Question 1

A liquidity trap occurs when

Accepted Answer

A)  too many arbitrage opportunities exist. 
B)  the central bank does not print enough currency. 
C)  consumers are too reliant on credit cards for purchases. 
D)  the real interest rate is very high. 
E)  the real interest rate is zero. 
A)  too many arbitrage opportunities exist. 
B)  the central bank does not print enough currency. 
C)  consumers are too reliant on credit cards for purchases. 
D)  the real interest rate is very high. 
E)  the real interest rate is zero.

Question 2

If the nominal interest rate rises,

Accepted Answer

A)  there is substantial inflation in the economy. 
B)  real interest rates are declining. 
C)  the opportunity cost of holding cash rises. 
D)  consumers and firms are less inclined to use credit cards. 
E)  inflation is declining. 
A)  there is substantial inflation in the economy. 
B)  real interest rates are declining. 
C)  the opportunity cost of holding cash rises. 
D)  consumers and firms are less inclined to use credit cards. 
E)  inflation is declining.

Question 3

If R > q, then

Accepted Answer

A)  the marginal benefit of using the credit card exceeds the marginal cost. 
B)  the marginal benefit of using cash exceeds the marginal cost. 
C)  the real interest rate does not reach its equilibrium value. 
D)  the nominal interest rate is not in equilibrium. 
E)  the marginal cost of using the credit card exceeds the marginal benefit. 
A)  the marginal benefit of using the credit card exceeds the marginal cost. 
B)  the marginal benefit of using cash exceeds the marginal cost. 
C)  the real interest rate does not reach its equilibrium value. 
D)  the nominal interest rate is not in equilibrium. 
E)  the marginal cost of using the credit card exceeds the marginal benefit.

Question 4

The most significant problem in trying to empirically measure the real rate of interest is that

Accepted Answer

A)  there are so many different types of bonds. 
B)  expected inflation is unobservable. 
C)  interest rates fluctuate so much from day to day. 
D)  banks infrequently change the prime rate of interest. 
E)  there are so many different nominal interest rates. 
A)  there are so many different types of bonds. 
B)  expected inflation is unobservable. 
C)  interest rates fluctuate so much from day to day. 
D)  banks infrequently change the prime rate of interest. 
E)  there are so many different nominal interest rates.

Question 5

The Fisher effect is

Accepted Answer

A)  the effect of the money supply on the price level. 
B)  the effect of money supply growth on inflation. 
C)  the effect of government spending on output. 
D)  the effect of inflation on the nominal interest rate. 
E)  the effect of inflation on the real interest rate. 
A)  the effect of the money supply on the price level. 
B)  the effect of money supply growth on inflation. 
C)  the effect of government spending on output. 
D)  the effect of inflation on the nominal interest rate. 
E)  the effect of inflation on the real interest rate.

Question 6

Money is useful in exchange when

Accepted Answer

A)  credit transactions are difficult. 
B)  inflation is rising. 
C)  there is a single coincidence of wants. 
D)  interest rates are high. 
E)  there are several monetary aggregates. 
A)  credit transactions are difficult. 
B)  inflation is rising. 
C)  there is a single coincidence of wants. 
D)  interest rates are high. 
E)  there are several monetary aggregates.

Question 7

Monetary aggregates are

Accepted Answer

A)  the various roles of money. 
B)  the money at the Bank of Canada. 
C)  high-powered money. 
D)  different definitions of money. 
E)  currency in the hands of the public and demand deposits. 
A)  the various roles of money. 
B)  the money at the Bank of Canada. 
C)  high-powered money. 
D)  different definitions of money. 
E)  currency in the hands of the public and demand deposits.

Question 8

Nominal bonds can be issued by

Accepted Answer

A)  government, consumers, or business firms. 
B)  the Bank of Canada. 
C)  business firms. 
D)  government and consumers. 
E)  chartered banks. 
A)  government, consumers, or business firms. 
B)  the Bank of Canada. 
C)  business firms. 
D)  government and consumers. 
E)  chartered banks.

Question 9

The zero lower bound is

Accepted Answer

A)  the constraint that consumption cannot fall below zero. 
B)  the constraint that the nominal interest rate cannot fall below zero. 
C)  the lower bound on money supply growth. 
D)  conventional monetary policy. 
E)  illegal. 
A)  the constraint that consumption cannot fall below zero. 
B)  the constraint that the nominal interest rate cannot fall below zero. 
C)  the lower bound on money supply growth. 
D)  conventional monetary policy. 
E)  illegal.

Question 10

The nominal money demand is defined as

Accepted Answer

A)    = (Y, 1 + r). 
B)    = L(Y, 1 + r). 
C)  M = P(Y, r). 
D)  M = PL(Y, r). 
E)  M = P(LY, 1 + r). 
A)    = (Y, 1 + r). 
B)    = L(Y, 1 + r). 
C)  M = P(Y, r). 
D)  M = PL(Y, r). 
E)  M = P(LY, 1 + r).

Question 11

At the zero lower bound

Accepted Answer

A)  monetary policy has the usual effects. 
B)  conventional monetary policy is all that works. 
C)  government spending has no effects. 
D)  open market purchases of government bonds by the central bank have no effects. 
E)  consumption goes to zero. 
A)  monetary policy has the usual effects. 
B)  conventional monetary policy is all that works. 
C)  government spending has no effects. 
D)  open market purchases of government bonds by the central bank have no effects. 
E)  consumption goes to zero.

Question 12

Double coincidence of wants means

Accepted Answer

A)  two economic agents want to exchange the goods they have. 
B)  households prefer to double the quantity of their goods. 
C)  households want more of leisure and consumption. 
D)  households prefer a diverse set of goods. 
E)  two economic agents want different sets of goods. 
A)  two economic agents want to exchange the goods they have. 
B)  households prefer to double the quantity of their goods. 
C)  households want more of leisure and consumption. 
D)  households prefer a diverse set of goods. 
E)  two economic agents want different sets of goods.

Question 13

Buying an item with cash would be an example of money's role as a

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  store of wealth. 
E)  standard of deferred payment. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  store of wealth. 
E)  standard of deferred payment.

Question 14

In the monetary intertemporal model, the supply of money is determined by

Accepted Answer

A)  foreign capital flows. 
B)  the Bank of Canada. 
C)  the government merged with the Bank of Canada. 
D)  the sale of bonds by the chartered banks. 
E)  private sector transactions. 
A)  foreign capital flows. 
B)  the Bank of Canada. 
C)  the government merged with the Bank of Canada. 
D)  the sale of bonds by the chartered banks. 
E)  private sector transactions.

Question 15

The real interest rate is approximately equal to

Accepted Answer

A)  the growth in real GDP. 
B)  the nominal interest rate. 
C)  the nominal interest rate plus the inflation rate. 
D)  the nominal interest rate minus the inflation rate. 
E)  one divided by the nominal interest rate minus the inflation rate. 
A)  the growth in real GDP. 
B)  the nominal interest rate. 
C)  the nominal interest rate plus the inflation rate. 
D)  the nominal interest rate minus the inflation rate. 
E)  one divided by the nominal interest rate minus the inflation rate.

Question 16

The Fisher relationship may be described by the following equation in which R is the nominal rate of interest, r is the real rate of interest, and i is the inflation rate.

Accepted Answer

A)  i = r + R 
B)  1 + i =   
C)  1 + r =   
D)  1 + r =   
E)  r = R + i + ir. 
A)  i = r + R 
B)  1 + i =   
C)  1 + r =   
D)  1 + r =   
E)  r = R + i + ir.

Question 17

The real return on bonds is

Accepted Answer

A)  R. 
B)  the return someone receives from holding a nominal bond from the current to the future period. 
C)  always equal to the nominal return. 
D)  the return someone receives from holding a real bond from the current to the future period. 
E)  always greater than the nominal return. 
A)  R. 
B)  the return someone receives from holding a nominal bond from the current to the future period. 
C)  always equal to the nominal return. 
D)  the return someone receives from holding a real bond from the current to the future period. 
E)  always greater than the nominal return.

Question 18

Monetary aggregates are useful indirect measures of

Accepted Answer

A)  the monetary base. 
B)  interest rates. 
C)  inflation. 
D)  aggregate economic activity. 
E)  the role of money. 
A)  the monetary base. 
B)  interest rates. 
C)  inflation. 
D)  aggregate economic activity. 
E)  the role of money.

Question 19

The monetary intertemporal model contains the fact that

Accepted Answer

A)  the Bank of Canada supplies money. 
B)  interest rates are determined by the federal government. 
C)  interest rates are determined by the chartered banks. 
D)  the foreign sector does not matter. 
E)  transactions require money and transactions services supplied by banks. 
A)  the Bank of Canada supplies money. 
B)  interest rates are determined by the federal government. 
C)  interest rates are determined by the chartered banks. 
D)  the foreign sector does not matter. 
E)  transactions require money and transactions services supplied by banks.

Question 20

Debit cards and online banking has

Accepted Answer

A)  lowered the cost of banking transactions and increased the demand for money. 
B)  increased the riskiness of banks. 
C)  lowered the cost of banking transactions and reduced the demand for money. 
D)  increased the cost of banking transactions and reduced the demand for money. 
E)  decreased the riskiness of banks. 
A)  lowered the cost of banking transactions and increased the demand for money. 
B)  increased the riskiness of banks. 
C)  lowered the cost of banking transactions and reduced the demand for money. 
D)  increased the cost of banking transactions and reduced the demand for money. 
E)  decreased the riskiness of banks.

A liquidity trap occurs when

If the nominal interest rate rises,

If R > q, then

The most significant problem in trying to empirically measure the real rate of interest is that

The Fisher effect is

Money is useful in exchange when

Monetary aggregates are

Nominal bonds can be issued by

The zero lower bound is

The nominal money demand is defined as

At the zero lower bound

Double coincidence of wants means

Buying an item with cash would be an example of money's role as a

In the monetary intertemporal model, the supply of money is determined by

The real interest rate is approximately equal to

The Fisher relationship may be described by the following equation in which R is the nominal rate of interest, r is the real rate of interest, and i is the inflation rate.

The real return on bonds is

Monetary aggregates are useful indirect measures of

The monetary intertemporal model contains the fact that

Debit cards and online banking has

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 12: A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

A liquidity trap occurs when

If the nominal interest rate rises,

If R > q, then

The most significant problem in trying to empirically measure the real rate of interest is that

The Fisher effect is

Money is useful in exchange when

Monetary aggregates are

Nominal bonds can be issued by

The zero lower bound is

The nominal money demand is defined as

At the zero lower bound

Double coincidence of wants means

Buying an item with cash would be an example of money's role as a

In the monetary intertemporal model, the supply of money is determined by

The real interest rate is approximately equal to

The Fisher relationship may be described by the following equation in which R is the nominal rate of interest, r is the real rate of interest, and i is the inflation rate.

The real return on bonds is

Monetary aggregates are useful indirect measures of

The monetary intertemporal model contains the fact that

Debit cards and online banking has

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters