Question 1

Movements along a money demand curve reflect the effects of changes in the:

Accepted Answer

A)  price level on the quantity of money demanded. 
B)  interest rate on the demand for money. 
C)  real exchange rate on the demand for money. 
D)  interest rate on the quantity of money demanded. 
E)  potential GDP on the quantity of money demanded. 
A)  price level on the quantity of money demanded. 
B)  interest rate on the demand for money. 
C)  real exchange rate on the demand for money. 
D)  interest rate on the quantity of money demanded. 
E)  potential GDP on the quantity of money demanded.

Question 2

Over the past 40 years, the most frequent target for the Fed's monetary policy has been the:

Accepted Answer

A)  prime interest rate. 
B)  federal funds rate. 
C)  M1 money supply. 
D)  M2 money supply. 
E)  required reserve ratio. 
A)  prime interest rate. 
B)  federal funds rate. 
C)  M1 money supply. 
D)  M2 money supply. 
E)  required reserve ratio.

Question 3

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis. In this figure, a decrease in nominal GDP with no change 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 4

If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand:

Accepted Answer

A)  falls, which increases real GDP and the price level. 
B)  increases, which decreases real GDP and the price level. 
C)  falls, which decreases real GDP and increases the price level. 
D)  increases, which decreases real GDP and increases the price level. 
E)  increases, which increases real GDP and the price level. 
A)  falls, which increases real GDP and the price level. 
B)  increases, which decreases real GDP and the price level. 
C)  falls, which decreases real GDP and increases the price level. 
D)  increases, which decreases real GDP and increases the price level. 
E)  increases, which increases real GDP and the price level.

Question 5

Which of the following changes will shift the money demand rightward?

Accepted Answer

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

Question 6

If real output and velocity are stable and predictable, then the equation of exchange can be used to derive a simple relationship between:

Accepted Answer

A)  the money supply and the price level. 
B)  the money supply and the interest rate. 
C)  the money supply and the foreign exchange rate. 
D)  unemployment and aggregate demand. 
E)  unemployment and nominal GDP. 
A)  the money supply and the price level. 
B)  the money supply and the interest rate. 
C)  the money supply and the foreign exchange rate. 
D)  unemployment and aggregate demand. 
E)  unemployment and nominal GDP.

Question 7

The figure given below shows equilibrium in a money market. If S is the supply curve, the equilibrium interest rate and quantity of money will be:

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 8

Since the Federal Reserve was established in 1913, the U.S. has experienced three periods of high inflation and each was preceded and accompanied by a period of sharp decline in the money supply

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about the velocity of money in the U.S. is correct?

Accepted Answer

A)  From 1915 to 1947, the velocity of M1 increased. 
B)  From 1947 to 1973, the velocity of M1 decreased. 
C)  The growth in the velocity of money was steady in the 1970s. 
D)  The velocity of money has remained more or less stable post 1980s. 
E)  ATM machines and credit cards have increased the velocity of money. 
A)  From 1915 to 1947, the velocity of M1 increased. 
B)  From 1947 to 1973, the velocity of M1 decreased. 
C)  The growth in the velocity of money was steady in the 1970s. 
D)  The velocity of money has remained more or less stable post 1980s. 
E)  ATM machines and credit cards have increased the velocity of money.

Question 10

Given an upward sloping aggregate supply curve, which of the following changes in the aggregate demand curve is observed when the Fed reduces the money supply?

Accepted Answer

A)  The aggregate demand curve shifts leftward, lowering real GDP and the price level. 
B)  The aggregate demand curve shifts leftward, raising real GDP and the price level. 
C)  The aggregate demand curve shifts leftward, lowering real GDP but raising the price level. 
D)  The aggregate demand curve shifts rightward, raising real GDP and the price level. 
E)  The aggregate demand curve shifts rightward, lowering real GDP but raising the price level. 
A)  The aggregate demand curve shifts leftward, lowering real GDP and the price level. 
B)  The aggregate demand curve shifts leftward, raising real GDP and the price level. 
C)  The aggregate demand curve shifts leftward, lowering real GDP but raising the price level. 
D)  The aggregate demand curve shifts rightward, raising real GDP and the price level. 
E)  The aggregate demand curve shifts rightward, lowering real GDP but raising the price level.

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

According to the quantity theory of money, if velocity of money is constant, a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

Accepted Answer

A) True 
 B)False

Question 13

To eliminate a recessionary gap, the Fed can:

Accepted Answer

A)  increase the money supply as it will increase the interest rate and investment. 
B)  increase the money supply as it will decrease the interest rate and increase investment. 
C)  decrease the money supply as it will increase the interest rate and investment. 
D)  decrease the money supply as it will decrease the interest rate and investment. 
E)  decrease the money supply as it will increase the interest rate and decrease investment. 
A)  increase the money supply as it will increase the interest rate and investment. 
B)  increase the money supply as it will decrease the interest rate and increase investment. 
C)  decrease the money supply as it will increase the interest rate and investment. 
D)  decrease the money supply as it will decrease the interest rate and investment. 
E)  decrease the money supply as it will increase the interest rate and decrease investment.

Question 14

If the money supply in an economy is increased, the interest rate will fall, and real GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that the demand and supply of money are initially in equilibrium, and that the demand for money increases. A monetary authority interested in keeping the money supply constant and the interest rate low must:

Accepted Answer

A)  adopt an expansionary monetary policy. 
B)  adopt a contractionary monetary policy. 
C)  increase the demand for money. 
D)  decrease the demand for money. 
E)  give up pursuing both goals at the same time. 
A)  adopt an expansionary monetary policy. 
B)  adopt a contractionary monetary policy. 
C)  increase the demand for money. 
D)  decrease the demand for money. 
E)  give up pursuing both goals at the same time.

Question 16

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 17

When the Fed purchases U.S. government securities through the open market, the money supply:

Accepted Answer

A)  increases, the interest rate falls, and the quantity of money demanded increases. 
B)  falls, the interest rate falls, and the quantity of money demanded increases. 
C)  increases, the interest rate increases, and the quantity of money demanded increases. 
D)  falls, the interest rate increases, and the quantity of money demanded falls. 
E)  falls, the interest rate falls, and the quantity of money demanded falls. 
A)  increases, the interest rate falls, and the quantity of money demanded increases. 
B)  falls, the interest rate falls, and the quantity of money demanded increases. 
C)  increases, the interest rate increases, and the quantity of money demanded increases. 
D)  falls, the interest rate increases, and the quantity of money demanded falls. 
E)  falls, the interest rate falls, and the quantity of money demanded falls.

Question 18

The figure given below shows equilibrium in a money market. If S is the initial supply curve, the movement from S to S* can be attributed to:

Accepted Answer

A)  a decrease in the required reserve ratio. 
B)  the purchase of U.S. Treasury securities by the Fed. 
C)  the sale of U.S. Treasury securities by the Fed. 
D)  a decrease in the discount rate. 
E)  a decrease in excess reserves in the banking system. 
A)  a decrease in the required reserve ratio. 
B)  the purchase of U.S. Treasury securities by the Fed. 
C)  the sale of U.S. Treasury securities by the Fed. 
D)  a decrease in the discount rate. 
E)  a decrease in excess reserves in the banking system.

Question 19

Which of the following forms of money will earn at least some interest income?

Accepted Answer

A)  Gold coins 
B)  Currency notes 
C)  Traveler's checks 
D)  Checkable deposits 
E)  Gift checks 
A)  Gold coins 
B)  Currency notes 
C)  Traveler's checks 
D)  Checkable deposits 
E)  Gift checks

Question 20

The demand for money is a relationship between:

Accepted Answer

A)  the price level and the amount of cyclical unemployment. 
B)  the price level and the actual output produced in an economy. 
C)  the interest rate and how much money people choose to hold. 
D)  the interest rate and how much money people earn during a certain time period. 
E)  the interest rate and the rate of inflation. 
A)  the price level and the amount of cyclical unemployment. 
B)  the price level and the actual output produced in an economy. 
C)  the interest rate and how much money people choose to hold. 
D)  the interest rate and how much money people earn during a certain time period. 
E)  the interest rate and the rate of inflation.

Movements along a money demand curve reflect the effects of changes in the:

Over the past 40 years, the most frequent target for the Fed's monetary policy has been the:

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis. In this figure, a decrease in nominal GDP with no change in the price level will cause a movement from:

If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand:

Which of the following changes will shift the money demand rightward?

If real output and velocity are stable and predictable, then the equation of exchange can be used to derive a simple relationship between:

The figure given below shows equilibrium in a money market. If S is the supply curve, the equilibrium interest rate and quantity of money will be:

Since the Federal Reserve was established in 1913, the U.S. has experienced three periods of high inflation and each was preceded and accompanied by a period of sharp decline in the money supply

Which of the following statements about the velocity of money in the U.S. is correct?

Given an upward sloping aggregate supply curve, which of the following changes in the aggregate demand curve is observed when the Fed reduces the money supply?

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

According to the quantity theory of money, if velocity of money is constant, a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

To eliminate a recessionary gap, the Fed can:

If the money supply in an economy is increased, the interest rate will fall, and real GDP will decrease.

Suppose that the demand and supply of money are initially in equilibrium, and that the demand for money increases. A monetary authority interested in keeping the money supply constant and the interest rate low must:

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

When the Fed purchases U.S. government securities through the open market, the money supply:

The figure given below shows equilibrium in a money market. If S is the initial supply curve, the movement from S to S* can be attributed to:

Which of the following forms of money will earn at least some interest income?

The demand for money is a relationship between:

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

Movements along a money demand curve reflect the effects of changes in the:

Over the past 40 years, the most frequent target for the Fed's monetary policy has been the:

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis. In this figure, a decrease in nominal GDP with no change in the price level will cause a movement from:

If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand:

Which of the following changes will shift the money demand rightward?

If real output and velocity are stable and predictable, then the equation of exchange can be used to derive a simple relationship between:

The figure given below shows equilibrium in a money market. If S is the supply curve, the equilibrium interest rate and quantity of money will be:

Since the Federal Reserve was established in 1913, the U.S. has experienced three periods of high inflation and each was preceded and accompanied by a period of sharp decline in the money supply

Which of the following statements about the velocity of money in the U.S. is correct?

Given an upward sloping aggregate supply curve, which of the following changes in the aggregate demand curve is observed when the Fed reduces the money supply?

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

According to the quantity theory of money, if velocity of money is constant, a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

To eliminate a recessionary gap, the Fed can:

If the money supply in an economy is increased, the interest rate will fall, and real GDP will decrease.

Suppose that the demand and supply of money are initially in equilibrium, and that the demand for money increases. A monetary authority interested in keeping the money supply constant and the interest rate low must:

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

When the Fed purchases U.S. government securities through the open market, the money supply:

The figure given below shows equilibrium in a money market. If S is the initial supply curve, the movement from S to S* can be attributed to:

Which of the following forms of money will earn at least some interest income?

The demand for money is a relationship between:

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