Question 1

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy. In this figure, short-run equilibrium occurs at:

Accepted Answer

A)  point b, where actual output exceeds potential output. 
B)  point a, where actual output exceeds potential output. 
C)  point c, where actual price level exceeds the expected price level. 
D)  point c, where the actual price level is less than the expected price level. 
E)  point b, where the actual price level exceeds the expected price level. 
A)  point b, where actual output exceeds potential output. 
B)  point a, where actual output exceeds potential output. 
C)  point c, where actual price level exceeds the expected price level. 
D)  point c, where the actual price level is less than the expected price level. 
E)  point b, where the actual price level exceeds the expected price level.

Question 2

The demand for money will be high in an economy experiencing:

Accepted Answer

A)  a depression. 
B)  hyperinflation. 
C)  deflation. 
D)  a recession. 
E)  a sluggish population growth. 
A)  a depression. 
B)  hyperinflation. 
C)  deflation. 
D)  a recession. 
E)  a sluggish population growth.

Question 3

A movement upward and to the left along the money demand curve is caused by:

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 average 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 average price level.

Question 4

The equation of exchange states that the quantity of money multiplied by the velocity of money equals:

Accepted Answer

A)  real Gross Domestic Product. 
B)  the price level. 
C)  nominal Gross Domestic Product. 
D)  the turnover rate. 
E)  the demand for money. 
A)  real Gross Domestic Product. 
B)  the price level. 
C)  nominal Gross Domestic Product. 
D)  the turnover rate. 
E)  the demand for money.

Question 5

In the money market, if the money supply decreases, the opportunity cost of holding money:

Accepted Answer

A)  decreases and the quantity of money demanded increases. 
B)  decreases and the quantity of money demanded falls. 
C)  increases and the quantity of money demanded falls. 
D)  increases but the quantity of money demanded remains unchanged. 
E)  increases and the quantity of money demanded also increases. 
A)  decreases and the quantity of money demanded increases. 
B)  decreases and the quantity of money demanded falls. 
C)  increases and the quantity of money demanded falls. 
D)  increases but the quantity of money demanded remains unchanged. 
E)  increases and the quantity of money demanded also increases.

Question 6

An increase in the expected inflation rate causes:

Accepted Answer

A)  the velocity of money to increase. 
B)  the velocity of money to decrease. 
C)  the actual inflation rate to fall. 
D)  the actual price level to decrease. 
E)  the money supply to increase. 
A)  the velocity of money to increase. 
B)  the velocity of money to decrease. 
C)  the actual inflation rate to fall. 
D)  the actual price level to decrease. 
E)  the money supply to increase.

Question 7

In the aggregate demand-aggregate supply model in the short run, a decrease in the money supply is likely to cause a(n):

Accepted Answer

A)  increase in both the price level and real GDP. 
B)  decrease in both the price level and real GDP. 
C)  increase in real GDP and a decrease in the price level. 
D)  decrease in real GDP and an increase in the price level. 
E)  increase in the price level only. 
A)  increase in both the price level and real GDP. 
B)  decrease in both the price level and real GDP. 
C)  increase in real GDP and a decrease in the price level. 
D)  decrease in real GDP and an increase in the price level. 
E)  increase in the price level only.

Question 8

The demand for money in an economy is high when the:

Accepted Answer

A)  real GDP is low. 
B)  personal tax rate is low. 
C)  unemployment rate is high. 
D)  price level is high. 
E)  interest rate is high. 
A)  real GDP is low. 
B)  personal tax rate is low. 
C)  unemployment rate is high. 
D)  price level is high. 
E)  interest rate is high.

Question 9

If the money supply is $600, the price level is $2, and real GDP is $300, the velocity of money is _____.

Accepted Answer

A)  1 
B)  150 
C)  300 
D)  600 
E)  1,200 
A)  1 
B)  150 
C)  300 
D)  600 
E)  1,200

Question 10

The demand curve for investment depicts:

Accepted Answer

A)  an inverse relationship between interest rate and aggregate demand. 
B)  an inverse relationship between interest rate and investment. 
C)  an inverse relationship between price level and real GDP. 
D)  a direct relationship between interest rate and quantity of money. 
E)  a direct relationship between aggregate demand and real GDP. 
A)  an inverse relationship between interest rate and aggregate demand. 
B)  an inverse relationship between interest rate and investment. 
C)  an inverse relationship between price level and real GDP. 
D)  a direct relationship between interest rate and quantity of money. 
E)  a direct relationship between aggregate demand and real GDP.

Question 11

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 12

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 13

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 14

An identity is a relationship expressed in such a way that it is true by definition.

Accepted Answer

A) True 
 B)False

Question 15

Monetary policy will be effective in changing the gross domestic product of a nation only if:

Accepted Answer

A)  planned investment expenditures are autonomous. 
B)  planned investment expenditures are sensitive to interest rates. 
C)  interest rates are unresponsive to changes in money supply. 
D)  interest rates are sensitive to changes in the price level. 
A)  planned investment expenditures are autonomous. 
B)  planned investment expenditures are sensitive to interest rates. 
C)  interest rates are unresponsive to changes in money supply. 
D)  interest rates are sensitive to changes in the price level.

Question 16

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 sell U.S. Treasury securities. 
D)  The money market equilibrium will move from point B to point C. 
E)  The money market equilibrium will move from point C to point A. 
A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will sell U.S. Treasury securities. 
D)  The money market equilibrium will move from point B to point C. 
E)  The money market equilibrium will move from point C to point A.

Question 17

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is at point "e" in the short run, which of these policies adopted by the Fed is likely to return it to long-run equilibrium?

Accepted Answer

A)  A decrease in government spending 
B)  An increase in the tax rate 
C)  A decrease in the tax rate 
D)  A decrease in the money supply 
E)  An increase in the money supply 
A)  A decrease in government spending 
B)  An increase in the tax rate 
C)  A decrease in the tax rate 
D)  A decrease in the money supply 
E)  An increase in the money supply

Question 18

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 19

If the Fed adopts a contractionary monetary policy, eventually we can expect:

Accepted Answer

A)  aggregate demand to increase. 
B)  short-run aggregate supply to decrease. 
C)  interest rates to decrease. 
D)  planned investment expenditures to decrease. 
E)  real Gross Domestic Product to increase. 
A)  aggregate demand to increase. 
B)  short-run aggregate supply to decrease. 
C)  interest rates to decrease. 
D)  planned investment expenditures to decrease. 
E)  real Gross Domestic Product to increase.

Question 20

The Fed seeks a target rate of inflation of around _____.

Accepted Answer

A)  1 percent 
B)  2 percent 
C)  3 percent 
D)  4 percent 
E)  5 percent 
A)  1 percent 
B)  2 percent 
C)  3 percent 
D)  4 percent 
E)  5 percent

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy. In this figure, short-run equilibrium occurs at:

The demand for money will be high in an economy experiencing:

A movement upward and to the left along the money demand curve is caused by:

The equation of exchange states that the quantity of money multiplied by the velocity of money equals:

In the money market, if the money supply decreases, the opportunity cost of holding money:

An increase in the expected inflation rate causes:

In the aggregate demand-aggregate supply model in the short run, a decrease in the money supply is likely to cause a(n):

The demand for money in an economy is high when the:

If the money supply is $600, the price level is $2, and real GDP is $300, the velocity of money is _____.

The demand curve for investment depicts:

The money demand curve slopes:

The velocity of money in circulation measures:

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

An identity is a relationship expressed in such a way that it is true by definition.

Monetary policy will be effective in changing the gross domestic product of a nation only if:

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?

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is at point "e" in the short run, which of these policies adopted by the Fed is likely to return it to long-run equilibrium?

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?

If the Fed adopts a contractionary monetary policy, eventually we can expect:

The Fed seeks a target rate of inflation of around _____.

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 figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy. In this figure, short-run equilibrium occurs at:

The demand for money will be high in an economy experiencing:

A movement upward and to the left along the money demand curve is caused by:

The equation of exchange states that the quantity of money multiplied by the velocity of money equals:

In the money market, if the money supply decreases, the opportunity cost of holding money:

An increase in the expected inflation rate causes:

In the aggregate demand-aggregate supply model in the short run, a decrease in the money supply is likely to cause a(n):

The demand for money in an economy is high when the:

If the money supply is $600, the price level is $2, and real GDP is $300, the velocity of money is _____.

The demand curve for investment depicts:

The money demand curve slopes:

The velocity of money in circulation measures:

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

An identity is a relationship expressed in such a way that it is true by definition.

Monetary policy will be effective in changing the gross domestic product of a nation only if:

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?

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is at point "e" in the short run, which of these policies adopted by the Fed is likely to return it to long-run equilibrium?

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?

If the Fed adopts a contractionary monetary policy, eventually we can expect:

The Fed seeks a target rate of inflation of around _____.

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