Question 1

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

Accepted Answer

A) True 
 B)False  False

Question 2

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. C

Question 3

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. E

Question 4

In the long run, if the money supply increases:

Accepted Answer

A)  most of the resulting rise in nominal GDP will be a result of increases in the exchange rate. 
B)  most of the resulting rise in nominal GDP will be a result of increases in the price level. 
C)  most of the resulting rise in real GDP will be a result of increases in the price level. 
D)  most of the resulting rise in real GDP will be a result of increases in the interest rate. 
E)  most of the resulting rise in real GDP will be a result of increases in aggregate expenditure. 
A)  most of the resulting rise in nominal GDP will be a result of increases in the exchange rate. 
B)  most of the resulting rise in nominal GDP will be a result of increases in the price level. 
C)  most of the resulting rise in real GDP will be a result of increases in the price level. 
D)  most of the resulting rise in real GDP will be a result of increases in the interest rate. 
E)  most of the resulting rise in real GDP will be a result of increases in aggregate expenditure.

Question 5

Which of the following policies can be adopted by the Fed in order to stimulate an economy in the short run?

Accepted Answer

A)  Increase the market interest rate 
B)  Purchase U.S. government securities 
C)  Increase the discount rate 
D)  Increase the price of consumer goods 
E)  Increase the required reserve ratio 
A)  Increase the market interest rate 
B)  Purchase U.S. government securities 
C)  Increase the discount rate 
D)  Increase the price of consumer goods 
E)  Increase the required reserve ratio

Question 6

According to the equation of exchange, if the amount of money in an economy multiplied by the velocity of money equals 800 million dollars, then this economy's:

Accepted Answer

A)  real GDP equals $800 million. 
B)  nominal GDP equals $800 million. 
C)  real GDP equals $800 million times the price level. 
D)  nominal GDP equals $800 million times the price level. 
E)  price level equals $800. 
A)  real GDP equals $800 million. 
B)  nominal GDP equals $800 million. 
C)  real GDP equals $800 million times the price level. 
D)  nominal GDP equals $800 million times the price level. 
E)  price level equals $800.

Question 7

Which of the following changes will cause a downward movement along the money demand curve?

Accepted Answer

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

Question 8

The supply of money is depicted as an upward sloping line that depends directly on the interest rate.

Accepted Answer

A) True 
 B)False

Question 9

The Fed uses the federal funds rate to pursue its twin goals of:

Accepted Answer

A)  exchange rate stability and maximum GDP. 
B)  interest rate stability and maximum GDP. 
C)  deflation and maximum GDP. 
D)  price stability and maximum employment. 
E)  interest rate stability and maximum employment. 
A)  exchange rate stability and maximum GDP. 
B)  interest rate stability and maximum GDP. 
C)  deflation and maximum GDP. 
D)  price stability and maximum employment. 
E)  interest rate stability and maximum employment.

Question 10

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.

Question 11

Which one of these statements is correct?

Accepted Answer

A)  The lower the interest rate, the higher the opportunity cost of holding assets in the form of money. 
B)  The quantity of money supplied is independent of the interest rate. 
C)  The larger the supply of money, the higher the interest rate, all things equal. 
D)  Travelers checks and government bonds are equally liquid assets. 
E)  The demand for money increases whenever the price level decreases. 
A)  The lower the interest rate, the higher the opportunity cost of holding assets in the form of money. 
B)  The quantity of money supplied is independent of the interest rate. 
C)  The larger the supply of money, the higher the interest rate, all things equal. 
D)  Travelers checks and government bonds are equally liquid assets. 
E)  The demand for money increases whenever the price level decreases.

Question 12

The demand for money is based primarily on money's role as a(n):

Accepted Answer

A)  measure of wealth. 
B)  medium of exchange. 
C)  standard of economic well-being. 
D)  interest-bearing asset. 
E)  non-interest-bearing asset. 
A)  measure of wealth. 
B)  medium of exchange. 
C)  standard of economic well-being. 
D)  interest-bearing asset. 
E)  non-interest-bearing asset.

Question 13

Which of the following variables are assumed to be more or less constant in the quantity theory of money equation?

Accepted Answer

A)  The price level 
B)  The real GDP 
C)  The money supply 
D)  The nominal GDP 
E)  The velocity of money 
A)  The price level 
B)  The real GDP 
C)  The money supply 
D)  The nominal GDP 
E)  The velocity of money

Question 14

Which of the following is true of the equation of exchange?

Accepted Answer

A)  It states that the product of the price level and velocity of money is equal to real GDP. 
B)  It states that aggregate demand in an economy is equal to total investment spending. 
C)  It states that money supply times velocity of money equals real GDP. 
D)  It states that velocity of money is equal to the ratio of nominal GDP and money supply. 
E)  It changes to the quantity theory of money if the price level is assumed to be constant. 
A)  It states that the product of the price level and velocity of money is equal to real GDP. 
B)  It states that aggregate demand in an economy is equal to total investment spending. 
C)  It states that money supply times velocity of money equals real GDP. 
D)  It states that velocity of money is equal to the ratio of nominal GDP and money supply. 
E)  It changes to the quantity theory of money if the price level is assumed to be constant.

Question 15

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 16

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 17

Which of the following changes is most likely to be observed in the money market of a country experiencing a recession?

Accepted Answer

A)  The demand curve for money will shift to the right. 
B)  The demand curve for money will shift to the left. 
C)  The quantity of money demanded will increase. 
D)  The quantity of money demanded will decrease. 
E)  The supply of money will fall. 
A)  The demand curve for money will shift to the right. 
B)  The demand curve for money will shift to the left. 
C)  The quantity of money demanded will increase. 
D)  The quantity of money demanded will decrease. 
E)  The supply of money will fall.

Question 18

Which of the following identities describe the equation of exchange?

Accepted Answer

A)  Money in circulation × prices = velocity × income 
B)  Money in circulation × income = velocity × prices 
C)  Real GDP = money in circulation × velocity 
D)  Nominal GDP = money in circulation × velocity 
E)  Real GDP = prices × money in circulation × velocity 
A)  Money in circulation × prices = velocity × income 
B)  Money in circulation × income = velocity × prices 
C)  Real GDP = money in circulation × velocity 
D)  Nominal GDP = money in circulation × velocity 
E)  Real GDP = prices × money in circulation × velocity

Question 19

The money demand curve shifts to the right whenever there is a decrease in the interest rate.

Accepted Answer

A) True 
 B)False

Question 20

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.

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

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:

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

In the long run, if the money supply increases:

Which of the following policies can be adopted by the Fed in order to stimulate an economy in the short run?

According to the equation of exchange, if the amount of money in an economy multiplied by the velocity of money equals 800 million dollars, then this economy's:

Which of the following changes will cause a downward movement along the money demand curve?

The supply of money is depicted as an upward sloping line that depends directly on the interest rate.

The Fed uses the federal funds rate to pursue its twin goals of:

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

Which one of these statements is correct?

The demand for money is based primarily on money's role as a(n):

Which of the following variables are assumed to be more or less constant in the quantity theory of money equation?

Which of the following is true of the equation of exchange?

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

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

Which of the following changes is most likely to be observed in the money market of a country experiencing a recession?

Which of the following identities describe the equation of exchange?

The money demand curve shifts to the right whenever there is a decrease in the interest rate.

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

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

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

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:

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

In the long run, if the money supply increases:

Which of the following policies can be adopted by the Fed in order to stimulate an economy in the short run?

According to the equation of exchange, if the amount of money in an economy multiplied by the velocity of money equals 800 million dollars, then this economy's:

Which of the following changes will cause a downward movement along the money demand curve?

The supply of money is depicted as an upward sloping line that depends directly on the interest rate.

The Fed uses the federal funds rate to pursue its twin goals of:

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

Which one of these statements is correct?

The demand for money is based primarily on money's role as a(n):

Which of the following variables are assumed to be more or less constant in the quantity theory of money equation?

Which of the following is true of the equation of exchange?

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

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

Which of the following changes is most likely to be observed in the money market of a country experiencing a recession?

Which of the following identities describe the equation of exchange?

The money demand curve shifts to the right whenever there is a decrease in the interest rate.

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

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