Question 1

For a given money demand curve,an increase in money supply:

Accepted Answer

A) drives up the real interest rate. 
B) lowers the opportunity cost of holding money. 
C) decreases the quantity of money demanded. 
D) drives down the price level in an economy. 
E) contracts the total output produced in an economy. 
A) drives up the real interest rate. 
B) lowers the opportunity cost of holding money. 
C) decreases the quantity of money demanded. 
D) drives down the price level in an economy. 
E) contracts the total output produced in an economy.

Question 2

Which of the following changes is observed when the Fed increases the federal funds rate?

Accepted Answer

A) Inflation is brought to an immediate halt. 
B) The inflation rate increases for several months,but then begins to decrease. 
C) Major banks try to offset this change by lowering the interest rates they charge on loans. 
D) Major banks try to offset this change by lowering the interest rates they pay on savings deposits. 
E) Major banks raise the prime interest rate that they charge to their best customers. 
A) Inflation is brought to an immediate halt. 
B) The inflation rate increases for several months,but then begins to decrease. 
C) Major banks try to offset this change by lowering the interest rates they charge on loans. 
D) Major banks try to offset this change by lowering the interest rates they pay on savings deposits. 
E) Major banks raise the prime interest rate that they charge to their best customers.

Question 3

In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

Accepted Answer

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

Question 4

The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called:

Accepted Answer

A) structural adjustments. 
B) financial strengthening. 
C) quantitative easing. 
D) inflation targeting. 
E) stress testing. 
A) structural adjustments. 
B) financial strengthening. 
C) quantitative easing. 
D) inflation targeting. 
E) stress testing.

Question 5

The Fed can close a recessionary gap by:

Accepted Answer

A) increasing fiscal expenditure. 
B) increasing taxes. 
C) decreasing taxes. 
D) selling U.S.government bonds. 
E) lowering the discount rate. 
A) increasing fiscal expenditure. 
B) increasing taxes. 
C) decreasing taxes. 
D) selling U.S.government bonds. 
E) lowering the discount rate.

Question 6

If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

Accepted Answer

A) $1,200 
B) $4,500 
C) $6,000 
D) $180,000 
E) $500 
A) $1,200 
B) $4,500 
C) $6,000 
D) $180,000 
E) $500

Question 7

The ultimate effect of a reduction in the money supply is:

Accepted Answer

A) a leftward shift of the aggregate demand curve. 
B) a rightward shift of the short-run aggregate supply curve. 
C) a movement upward along the aggregate demand curve. 
D) a movement downward along the aggregate demand curve. 
E) a movement upward along the short-run aggregate supply curve. 
A) a leftward shift of the aggregate demand curve. 
B) a rightward shift of the short-run aggregate supply curve. 
C) a movement upward along the aggregate demand curve. 
D) a movement downward along the aggregate demand curve. 
E) a movement upward along the short-run aggregate supply curve.

Question 8

During the 2007-2009 financial crisis,the Federal Reserve took some unusual steps in its conduct of monetary policy.Which of the following was not one of them?

Accepted Answer

A) It invested in AIG. 
B) It invested more than $1 trillion in mortgage-backed securities. 
C) It worked with the U.S.Treasury and with other regulators to stabilize banks and thaw frozen credit lines. 
D) It worked with the U.S.Treasury and other regulators to help conduct a stress test of the 19 largest banks. 
E) It bailed out General Motors. 
A) It invested in AIG. 
B) It invested more than $1 trillion in mortgage-backed securities. 
C) It worked with the U.S.Treasury and with other regulators to stabilize banks and thaw frozen credit lines. 
D) It worked with the U.S.Treasury and other regulators to help conduct a stress test of the 19 largest banks. 
E) It bailed out General Motors.

Question 9

Which of the following is not assumed to be constant along a money demand curve?

Accepted Answer

A) The price level 
B) The interest rate 
C) Real GDP 
D) Nominal GDP 
E) Individual's tastes and preferences 
A) The price level 
B) The interest rate 
C) Real GDP 
D) Nominal GDP 
E) Individual's tastes and preferences

Question 10

The demand for money is a downward sloping line that depicts the relationship between the price level and the opportunity cost of holding money.

Accepted Answer

A) True 
 B)False

Question 11

The velocity of money increases with a _____,other things constant.

Accepted Answer

A) fall in the inflation rate 
B) rise in the inflation rate 
C) rise in the employment rate 
D) fall in the exchange rate 
E) rise in the real interest rate 
A) fall in the inflation rate 
B) rise in the inflation rate 
C) rise in the employment rate 
D) fall in the exchange rate 
E) rise in the real interest rate

Question 12

When the short-run aggregate supply curve is steep,then for a given increase in aggregate demand:

Accepted Answer

A) the increase in real GDP will be relatively small and the increase in the price level will be relatively large. 
B) the increase in real GDP will be relatively large and the increase in the price level will be relatively small. 
C) the increase in both real GDP and the price level will be large. 
D) the increase in both real GDP and the price level will be small. 
E) the decrease in real GDP will be larger than the decrease in the price level. 
A) the increase in real GDP will be relatively small and the increase in the price level will be relatively large. 
B) the increase in real GDP will be relatively large and the increase in the price level will be relatively small. 
C) the increase in both real GDP and the price level will be large. 
D) the increase in both real GDP and the price level will be small. 
E) the decrease in real GDP will be larger than the decrease in the price level.

Question 13

If investment is not sensitive to changes in the interest rate,then changes in the money supply:

Accepted Answer

A) will have no effect on interest rates. 
B) will have no impact on the quantity of money demanded. 
C) will have no effect on the aggregate demand of an economy. 
D) will have a major impact on the aggregate demand of an economy. 
E) will have a major impact on the price level in an economy. 
A) will have no effect on interest rates. 
B) will have no impact on the quantity of money demanded. 
C) will have no effect on the aggregate demand of an economy. 
D) will have a major impact on the aggregate demand of an economy. 
E) will have a major impact on the price level in an economy.

Question 14

The figure given below shows equilibrium in a money market.When the money supply curve shifts from S to S',the equilibrium interest rate and quantity of money changes to:

Accepted Answer

A) r and m,respectively. 
B) r* and m*,respectively. 
C) r' and m',respectively. 
D) r and m',respectively. 
E) r' and m*,respectively. 
A) r and m,respectively. 
B) r* and m*,respectively. 
C) r' and m',respectively. 
D) r and m',respectively. 
E) r' and m*,respectively.

Question 15

At a given point in time,if the demand for money increases:

Accepted Answer

A) the interest rate will fall. 
B) there will be a movement downward along the money demand curve. 
C) there will be a movement upward along the money demand curve. 
D) there will be a rightward shift of the money demand curve. 
E) there will be a leftward shift of the money demand curve. 
A) the interest rate will fall. 
B) there will be a movement downward along the money demand curve. 
C) there will be a movement upward along the money demand curve. 
D) there will be a rightward shift of the money demand curve. 
E) there will be a leftward shift of the money demand curve.

Question 16

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy.The Fed can return the economy depicted by this figure to its potential output in the long run by:

Accepted Answer

A) selling US Treasury securities in the open market. 
B) lowering the discount rate. 
C) by lowering the reserve requirement. 
D) buying US Treasury securities in the open market. 
E) printing money. 
A) selling US Treasury securities in the open market. 
B) lowering the discount rate. 
C) by lowering the reserve requirement. 
D) buying US Treasury securities in the open market. 
E) printing money.

Question 17

The quantity theory of money assumes that money supply and price level are the only variables in the equation of exchange that are free to fluctuate.

Accepted Answer

A) True 
 B)False

Question 18

If the money supply in an economy equals $1,000 and nominal GDP equals $3,000,then according to the equation of exchange,velocity of money:

Accepted Answer

A) equals 1/3. 
B) equals 3. 
C) equals 3 million. 
D) cannot be determined since we do not know anything about prices. 
E) cannot be determined since we do not know anything about real GDP. 
A) equals 1/3. 
B) equals 3. 
C) equals 3 million. 
D) cannot be determined since we do not know anything about prices. 
E) cannot be determined since we do not know anything about real GDP.

Question 19

Other things constant,the quantity of money demanded varies:

Accepted Answer

A) directly with the market interest rate. 
B) inversely with the market interest rate. 
C) inversely with the price level. 
D) directly with the price level. 
E) inversely with the unemployment rate. 
A) directly with the market interest rate. 
B) inversely with the market interest rate. 
C) inversely with the price level. 
D) directly with the price level. 
E) inversely with the unemployment rate.

Question 20

If the Fed targets the interest rate,then:

Accepted Answer

A) the money supply will grow at a more controlled rate. 
B) monetary policy will reinforce fluctuations in economic activity. 
C) the price level will be more stable in the long run. 
D) money demand will be more stable. 
E) velocity will be less stable. 
A) the money supply will grow at a more controlled rate. 
B) monetary policy will reinforce fluctuations in economic activity. 
C) the price level will be more stable in the long run. 
D) money demand will be more stable. 
E) velocity will be less stable.

For a given money demand curve,an increase in money supply:

Which of the following changes is observed when the Fed increases the federal funds rate?

In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called:

The Fed can close a recessionary gap by:

If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

The ultimate effect of a reduction in the money supply is:

During the 2007-2009 financial crisis,the Federal Reserve took some unusual steps in its conduct of monetary policy.Which of the following was not one of them?

Which of the following is not assumed to be constant along a money demand curve?

The demand for money is a downward sloping line that depicts the relationship between the price level and the opportunity cost of holding money.

The velocity of money increases with a _____,other things constant.

When the short-run aggregate supply curve is steep,then for a given increase in aggregate demand:

If investment is not sensitive to changes in the interest rate,then changes in the money supply:

The figure given below shows equilibrium in a money market.When the money supply curve shifts from S to S',the equilibrium interest rate and quantity of money changes to:

At a given point in time,if the demand for money increases:

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy.The Fed can return the economy depicted by this figure to its potential output in the long run by:

The quantity theory of money assumes that money supply and price level are the only variables in the equation of exchange that are free to fluctuate.

If the money supply in an economy equals $1,000 and nominal GDP equals $3,000,then according to the equation of exchange,velocity of money:

Other things constant,the quantity of money demanded varies:

If the Fed targets the interest rate,then:

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

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Exam 15: Monetary Theory and Policy

For a given money demand curve,an increase in money supply:

Which of the following changes is observed when the Fed increases the federal funds rate?

In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called:

The Fed can close a recessionary gap by:

If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

The ultimate effect of a reduction in the money supply is:

During the 2007-2009 financial crisis,the Federal Reserve took some unusual steps in its conduct of monetary policy.Which of the following was not one of them?

Which of the following is not assumed to be constant along a money demand curve?

The demand for money is a downward sloping line that depicts the relationship between the price level and the opportunity cost of holding money.

The velocity of money increases with a _____,other things constant.

When the short-run aggregate supply curve is steep,then for a given increase in aggregate demand:

If investment is not sensitive to changes in the interest rate,then changes in the money supply:

The figure given below shows equilibrium in a money market.When the money supply curve shifts from S to S',the equilibrium interest rate and quantity of money changes to:

At a given point in time,if the demand for money increases:

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy.The Fed can return the economy depicted by this figure to its potential output in the long run by:

The quantity theory of money assumes that money supply and price level are the only variables in the equation of exchange that are free to fluctuate.

If the money supply in an economy equals $1,000 and nominal GDP equals $3,000,then according to the equation of exchange,velocity of money:

Other things constant,the quantity of money demanded varies:

If the Fed targets the interest rate,then:

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