Final answer:
The pure time value of money is termed the interest rate factor. It signifies the expected return on funds lent or invested, excluding other effects such as inflation or changes in liquidity. It's central to financial capital transactions where money is moved over time. Therefore, the correct option is 5.
Step-by-step explanation:
The pure time value of money is known as the interest rate factor. This factor represents the compensation that lenders require for parting with their money and postponing their own consumption. The quantity of money per year and its present value are influenced by the interest rate. When the money supply does not affect the interest rate, it may signal an economy is in a liquidity trap. In such a situation, the central bank, like the Fed, may focus on non-traditional measures since it can't reduce interest rates further. When referring to changes in the money supply and their effects, it is crucial to understand the universal generalizations that these changes affect the interest rate, availability of credit, and price level. The expansion and contraction of the money supply can directly influence the cost of credit. This relationship also implies that changes in the interest rate cause a movement along the supply curve for financial capital, which includes concepts like the liquidity effect and Fisher effect. However, these are distinguished from the pure time value of money, which is synonymous with the interest rate factor and excludes other factors like expected inflation or changes in money supply.