Question 1

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 2

In the short run, money affects the economy through _____

Accepted Answer

A)  changes in GDP. 
B)  changes in money demand. 
C)  changes in money supply. 
D)  changes in interest rates. 
E)  changes in price levels. 
A)  changes in GDP. 
B)  changes in money demand. 
C)  changes in money supply. 
D)  changes in interest rates. 
E)  changes in price levels.

Question 3

Which of the following changes will shift the money demand curve 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 4

In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n) _____

Accepted Answer

A)  inflation rate of 4 percent, if the velocity of money in circulation is constant. 
B)  inflation rate of -4 percent, if the velocity of money in circulation is constant. 
C)  $7 increase in the price level each year. 
D)  $7 decrease in the price level each year. 
E)  increase in the velocity of money in circulation. 
A)  inflation rate of 4 percent, if the velocity of money in circulation is constant. 
B)  inflation rate of -4 percent, if the velocity of money in circulation is constant. 
C)  $7 increase in the price level each year. 
D)  $7 decrease in the price level each year. 
E)  increase in the velocity of money in circulation.

Question 5

An increase in the nominal interest rate, other things constant, will _____

Accepted Answer

A)  shift the money demand curve to the right. 
B)  shift the money demand curve to the left. 
C)  increase the quantity of money people choose to hold. 
D)  decrease the quantity of money people choose to hold. 
E)  have no impact on the money demand curve. 
A)  shift the money demand curve to the right. 
B)  shift the money demand curve to the left. 
C)  increase the quantity of money people choose to hold. 
D)  decrease the quantity of money people choose to hold. 
E)  have no impact on the money demand curve.

Question 6

If the velocity of money is 5 and money supply is $10 trillion, then nominal GDP is _____

Accepted Answer

A)  $10 trillion. 
B)  $50 trillion. 
C)  $100 trillion. 
D)  $200 trillion. 
E)  $500 trillion. 
A)  $10 trillion. 
B)  $50 trillion. 
C)  $100 trillion. 
D)  $200 trillion. 
E)  $500 trillion.

Question 7

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 8

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

Accepted Answer

A)  the real gross domestic product. 
B)  the price level. 
C)  the nominal gross domestic product. 
D)  the turnover rate. 
E)  the demand for money. 
A)  the real gross domestic product. 
B)  the price level. 
C)  the nominal gross domestic product. 
D)  the turnover rate. 
E)  the demand for money.

Question 9

Exhibit 15.6
  
-Exhibit 15.6 depicts the short-run and long-run equilibrium in an aggregate demand-aggregate supply model. The economy is _____

Accepted Answer

A)  in a long-run equilibrium at the price level P and income level Y. 
B)  in a short-run equilibrium at the price level P and income level Y. 
C)  experiencing a contractionary gap at the price level P and income level Y. 
D)  experiencing an expansionary gap at the price level P" and income level Y'. 
E)  in a short-run equilibrium at the price level P' and income level Y. 
A)  in a long-run equilibrium at the price level P and income level Y. 
B)  in a short-run equilibrium at the price level P and income level Y. 
C)  experiencing a contractionary gap at the price level P and income level Y. 
D)  experiencing an expansionary gap at the price level P" and income level Y'. 
E)  in a short-run equilibrium at the price level P' and income level Y.

Question 10

In 2001, the FOMC reversed course, and between the beginning of 2001 and mid-2003, the FOMC _____ the interest rate from _____ to _____.

Accepted Answer

A)  raised; 1 percent; 6.5 percent 
B)  raised; 4.75 percent; 6.5 percent 
C)  lowered; 6.5 percent; 1 percent 
D)  lowered; 6.5 percent; 4.75 percent 
E)  raised; 1.0 percent; 5.25 percent 
A)  raised; 1 percent; 6.5 percent 
B)  raised; 4.75 percent; 6.5 percent 
C)  lowered; 6.5 percent; 1 percent 
D)  lowered; 6.5 percent; 4.75 percent 
E)  raised; 1.0 percent; 5.25 percent

Question 11

Exhibit 15.4
  
-Exhibit 15.4 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 12

Exhibit 15.3
  
-Exhibit 15.3 shows equilibrium in a money market. What determines the equilibrium interest rate, i?

Accepted Answer

A)  the intersection of the demand for money Dm with the supply of money S'm. 
B)  the intersection of the demand for money Dm with the supply of money Sm. 
C)  the intersection of the demand for money Sm with the supply of money Dm. 
D)  the intersection of the demand for money S'm with the supply of money Dm. 
E)  the discount rate at the Federal Reserve 
A)  the intersection of the demand for money Dm with the supply of money S'm. 
B)  the intersection of the demand for money Dm with the supply of money Sm. 
C)  the intersection of the demand for money Sm with the supply of money Dm. 
D)  the intersection of the demand for money S'm with the supply of money Dm. 
E)  the discount rate at the Federal Reserve

Question 13

The Fed and the FDIC have set out rules for so-called living wills, which require each large financial institution to prepare a blueprint for how it should be taken apart in the event of bankruptcy.

Accepted Answer

A) True 
 B)False

Question 14

If the money supply in an economy equals $1,000 and nominal GDP equals $3,000, then according to the equation of exchange, the 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 15

Over the past 40 years, the most frequent target of 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)  unemployment rate. 
A)  prime interest rate. 
B)  federal funds rate. 
C)  M1 money supply. 
D)  M2 money supply. 
E)  unemployment rate.

Question 16

Money supply as measured by M1 increased by _____ between mid-2007 and 2017, a period when real GDP grew by a total of only _____.

Accepted Answer

A)  100 percent; 15 percent 
B)  156 percent; 15 percent 
C)  100 percent; 25 percent 
D)  156 percent; 25 percent 
E)  250 percent; 15 percent 
A)  100 percent; 15 percent 
B)  156 percent; 15 percent 
C)  100 percent; 25 percent 
D)  156 percent; 25 percent 
E)  250 percent; 15 percent

Question 17

The average number of times per year each dollar is used to purchase final goods and services is called _____

Accepted Answer

A)  nominal gross domestic product. 
B)  real gross domestic product. 
C)  the velocity of money. 
D)  the quantity of money. 
E)  the supply of money. 
A)  nominal gross domestic product. 
B)  real gross domestic product. 
C)  the velocity of money. 
D)  the quantity of money. 
E)  the supply of money.

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 money supply in an economy equals $10 trillion and nominal GDP equals $50 trillion, then according to the equation of exchange, the velocity of money _____

Accepted Answer

A)  equals 1. 
B)  equals 2. 
C)  equals 5. 
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. 
B)  equals 2. 
C)  equals 5. 
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 20

An increase in aggregate demand will have a smaller long-run effect on real GDP if the _____

Accepted Answer

A)  aggregate demand curve is flat. 
B)  short-run aggregate supply curve is horizontal. 
C)  economy is well below potential output. 
D)  economy is already at potential output. 
E)  aggregate demand curve is fairly steep. 
A)  aggregate demand curve is flat. 
B)  short-run aggregate supply curve is horizontal. 
C)  economy is well below potential output. 
D)  economy is already at potential output. 
E)  aggregate demand curve is fairly steep.

As a result of an expansionary monetary policy, _____

In the short run, money affects the economy through _____

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

In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n) _____

An increase in the nominal interest rate, other things constant, will _____

If the velocity of money is 5 and money supply is $10 trillion, then nominal GDP is _____

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

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

Exhibit 15.6 -Exhibit 15.6 depicts the short-run and long-run equilibrium in an aggregate demand-aggregate supply model. The economy is _____

In 2001, the FOMC reversed course, and between the beginning of 2001 and mid-2003, the FOMC ___ the interest rate from _ to ___.

Exhibit 15.4 -Exhibit 15.4 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?

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. What determines the equilibrium interest rate, i?

The Fed and the FDIC have set out rules for so-called living wills, which require each large financial institution to prepare a blueprint for how it should be taken apart in the event of bankruptcy.

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

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

Money supply as measured by M1 increased by _ between mid-2007 and 2017, a period when real GDP grew by a total of only _.

The average number of times per year each dollar is used to purchase final goods and services is called _____

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 money supply in an economy equals $10 trillion and nominal GDP equals $50 trillion, then according to the equation of exchange, the velocity of money _____

An increase in aggregate demand will have a smaller long-run effect on real GDP if the _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 15: Monetary Theory and Policy.

As a result of an expansionary monetary policy, _____

In the short run, money affects the economy through _____

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

In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n) _____

An increase in the nominal interest rate, other things constant, will _____

If the velocity of money is 5 and money supply is $10 trillion, then nominal GDP is _____

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

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

Exhibit 15.6 -Exhibit 15.6 depicts the short-run and long-run equilibrium in an aggregate demand-aggregate supply model. The economy is _____

In 2001, the FOMC reversed course, and between the beginning of 2001 and mid-2003, the FOMC _____ the interest rate from _____ to _____.

Exhibit 15.4 -Exhibit 15.4 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?

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. What determines the equilibrium interest rate, i?

The Fed and the FDIC have set out rules for so-called living wills, which require each large financial institution to prepare a blueprint for how it should be taken apart in the event of bankruptcy.

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

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

Money supply as measured by M1 increased by _____ between mid-2007 and 2017, a period when real GDP grew by a total of only _____.

The average number of times per year each dollar is used to purchase final goods and services is called _____

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 money supply in an economy equals $10 trillion and nominal GDP equals $50 trillion, then according to the equation of exchange, the velocity of money _____

An increase in aggregate demand will have a smaller long-run effect on real GDP if the _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

In 2001, the FOMC reversed course, and between the beginning of 2001 and mid-2003, the FOMC ___ the interest rate from _ to ___.

Money supply as measured by M1 increased by _ between mid-2007 and 2017, a period when real GDP grew by a total of only _.