of the following is a benefit of investing in money market instruments?

• Protection against inflation

• Potential for high returns

• Tax advantages

• Liquidity and safety

Which of the following is true?

• The quantity of money demanded will be greater at IR2 than IR1

• The graph depicts a decrease in the money supply

• The quantity of money demanded will be greater at IR1 than IR2

• The graph depicts a leftward shift in the demand for money

Imagine that the supply of money decreased. What impact would this have on interest rates? How would this impact aggregate demand?

Which of the following could have caused the shift seen on the graph?

• An increase in interest rates

• An increase in real income levels

• A decrease in the price level

• An increase in unemployment

Show the impact that a decrease in the price level would have on the demand for money

Which of the following is a primary function of the money market?

• Facilitating long-term investments

• Providing short-term liquidity

• Offering high-risk investment opportunities

• Ensuring high returns

What is a common characteristic of money market instruments?

• High volatility

• Long-term maturity

• Low risk

• High return

Which entity is most likely to participate in the money market?

• Individual retail investors

• Large corporations

• Real estate developers

• Venture capitalists