Question 1

Suppose the money demand curve shifts rightward.Which of the following is true about the alternative policy options available with the Fed?

Accepted Answer

A) The Fed can keep the interest rate from rising only if it increases the money supply. 
B) The Fed cannot prevent the interest rate from rising. 
C) The Fed can prevent the interest rate from rising without changing the money supply. 
D) If the Fed expands the money supply,the interest rate will rise even further. 
E) The Fed should reduce the money supply if it plans to prevent the interest rate from rising. 
A) The Fed can keep the interest rate from rising only if it increases the money supply. 
B) The Fed cannot prevent the interest rate from rising. 
C) The Fed can prevent the interest rate from rising without changing the money supply. 
D) If the Fed expands the money supply,the interest rate will rise even further. 
E) The Fed should reduce the money supply if it plans to prevent the interest rate from rising.

Question 2

The velocity of money in circulation measures:

Accepted Answer

A) the average length of time that people hold wealth. 
B) how fast aggregate spending will increase for a given decline in money demand. 
C) how fast inflation will rise for a given increase in the money supply. 
D) how quickly money changes hands. 
E) how quickly banks can create money. 
A) the average length of time that people hold wealth. 
B) how fast aggregate spending will increase for a given decline in money demand. 
C) how fast inflation will rise for a given increase in the money supply. 
D) how quickly money changes hands. 
E) how quickly banks can create money.

Question 3

When the Fed decreases the money supply:

Accepted Answer

A) aggregate demand and aggregate supply both increase. 
B) aggregate demand increases,which leads to movement along the short-run aggregate supply curve. 
C) aggregate demand decreases,which leads to movement along the short-run aggregate supply curve. 
D) aggregate supply increases,which leads to movement along the aggregate demand curve. 
E) aggregate supply decreases,which leads to movement along the aggregate demand curve. 
A) aggregate demand and aggregate supply both increase. 
B) aggregate demand increases,which leads to movement along the short-run aggregate supply curve. 
C) aggregate demand decreases,which leads to movement along the short-run aggregate supply curve. 
D) aggregate supply increases,which leads to movement along the aggregate demand curve. 
E) aggregate supply decreases,which leads to movement along the aggregate demand curve.

Question 4

As a result of an expansionary monetary policy:

Accepted Answer

A) both aggregate expenditure and aggregate demand increase. 
B) both aggregate expenditure and aggregate demand decrease. 
C) aggregate expenditure increases and aggregate demand decreases. 
D) aggregate expenditure decreases and aggregate demand increases. 
E) aggregate expenditure remains unchanged;aggregate demand increases. 
A) both aggregate expenditure and aggregate demand increase. 
B) both aggregate expenditure and aggregate demand decrease. 
C) aggregate expenditure increases and aggregate demand decreases. 
D) aggregate expenditure decreases and aggregate demand increases. 
E) aggregate expenditure remains unchanged;aggregate demand increases.

Question 5

Which of the following changes will shift the money demand curve leftward?

Accepted Answer

A) An increase in the price level 
B) An increase in real GDP 
C) A decrease in the nominal interest rate 
D) An increase in the nominal interest rate 
E) A decrease in real GDP 
A) An increase in the price level 
B) An increase in real GDP 
C) A decrease in the nominal interest rate 
D) An increase in the nominal interest rate 
E) A decrease in real GDP

Question 6

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 price level 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 7

The money demand curve slopes:

Accepted Answer

A) downward because the cost of holding money decreases as the interest rate decreases. 
B) downward because the cost of holding money increases as the interest rate decreases. 
C) upward because people demand more money as real GDP increases. 
D) upward because people demand more money as real GDP decreases. 
E) downward because people demand more money as the price level decreases. 
A) downward because the cost of holding money decreases as the interest rate decreases. 
B) downward because the cost of holding money increases as the interest rate decreases. 
C) upward because people demand more money as real GDP increases. 
D) upward because people demand more money as real GDP decreases. 
E) downward because people demand more money as the price level decreases.

Question 8

For interest rates to remain stable during economic expansions,the money supply should:

Accepted Answer

A) decrease at a faster rate than the demand for money. 
B) grow at the same rate as money demand. 
C) grow at a faster rate than money demand. 
D) grow at a slower rate than money demand. 
E) decrease at a slower rate than the demand for money. 
A) decrease at a faster rate than the demand for money. 
B) grow at the same rate as money demand. 
C) grow at a faster rate than money demand. 
D) grow at a slower rate than money demand. 
E) decrease at a slower rate than the demand for money.

Question 9

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "r"?

Accepted Answer

A) There will be an excess demand for money. 
B) There will be an excess supply of money. 
C) The Fed will buy U.S.Treasury securities. 
D) The quantity of money demanded will fall. 
E) The quantity of money supplied will fall. 
A) There will be an excess demand for money. 
B) There will be an excess supply of money. 
C) The Fed will buy U.S.Treasury securities. 
D) The quantity of money demanded will fall. 
E) The quantity of money supplied will fall.

Question 10

If the Fed decreases the money supply,gross domestic product:

Accepted Answer

A) increases by the same amount as the increase in the interest rate. 
B) decreases by a greater amount than the increase in the interest rate because of the multiplier. 
C) decreases by the same amount as the decrease in investment. 
D) decreases by a greater amount than the decrease in investment because of the multiplier. 
E) decreases by a lesser amount than the decrease in investment because of the multiplier. 
A) increases by the same amount as the increase in the interest rate. 
B) decreases by a greater amount than the increase in the interest rate because of the multiplier. 
C) decreases by the same amount as the decrease in investment. 
D) decreases by a greater amount than the decrease in investment because of the multiplier. 
E) decreases by a lesser amount than the decrease in investment because of the multiplier.

Suppose the money demand curve shifts rightward.Which of the following is true about the alternative policy options available with the Fed?

The velocity of money in circulation measures:

When the Fed decreases the money supply:

As a result of an expansionary monetary policy:

Which of the following changes will shift the money demand curve leftward?

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 price level will cause a movement from:

The money demand curve slopes:

For interest rates to remain stable during economic expansions,the money supply should:

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "r"?

If the Fed decreases the money supply,gross domestic product:

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

Suppose the money demand curve shifts rightward.Which of the following is true about the alternative policy options available with the Fed?

The velocity of money in circulation measures:

When the Fed decreases the money supply:

As a result of an expansionary monetary policy:

Which of the following changes will shift the money demand curve leftward?

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 price level will cause a movement from:

The money demand curve slopes:

For interest rates to remain stable during economic expansions,the money supply should:

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "r"?

If the Fed decreases the money supply,gross domestic product:

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