Question 1

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 2

If the money demand function is instable then ________.

Accepted Answer

A)  velocity of money is unstable and monetary policy is more effective 
B)  monetary policy is ineffective 
C)  fiscal policy is more effective than monetary policy 
D)  neither fiscal nor monetary policy will impact aggregate output 
A)  velocity of money is unstable and monetary policy is more effective 
B)  monetary policy is ineffective 
C)  fiscal policy is more effective than monetary policy 
D)  neither fiscal nor monetary policy will impact aggregate output

Question 3

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 4

If the government deficit is financed by an increase in bond holdings by the public ________.

Accepted Answer

A)  there is no effect of the monetary base 
B)  there is no effect on the money supply 
C)  the money supply increases 
D)  both A and B 
A)  there is no effect of the monetary base 
B)  there is no effect on the money supply 
C)  the money supply increases 
D)  both A and B

Question 5

Comparing Tobin's model of the speculative demand for money with Keynesian speculative demand ________.

Accepted Answer

A)  both models imply that individuals hold only money or only bonds 
B)  the Keynesian model implies individuals diversify their asset holdings, while the Tobin model predicts that individuals hold only money or only bonds 
C)  the Tobin model implies individuals diversify their asset holdings, while the Keynesian model predicts that individuals hold only money or only bonds 
D)  both models imply that individuals diversify their asset holdings 
A)  both models imply that individuals hold only money or only bonds 
B)  the Keynesian model implies individuals diversify their asset holdings, while the Tobin model predicts that individuals hold only money or only bonds 
C)  the Tobin model implies individuals diversify their asset holdings, while the Keynesian model predicts that individuals hold only money or only bonds 
D)  both models imply that individuals diversify their asset holdings

Question 6

Irving Fisher took the view that the institutional features of the economy which affect velocity change ________ over time so that velocity will be fairly ________ in the short run.

Accepted Answer

A)  rapidly; erratic 
B)  rapidly; stable 
C)  slowly; stable 
D)  slowly; erratic 
A)  rapidly; erratic 
B)  rapidly; stable 
C)  slowly; stable 
D)  slowly; erratic

Question 7

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 8

Irving Fisher's view that velocity is fairly constant in the short run transforms the equation of exchange into the ________.

Accepted Answer

A)  Friedman's theory of income determination 
B)  quantity theory of money 
C)  Keynesian theory of income determination 
D)  monetary theory of income determination 
A)  Friedman's theory of income determination 
B)  quantity theory of money 
C)  Keynesian theory of income determination 
D)  monetary theory of income determination

Question 9

Explain the conclusion that the quantity theory of money is a good theory of inflation in the long run,but not in the short run.How does is this conclusion related to flexible wages and prices.

Accepted Answer

Inflation is always and everywhere a mon

Question 10

If initially the money supply is $1 trillion,velocity is 5,the price level is 1,and real GDP is $5 trillion,an increase in the money supply to $2 trillion ________.

Accepted Answer

A)  increases real GDP to $10 trillion 
B)  causes velocity to fall to 2.5 
C)  increases the price level to 2 
D)  increases the price level to 2 and velocity to 10 
A)  increases real GDP to $10 trillion 
B)  causes velocity to fall to 2.5 
C)  increases the price level to 2 
D)  increases the price level to 2 and velocity to 10

Question 11

The theory of portfolio choice says that the demand for an asset is ________ related to ________.

Accepted Answer

A)  positively; wealth 
B)  negatively; expected return 
C)  negatively; wealth 
D)  positively; risk. 
A)  positively; wealth 
B)  negatively; expected return 
C)  negatively; wealth 
D)  positively; risk.

The quantity theory of money is a theory of how ________.

If the money demand function is instable then ________.

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

If the government deficit is financed by an increase in bond holdings by the public ________.

Comparing Tobin's model of the speculative demand for money with Keynesian speculative demand ________.

Irving Fisher took the view that the institutional features of the economy which affect velocity change over time so that velocity will be fairly in the short run.

Evidence suggests that a liquidity trap is possible when ________.

Irving Fisher's view that velocity is fairly constant in the short run transforms the equation of exchange into the ________.

Explain the conclusion that the quantity theory of money is a good theory of inflation in the long run,but not in the short run.How does is this conclusion related to flexible wages and prices.

If initially the money supply is $1 trillion,velocity is 5,the price level is 1,and real GDP is $5 trillion,an increase in the money supply to $2 trillion ________.

The theory of portfolio choice says that the demand for an asset is related to .

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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 21: Quantity Theory, inflation, and the Demand for Money

The quantity theory of money is a theory of how ________.

If the money demand function is instable then ________.

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

If the government deficit is financed by an increase in bond holdings by the public ________.

Comparing Tobin's model of the speculative demand for money with Keynesian speculative demand ________.

Irving Fisher took the view that the institutional features of the economy which affect velocity change ________ over time so that velocity will be fairly ________ in the short run.

Evidence suggests that a liquidity trap is possible when ________.

Irving Fisher's view that velocity is fairly constant in the short run transforms the equation of exchange into the ________.

Explain the conclusion that the quantity theory of money is a good theory of inflation in the long run,but not in the short run.How does is this conclusion related to flexible wages and prices.

If initially the money supply is $1 trillion,velocity is 5,the price level is 1,and real GDP is $5 trillion,an increase in the money supply to $2 trillion ________.

The theory of portfolio choice says that the demand for an asset is ________ related to ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Irving Fisher took the view that the institutional features of the economy which affect velocity change over time so that velocity will be fairly in the short run.

The theory of portfolio choice says that the demand for an asset is related to .