Question 1

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 2

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 3

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

Accepted Answer

A)  constant. 
B)  positively related to interest rates. 
C)  negatively related to interest rates. 
D)  positively related to bond values. 
A)  constant. 
B)  positively related to interest rates. 
C)  negatively related to interest rates. 
D)  positively related to bond values.

Question 4

Financing government spending with taxes

Accepted Answer

A)  causes both reserves and the monetary base to rise. 
B)  causes both reserves and the monetary base to decline. 
C)  causes reserves to rise, but the monetary base to decline. 
D)  has no net effect on the monetary base. 
A)  causes both reserves and the monetary base to rise. 
B)  causes both reserves and the monetary base to decline. 
C)  causes reserves to rise, but the monetary base to decline. 
D)  has no net effect on the monetary base.

Question 5

The classical economists believed that if the quantity of money doubled,

Accepted Answer

A)  output would double. 
B)  prices would fall. 
C)  prices would double. 
D)  prices would remain constant. 
A)  output would double. 
B)  prices would fall. 
C)  prices would double. 
D)  prices would remain constant.

Question 6

In the liquidity trap,monetary policy

Accepted Answer

A)  has a large impact on interest rates. 
B)  has a small impact on interest rates. 
C)  has no impact on interest rates. 
D)  has a proportionate impact on interest rates. 
A)  has a large impact on interest rates. 
B)  has a small impact on interest rates. 
C)  has no impact on interest rates. 
D)  has a proportionate impact on interest rates.

Question 7

Tobin's model of the speculative demand for money shows that people can reduce their ________ by ________ their asset holdings.

Accepted Answer

A)  wealth; diversifying 
B)  risk; specializing 
C)  return; diversifying 
D)  risk; diversifying 
A)  wealth; diversifying 
B)  risk; specializing 
C)  return; diversifying 
D)  risk; diversifying

Question 8

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

Accepted Answer

A)  constant. 
B)  positively related to interest rates. 
C)  negatively related to interest rates. 
D)  negatively related to bond values. 
A)  constant. 
B)  positively related to interest rates. 
C)  negatively related to interest rates. 
D)  negatively related to bond values.

Question 9

If nominal GDP is $8 trillion,and the money supply is $2 trillion,velocity is

Accepted Answer

A)  0.25. 
B)  4. 
C)  8. 
D)  16. 
A)  0.25. 
B)  4. 
C)  8. 
D)  16.

Question 10

The absence of money illusion means that

Accepted Answer

A)  as real income doubles, the demand for money doubles. 
B)  as interest rates double, the demand for money doubles. 
C)  as the money supply doubles, the demand for money doubles. 
D)  as the price level doubles, the demand for money doubles. 
A)  as real income doubles, the demand for money doubles. 
B)  as interest rates double, the demand for money doubles. 
C)  as the money supply doubles, the demand for money doubles. 
D)  as the price level doubles, the demand for money doubles.

Question 11

Cutting the money supply by one-third is predicted by the quantity theory of money to cause

Accepted Answer

A)  a sharp decline in real output of one-third in the short run, and a fall in the price level by one-third in the long run. 
B)  a decline in real output by one-third. 
C)  a decline in output by one-sixth, and a decline in the price level of one-sixth. 
D)  a decline in the price level by one-third. 
A)  a sharp decline in real output of one-third in the short run, and a fall in the price level by one-third in the long run. 
B)  a decline in real output by one-third. 
C)  a decline in output by one-sixth, and a decline in the price level of one-sixth. 
D)  a decline in the price level by one-third.

Question 12

In the Baumol-Tobin analysis of the demand for money,either an increase in ________ or an increase in ________ increases money demand.

Accepted Answer

A)  income; interest rates 
B)  brokerage fees; interest rates 
C)  interest rates; the price level 
D)  brokerage fees; income 
A)  income; interest rates 
B)  brokerage fees; interest rates 
C)  interest rates; the price level 
D)  brokerage fees; income

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

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

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

Financing government spending with taxes

The classical economists believed that if the quantity of money doubled,

In the liquidity trap,monetary policy

Tobin's model of the speculative demand for money shows that people can reduce their by their asset holdings.

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

If nominal GDP is $8 trillion,and the money supply is $2 trillion,velocity is

The absence of money illusion means that

Cutting the money supply by one-third is predicted by the quantity theory of money to cause

In the Baumol-Tobin analysis of the demand for money,either an increase in or an increase in increases money demand.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding 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

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

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

The ISLM Model

Filters

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

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

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

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

Financing government spending with taxes

The classical economists believed that if the quantity of money doubled,

In the liquidity trap,monetary policy

Tobin's model of the speculative demand for money shows that people can reduce their ________ by ________ their asset holdings.

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

If nominal GDP is $8 trillion,and the money supply is $2 trillion,velocity is

The absence of money illusion means that

Cutting the money supply by one-third is predicted by the quantity theory of money to cause

In the Baumol-Tobin analysis of the demand for money,either an increase in ________ or an increase in ________ increases money demand.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding 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

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

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

The ISLM Model

Filters

Tobin's model of the speculative demand for money shows that people can reduce their by their asset holdings.

In the Baumol-Tobin analysis of the demand for money,either an increase in or an increase in increases money demand.