Question 1

Keynes's theory of the demand for money is consistent with

Accepted Answer

A) countercyclical movements in velocity. 
B) a constant velocity. 
C) procyclical movements in velocity. 
D) a relatively stable velocity. 
A) countercyclical movements in velocity. 
B) a constant velocity. 
C) procyclical movements in velocity. 
D) a relatively stable velocity.

Question 2

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to ________ so the quantity of money demanded would ________.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease 
A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease

Question 3

The classical economists' contention that prices double when the money supply doubles is predicated on the belief that in the short run velocity is ________ and real GDP is ________.

Accepted Answer

A) constant;constant 
B) constant;variable 
C) variable;variable 
D) variable;constant 
A) constant;constant 
B) constant;variable 
C) variable;variable 
D) variable;constant

Question 4

In Irving Fisher's quantity theory of money,velocity was determined by

Accepted Answer

A) interest rates. 
B) real GDP. 
C) the institutions in an economy that affect individuals' transactions. 
D) the price level. 
A) interest rates. 
B) real GDP. 
C) the institutions in an economy that affect individuals' transactions. 
D) the price level.

Question 5

Evidence suggests that a liquidity trap is possible when

Accepted Answer

A) real interest rates are at zero. 
B) real interest rates are at or just above zero. 
C) nominal interest rates are at zero. 
D) nominal interest rates are at or just above zero. 
A) real interest rates are at zero. 
B) real interest rates are at or just above zero. 
C) nominal interest rates are at zero. 
D) nominal interest rates are at or just above zero.

Question 6

________ quantity theory of money suggests that the demand for money is purely a function of income,and interest rates have no effect on the demand for money.

Accepted Answer

A) Keynes's 
B) Fisher's 
C) Friedman's 
D) Tobin's 
A) Keynes's 
B) Fisher's 
C) Friedman's 
D) Tobin's

Question 7

What factors determine the demand for money in the Baumol-Tobin analysis of transactions demand for money? How does a change in each factor affect the quantity of money demanded?

Accepted Answer

The factors are real income,the price le

Question 8

The quantity theory of money is a theory of how

Accepted Answer

A) the money supply is determined. 
B) interest rates are determined. 
C) the nominal value of aggregate income is determined. 
D) the real value of aggregate income is determined. 
A) the money supply is determined. 
B) interest rates are determined. 
C) the nominal value of aggregate income is determined. 
D) the real value of aggregate income is determined.

Question 9

Tobin's model of the speculative demand for money improves on Keynes's analysis by showing that

Accepted Answer

A) the speculative demand for money is interest insensitive. 
B) the transactions demand for money is interest insensitive. 
C) people will hold a diversified portfolio. 
D) people will hold money or bonds but not both. 
A) the speculative demand for money is interest insensitive. 
B) the transactions demand for money is interest insensitive. 
C) people will hold a diversified portfolio. 
D) people will hold money or bonds but not both.

Question 10

Keynes's model of the demand for money suggests that velocity is ________ related to ________.

Accepted Answer

A) positively;interest rates 
B) negatively;interest rates 
C) positively;bond values 
D) positively;stock prices 
A) positively;interest rates 
B) negatively;interest rates 
C) positively;bond values 
D) positively;stock prices

Question 11

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;decrease 
D) decrease;increase 
A) increase;increase 
B) increase;decrease 
C) decrease;decrease 
D) decrease;increase

Question 12

The view that velocity is constant in the short run transforms the equation of exchange into the quantity theory of money. According to the quantity theory of money,when the money supply doubles

Accepted Answer

A) velocity falls by 50 percent. 
B) velocity doubles. 
C) nominal incomes falls by 50 percent. 
D) nominal income doubles. 
A) velocity falls by 50 percent. 
B) velocity doubles. 
C) nominal incomes falls by 50 percent. 
D) nominal income doubles.

Question 13

In the liquidity trap,the money demand curve

Accepted Answer

A) is horizontal. 
B) is vertical. 
C) is negatively sloped. 
D) is positively sloped. 
A) is horizontal. 
B) is vertical. 
C) is negatively sloped. 
D) is positively sloped.

Question 14

In the liquidity trap a small change in interest rates produces ________ change in the quantity of money demanded.

Accepted Answer

A) a small 
B) no 
C) a proportionate 
D) a very large 
A) a small 
B) no 
C) a proportionate 
D) a very large

Question 15

Conventional money demand functions tended to ________ money demand in the middle and late 1970s,and ________ velocity beginning in 1982.

Accepted Answer

A) overpredict;overpredict 
B) overpredict;underpredict 
C) underpredict;overpredict 
D) underpredict;underpredict 
A) overpredict;overpredict 
B) overpredict;underpredict 
C) underpredict;overpredict 
D) underpredict;underpredict

Question 16

The equation of exchange is

Accepted Answer

A) M × P = V × Y. 
B) M + V = P + Y. 
C) M + Y = V + P. 
D) M × V = P × Y. 
A) M × P = V × Y. 
B) M + V = P + Y. 
C) M + Y = V + P. 
D) M × V = P × Y.

Question 17

If the government finances its spending by selling bonds to the central bank,the monetary base will ________ and the money supply will ________.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;decrease 
D) not change;not change 
A) increase;increase 
B) increase;decrease 
C) decrease;decrease 
D) not change;not change

Question 18

The theory of portfolio choice indicates that factors affecting the demand for money include

Accepted Answer

A) income. 
B) nominal interest rate. 
C) riskiness of money. 
D) all the above. 
A) income. 
B) nominal interest rate. 
C) riskiness of money. 
D) all the above.

Question 19

Keynes's liquidity preference theory indicates that the demand for money is ________ related to ________.

Accepted Answer

A) negatively;interest rates 
B) positively;interest rates 
C) negatively;income 
D) negatively;wealth 
A) negatively;interest rates 
B) positively;interest rates 
C) negatively;income 
D) negatively;wealth

Question 20

Keynes argued that the transactions component of the demand for money was primarily determined by the level of people's ________,which he believed were proportional to ________.

Accepted Answer

A) transactions;income 
B) transactions;age 
C) incomes;wealth 
D) incomes;age 
A) transactions;income 
B) transactions;age 
C) incomes;wealth 
D) incomes;age

Exam 19: Quantity Theory, inflation and the Demand for Money

Keynes's theory of the demand for money is consistent with

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to ________ so the quantity of money demanded would ________.

The classical economists' contention that prices double when the money supply doubles is predicated on the belief that in the short run velocity is ________ and real GDP is ________.

In Irving Fisher's quantity theory of money,velocity was determined by

Evidence suggests that a liquidity trap is possible when

________ quantity theory of money suggests that the demand for money is purely a function of income,and interest rates have no effect on the demand for money.

What factors determine the demand for money in the Baumol-Tobin analysis of transactions demand for money? How does a change in each factor affect the quantity of money demanded?

The quantity theory of money is a theory of how

Tobin's model of the speculative demand for money improves on Keynes's analysis by showing that

Keynes's model of the demand for money suggests that velocity is ________ related to ________.

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

The view that velocity is constant in the short run transforms the equation of exchange into the quantity theory of money. According to the quantity theory of money,when the money supply doubles

In the liquidity trap,the money demand curve

In the liquidity trap a small change in interest rates produces ________ change in the quantity of money demanded.

Conventional money demand functions tended to ________ money demand in the middle and late 1970s,and ________ velocity beginning in 1982.

The equation of exchange is

If the government finances its spending by selling bonds to the central bank,the monetary base will ________ and the money supply will ________.

The theory of portfolio choice indicates that factors affecting the demand for money include

Keynes's liquidity preference theory indicates that the demand for money is ________ related to ________.

Keynes argued that the transactions component of the demand for money was primarily determined by the level of people's ________,which he believed were proportional to ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Market Economies

The ISLM Model

Filters

Keynes argued that when interest rates were low relative to some normal value,people would expect bond prices to so the quantity of money demanded would .

The classical economists' contention that prices double when the money supply doubles is predicated on the belief that in the short run velocity is and real GDP is .

Keynes's model of the demand for money suggests that velocity is related to .

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ,so the quantity of money demanded would .

Conventional money demand functions tended to money demand in the middle and late 1970s,and velocity beginning in 1982.

If the government finances its spending by selling bonds to the central bank,the monetary base will and the money supply will .

Keynes's liquidity preference theory indicates that the demand for money is related to .

Keynes argued that the transactions component of the demand for money was primarily determined by the level of people's ,which he believed were proportional to .