Chapter_11_Modeling_Money - 1. In the ATM model of money,...

1. In the ATM model of money, the opportunity cost of holding money is determined by
a. the rate of inflation.
b. the cost of going to an ATM.
c. the charges levied on every ATM transaction.
d. the nominal interest rate and the possibility of having her money stolen.
ANSWER: d
POINTS: 1
DIFFICULTY: Basic
TOPICS: The ATM Model of the Demand for Cash
OTHER: Factual
2. What is the average cash holdings of someone who visits the ATM once every 8 days and spends $25 on a daily
basis?
c
POINTS: 1
DIFFICULTY: Moderate
TOPICS: The ATM Model of the Demand for Cash
OTHER: Conceptual
3. How much is someone who visits the ATM once every 7 days and has an average cash balance of $70 expected to
spend daily?
d
POINTS: 1
DIFFICULTY: Moderate
TOPICS: The ATM Model of the Demand for Cash
OTHER: Conceptual

4. Someone who has an average cash balance of $45 and spends $15 per day will visit the ATM once in every
days.
4
5
6
7
c
POINTS: 1
DIFFICULTY: Moderate
TOPICS: The ATM Model of the Demand for Cash
OTHER: Conceptual
5. The cost of going to an ATM is $1 in an economy. If the nominal interest rate in the economy is 5 percent, what is
the total cost associated with holding cash for an individual who spends $10 daily and has a 15 percent probability
of having his cash lost or stolen? Assume that he visits the ATM once in every T days.
a. (182.5/ T ) + (0.2 × T
b. (182.5/ T ) + (0.2 × T
c. (365/ T ) + (0.5 × T
d. (365/ T ) +
ANSWER:
)
)
)
T
d
POINTS: 1
DIFFICULTY: Moderate
TOPICS: The ATM Model of the Demand for Cash
OTHER: Conceptual
6. The cost of going to an ATM is $2 in an economy. If the nominal interest rate in the economy is 1 percent, what is
the total cost associated with holding cash for an individual who spends $15 daily and has a 9 percent probability of
having his cash lost or stolen? Assume that he visits the ATM once in every T days.
)
)
)
)
b
POINTS: 1
DIFFICULTY: Moderate
TOPICS: The ATM Model of the Demand for Cash
OTHER: Conceptual

7. The nominal interest rate in an economy is 5 percent, and there is also a 15 percent probability of having cash lost or
stolen in the economy. Given this information, what is the cost of going to the ATM for an individual who spends $10
daily and has a total cost of holding cash = (365/ T ) + T. Assume that the individual visits the ATM once in every
days.
T
a
POINTS: 1
DIFFICULTY: Challenging
TOPICS: The ATM Model of the Demand for Cash
OTHER: Conceptual