Question 1

The higher the interest rate,the greater the preference for liquidity.

Accepted Answer

A) True 
 B)False  False

Question 2

The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is:

Accepted Answer

A) in a long-run equilibrium at the price level P and income level Y. 
B) in a short-run equilibrium at the price level P and income level Y. 
C) experiencing a contractionary gap at price level P and income level Y. 
D) experiencing an expansionary gap at price level P" and income level Y'. 
E) in a short-run equilibrium at the price level P' and income level Y. 
A) in a long-run equilibrium at the price level P and income level Y. 
B) in a short-run equilibrium at the price level P and income level Y. 
C) experiencing a contractionary gap at price level P and income level Y. 
D) experiencing an expansionary gap at price level P" and income level Y'. 
E) in a short-run equilibrium at the price level P' and income level Y. B

Question 3

The velocity of money is defined as:

Accepted Answer

A) the time it takes the average worker to get to the bank with his/her paycheck. 
B) the time it takes banks to clear checks. 
C) the average number of times per year each dollar is used to purchase final goods and services. 
D) the ratio of money supply to the average price level in an economy. 
E) the average number of times per year each dollar is spent for goods,payrolls,Social Security payments,etc. 
A) the time it takes the average worker to get to the bank with his/her paycheck. 
B) the time it takes banks to clear checks. 
C) the average number of times per year each dollar is used to purchase final goods and services. 
D) the ratio of money supply to the average price level in an economy. 
E) the average number of times per year each dollar is spent for goods,payrolls,Social Security payments,etc. C

Question 4

If the Fed increases the money supply,then:

Accepted Answer

A) the interest rate declines and the quantity of money demanded increases. 
B) the interest rate declines and the quantity of money demanded declines. 
C) the interest rate increases and the quantity of money demanded increases. 
D) the interest rate increases and the quantity of money demanded declines. 
E) the interest rate increases but the quantity of money demanded remains unaffected. 
A) the interest rate declines and the quantity of money demanded increases. 
B) the interest rate declines and the quantity of money demanded declines. 
C) the interest rate increases and the quantity of money demanded increases. 
D) the interest rate increases and the quantity of money demanded declines. 
E) the interest rate increases but the quantity of money demanded remains unaffected.

Question 5

In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

Accepted Answer

A) a constant price level. 
B) a slowly increasing price level. 
C) a rapidly increasing price level. 
D) constant real GDP. 
E) constant nominal GDP. 
A) a constant price level. 
B) a slowly increasing price level. 
C) a rapidly increasing price level. 
D) constant real GDP. 
E) constant nominal GDP.

Question 6

According to the equation of exchange,if real GDP is $2 trillion and the money supply is $0.5 trillion,the velocity of money:

Accepted Answer

A) must be 4. 
B) must be 1/4. 
C) must be 4 trillion. 
D) must be 1/4 trillion. 
E) cannot be determined unless we know the price level. 
A) must be 4. 
B) must be 1/4. 
C) must be 4 trillion. 
D) must be 1/4 trillion. 
E) cannot be determined unless we know the price level.

Question 7

An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

Accepted Answer

A) aggregate demand curve is flat. 
B) short-run aggregate supply curve is horizontal. 
C) economy is well below potential output. 
D) economy is already at potential output. 
E) aggregate demand curve is fairly steep. 
A) aggregate demand curve is flat. 
B) short-run aggregate supply curve is horizontal. 
C) economy is well below potential output. 
D) economy is already at potential output. 
E) aggregate demand curve is fairly steep.

Question 8

In the short run,a decrease in the money supply will lead to a(n):

Accepted Answer

A) decrease in Gross Domestic Product. 
B) increase in the price level. 
C) increase in aggregate demand. 
D) increase in the demand for money. 
E) decrease in the market interest rate. 
A) decrease in Gross Domestic Product. 
B) increase in the price level. 
C) increase in aggregate demand. 
D) increase in the demand for money. 
E) decrease in the market interest rate.

Question 9

Planned investment expenditures will eventually decrease after:

Accepted Answer

A) the money supply decreases. 
B) the demand for money decreases. 
C) the interest rate falls. 
D) the Fed buys government securities. 
E) business managers become more optimistic about future market conditions for their products. 
A) the money supply decreases. 
B) the demand for money decreases. 
C) the interest rate falls. 
D) the Fed buys government securities. 
E) business managers become more optimistic about future market conditions for their products.

Question 10

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the level of real GDP will cause a movement from:

Accepted Answer

A) point B to point A. 
B) point A to point B. 
C) DM to DM'. 
D) DM to DM*. 
E) point E to point F. 
A) point B to point A. 
B) point A to point B. 
C) DM to DM'. 
D) DM to DM*. 
E) point E to point F.

Question 11

If the Fed sells U.S.government securities in the open market,gross domestic product:

Accepted Answer

A) increases because the resulting increase in the interest rate leads to a decrease in investment. 
B) increases because the resulting decrease in the interest rate leads to an increase in investment. 
C) decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D) decreases because the resulting increase in the interest rate leads to an increase in investment. 
E) decreases because the resulting decrease in the interest rate leads to an increase in investment. 
A) increases because the resulting increase in the interest rate leads to a decrease in investment. 
B) increases because the resulting decrease in the interest rate leads to an increase in investment. 
C) decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D) decreases because the resulting increase in the interest rate leads to an increase in investment. 
E) decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 12

If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

Accepted Answer

A) The demand for money will increase and the interest rate will rise. 
B) The money supply will increase and the interest rate will fall. 
C) The interest rate will rise and the quantity of money demanded will fall. 
D) The money supply will decrease and the interest rate will fall. 
E) The interest rate will fall and the quantity of money demanded will increase. 
A) The demand for money will increase and the interest rate will rise. 
B) The money supply will increase and the interest rate will fall. 
C) The interest rate will rise and the quantity of money demanded will fall. 
D) The money supply will decrease and the interest rate will fall. 
E) The interest rate will fall and the quantity of money demanded will increase.

Question 13

For a given shift of the aggregate demand curve,the steeper the short-run aggregate supply curve,the larger the change in real GDP.

Accepted Answer

A) True 
 B)False

Question 14

If the value of the spending multiplier is greater than 1,then an increase in investment will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

In the long run,an expansionary monetary policy will lead to:

Accepted Answer

A) a decrease in aggregate expenditure. 
B) an increase in unemployment. 
C) an increase in the price level. 
D) an increase in potential output. 
E) a decrease in the price level. 
A) a decrease in aggregate expenditure. 
B) an increase in unemployment. 
C) an increase in the price level. 
D) an increase in potential output. 
E) a decrease in the price level.

Question 16

Most policy makers agree that in the long run,changes in the money supply influence:

Accepted Answer

A) the price level and inflation. 
B) the real interest rate and aggregate demand. 
C) the planned investment expenditure. 
D) the exchange rate. 
E) the potential GDP and unemployment. 
A) the price level and inflation. 
B) the real interest rate and aggregate demand. 
C) the planned investment expenditure. 
D) the exchange rate. 
E) the potential GDP and unemployment.

Question 17

Before 2008,money market mutual funds and hedge funds had been out of Fed's scope and control because they did not rely on customer deposits.

Accepted Answer

A) True 
 B)False

Question 18

The money demand curve will shift when there is a change in the:

Accepted Answer

A) unemployment rate. 
B) inflation rate. 
C) money supply. 
D) nominal interest rate. 
E) price level. 
A) unemployment rate. 
B) inflation rate. 
C) money supply. 
D) nominal interest rate. 
E) price level.

Question 19

Which of these is most likely to lower the velocity of money?

Accepted Answer

A) A commercial innovation that facilitates exchange 
B) A low inflation rate 
C) A decline in the effectiveness of money as a store of wealth 
D) A high inflation rate 
E) A weekly pay for workers instead of a monthly pay 
A) A commercial innovation that facilitates exchange 
B) A low inflation rate 
C) A decline in the effectiveness of money as a store of wealth 
D) A high inflation rate 
E) A weekly pay for workers instead of a monthly pay

Question 20

People prefer to hold less of their wealth in the form of financial assets like bonds and term deposits when:

Accepted Answer

A) real GDP is at an all-time low. 
B) the real interest rate is above 10 percent. 
C) the price level is very low. 
D) the nominal interest rate is close to zero. 
E) the nominal interest rate is very high. 
A) real GDP is at an all-time low. 
B) the real interest rate is above 10 percent. 
C) the price level is very low. 
D) the nominal interest rate is close to zero. 
E) the nominal interest rate is very high.

The higher the interest rate,the greater the preference for liquidity.

The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is:

The velocity of money is defined as:

If the Fed increases the money supply,then:

In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

According to the equation of exchange,if real GDP is $2 trillion and the money supply is $0.5 trillion,the velocity of money:

An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

In the short run,a decrease in the money supply will lead to a(n):

Planned investment expenditures will eventually decrease after:

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the level of real GDP will cause a movement from:

If the Fed sells U.S.government securities in the open market,gross domestic product:

If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

For a given shift of the aggregate demand curve,the steeper the short-run aggregate supply curve,the larger the change in real GDP.

If the value of the spending multiplier is greater than 1,then an increase in investment will shift the aggregate demand curve to the left.

In the long run,an expansionary monetary policy will lead to:

Most policy makers agree that in the long run,changes in the money supply influence:

Before 2008,money market mutual funds and hedge funds had been out of Fed's scope and control because they did not rely on customer deposits.

The money demand curve will shift when there is a change in the:

Which of these is most likely to lower the velocity of money?

People prefer to hold less of their wealth in the form of financial assets like bonds and term deposits when:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 15: Monetary Theory and Policy

The higher the interest rate,the greater the preference for liquidity.

The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is:

The velocity of money is defined as:

If the Fed increases the money supply,then:

In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

According to the equation of exchange,if real GDP is $2 trillion and the money supply is $0.5 trillion,the velocity of money:

An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

In the short run,a decrease in the money supply will lead to a(n):

Planned investment expenditures will eventually decrease after:

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the level of real GDP will cause a movement from:

If the Fed sells U.S.government securities in the open market,gross domestic product:

If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

For a given shift of the aggregate demand curve,the steeper the short-run aggregate supply curve,the larger the change in real GDP.

If the value of the spending multiplier is greater than 1,then an increase in investment will shift the aggregate demand curve to the left.

In the long run,an expansionary monetary policy will lead to:

Most policy makers agree that in the long run,changes in the money supply influence:

Before 2008,money market mutual funds and hedge funds had been out of Fed's scope and control because they did not rely on customer deposits.

The money demand curve will shift when there is a change in the:

Which of these is most likely to lower the velocity of money?

People prefer to hold less of their wealth in the form of financial assets like bonds and term deposits when:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters