Question 1

Suppose the money supply equals $1,000 and nominal GDP equals $3,000.What does V equal?

Accepted Answer

A)  1/3 
B)  3 
C)  300 
D)  3,000 
A)  1/3 
B)  3 
C)  300 
D)  3,000

Question 2

How is the money demand curve affected when price level increases?

Accepted Answer

A)  The money demand curve shifts to the right. 
B)  The money demand shifts curve to the left. 
C)  The money demand curve is NOT affected. 
D)  The slope of the money demand curve changes. 
A)  The money demand curve shifts to the right. 
B)  The money demand shifts curve to the left. 
C)  The money demand curve is NOT affected. 
D)  The slope of the money demand curve changes.

Question 3

In the long run, why do changes in the money supply affect only the price level?

Accepted Answer

A)  because the aggregate demand curve is vertical 
B)  because the aggregate demand curve is downward sloping 
C)  because the long-run aggregate supply curve is vertical 
D)  because the long-run aggregate supply curve is upward sloping 
A)  because the aggregate demand curve is vertical 
B)  because the aggregate demand curve is downward sloping 
C)  because the long-run aggregate supply curve is vertical 
D)  because the long-run aggregate supply curve is upward sloping

Question 4

Money has several roles.Which role is the demand for money based on?

Accepted Answer

A)  primarily on money's role as a store of wealth 
B)  primarily on money's role as a medium of exchange 
C)  primarily on money's role as a standard of value 
D)  primarily on money's role as an interest-bearing asset 
A)  primarily on money's role as a store of wealth 
B)  primarily on money's role as a medium of exchange 
C)  primarily on money's role as a standard of value 
D)  primarily on money's role as an interest-bearing asset

Question 5

If the Bank of Canada buys bonds, what are the effects on money supply, interest rates, and the quantity of money demanded?

Accepted Answer

A)  The money supply increases, the interest rate falls, and the quantity of money demanded increases. 
B)  The money supply falls, the interest rate falls, and the quantity of money demanded increases. 
C)  The money supply increases, the interest rate increases, and the quantity of money demanded increases. 
D)  The money supply falls, the interest rate increases, and the quantity of money demanded falls. 
A)  The money supply increases, the interest rate falls, and the quantity of money demanded increases. 
B)  The money supply falls, the interest rate falls, and the quantity of money demanded increases. 
C)  The money supply increases, the interest rate increases, and the quantity of money demanded increases. 
D)  The money supply falls, the interest rate increases, and the quantity of money demanded falls.

Question 6

Exhibit 14-4
  
-Refer to the graph in the exhibit.What can the Bank of Canada do to return the economy to its potential output?

Accepted Answer

A)  sell Government of Canada Treasury securities in the open market 
B)  lower the bank rate 
C)  buy Government of Canada Treasury securities in the open market 
D)  print money 
A)  sell Government of Canada Treasury securities in the open market 
B)  lower the bank rate 
C)  buy Government of Canada Treasury securities in the open market 
D)  print money

Question 7

Suppose a shift in the aggregate demand curve causes prices to increase a lot and real output to increase by a little.What does this suggest about the shape of short-run aggregate supply curve?

Accepted Answer

A)  It is horizontal. 
B)  It is very steep. 
C)  It is vertical. 
D)  It is downward sloping. 
A)  It is horizontal. 
B)  It is very steep. 
C)  It is vertical. 
D)  It is downward sloping.

Question 8

What does velocity measure?

Accepted Answer

A)  the average length of time that people hold wealth 
B)  how quickly aggregate spending will increase for a given decline in money demand 
C)  how quickly inflation will rise for a given increase in the money supply 
D)  how quickly money changes hands 
A)  the average length of time that people hold wealth 
B)  how quickly aggregate spending will increase for a given decline in money demand 
C)  how quickly inflation will rise for a given increase in the money supply 
D)  how quickly money changes hands

Question 9

Which of the following would most likely lower the velocity of money?

Accepted Answer

A)  commercial innovations that facilitate exchange 
B)  a lower inflation rate 
C)  a decline in the effectiveness of money as a store of wealth 
D)  paying workers once a week instead of once a month 
A)  commercial innovations that facilitate exchange 
B)  a lower inflation rate 
C)  a decline in the effectiveness of money as a store of wealth 
D)  paying workers once a week instead of once a month

Question 10

What happens to aggregate expenditure and demand as a result of expansionary monetary policy?

Accepted Answer

A)  Aggregate expenditure increases, and aggregate demand increases. 
B)  Aggregate expenditure decreases, and aggregate demand decreases. 
C)  Aggregate expenditure increases, and aggregate demand decreases. 
D)  Aggregate expenditure decreases, and aggregate demand increases. 
A)  Aggregate expenditure increases, and aggregate demand increases. 
B)  Aggregate expenditure decreases, and aggregate demand decreases. 
C)  Aggregate expenditure increases, and aggregate demand decreases. 
D)  Aggregate expenditure decreases, and aggregate demand increases.

Question 11

Exhibit 14-1
  
-Refer to the graph in the exhibit.Suppose the interest rate increases.What will this move cause?

Accepted Answer

A)  a move from B to A 
B)  a move from A to B 
C)  a move from DM to DM' 
D)  a move from DM to DM* 
A)  a move from B to A 
B)  a move from A to B 
C)  a move from DM to DM' 
D)  a move from DM to DM*

Question 12

How will a decrease in the interest rate affect the quantity of money people want to hold?

Accepted Answer

A)  The quantity of money people want to hold will increase. 
B)  The quantity of money people want to hold will decrease. 
C)  The quantity of money people want to hold will NOT be affected. 
D)  The quantity of money people want to hold will be constant. 
A)  The quantity of money people want to hold will increase. 
B)  The quantity of money people want to hold will decrease. 
C)  The quantity of money people want to hold will NOT be affected. 
D)  The quantity of money people want to hold will be constant.

Question 13

Exhibit 14-3
  
-Refer to the graph in the exhibit.In this situation, how could the Bank of Canada return the economy to potential output?

Accepted Answer

A)  by increasing taxes 
B)  by decreasing taxes 
C)  by decreasing the money supply 
D)  by increasing the money supply 
A)  by increasing taxes 
B)  by decreasing taxes 
C)  by decreasing the money supply 
D)  by increasing the money supply

Question 14

Suppose the Bank of Canada decreases the money supply.What would be expected to happen to the aggregate demand curve and the aggregate supply curve?

Accepted Answer

A)  Aggregate demand would increase, which would lead to movement along the short-run aggregate supply curve. 
B)  Aggregate demand would decrease, which would lead to movement along the short-run aggregate supply curve. 
C)  Aggregate supply would increase, which would lead to movement along the aggregate demand curve. 
D)  Aggregate supply would decrease, which would lead to movement along the aggregate demand curve. 
A)  Aggregate demand would increase, which would lead to movement along the short-run aggregate supply curve. 
B)  Aggregate demand would decrease, which would lead to movement along the short-run aggregate supply curve. 
C)  Aggregate supply would increase, which would lead to movement along the aggregate demand curve. 
D)  Aggregate supply would decrease, which would lead to movement along the aggregate demand curve.

Question 15

In the aggregate demand-aggregate supply model, what will be the effects of an increase in the money supply in the short run?

Accepted Answer

A)  an increase in the price level, and an increase in real GDP 
B)  a decrease in the price level, and a decrease in real GDP 
C)  an increase in real GDP, and a decrease in the price level 
D)  a decrease in real GDP, and an increase in the price level 
A)  an increase in the price level, and an increase in real GDP 
B)  a decrease in the price level, and a decrease in real GDP 
C)  an increase in real GDP, and a decrease in the price level 
D)  a decrease in real GDP, and an increase in the price level

Question 16

Which of the following would be claimed by individuals who argue against interest rate targets for monetary policy?

Accepted Answer

A)  that the necessary changes in money supply reinforce business cycles 
B)  that the necessary changes in money supply dampen expansions 
C)  that increased crowding out reduces private investment even more 
D)  that inflation will fall 
A)  that the necessary changes in money supply reinforce business cycles 
B)  that the necessary changes in money supply dampen expansions 
C)  that increased crowding out reduces private investment even more 
D)  that inflation will fall

Question 17

Which of the following is NOT assumed to be constant along the money demand curve?

Accepted Answer

A)  price level 
B)  interest rate 
C)  real GDP 
D)  nominal GDP 
A)  price level 
B)  interest rate 
C)  real GDP 
D)  nominal GDP

Question 18

Which of the following would cause a movement upward and to the left along the money demand curve?

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 
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

Question 19

Exhibit 14-3
  
-Refer to the graph in the exhibit.How could the Bank of Canada return the economy to potential output?

Accepted Answer

A)  by decreasing government spending 
B)  by decreasing excess reserves in the banking system 
C)  by selling Canadian government bonds to banks 
D)  by increasing the bank rate 
A)  by decreasing government spending 
B)  by decreasing excess reserves in the banking system 
C)  by selling Canadian government bonds to banks 
D)  by increasing the bank rate

Question 20

Suppose the government wants to eliminate a recessionary gap.Which of the following strategies should the Bank of Canada implement?

Accepted Answer

A)  The Bank of Canada should increase the money supply and increase the interest rate. 
B)  The Bank of Canada should increase the money supply and decrease the interest rate. 
C)  The Bank of Canada should decrease the money supply and increase the interest rate. 
D)  The Bank of Canada should decrease the money supply and decrease the interest rate. 
A)  The Bank of Canada should increase the money supply and increase the interest rate. 
B)  The Bank of Canada should increase the money supply and decrease the interest rate. 
C)  The Bank of Canada should decrease the money supply and increase the interest rate. 
D)  The Bank of Canada should decrease the money supply and decrease the interest rate.

Suppose the money supply equals $1,000 and nominal GDP equals $3,000.What does V equal?

How is the money demand curve affected when price level increases?

In the long run, why do changes in the money supply affect only the price level?

Money has several roles.Which role is the demand for money based on?

If the Bank of Canada buys bonds, what are the effects on money supply, interest rates, and the quantity of money demanded?

Exhibit 14-4 -Refer to the graph in the exhibit.What can the Bank of Canada do to return the economy to its potential output?

Suppose a shift in the aggregate demand curve causes prices to increase a lot and real output to increase by a little.What does this suggest about the shape of short-run aggregate supply curve?

What does velocity measure?

Which of the following would most likely lower the velocity of money?

What happens to aggregate expenditure and demand as a result of expansionary monetary policy?

Exhibit 14-1 -Refer to the graph in the exhibit.Suppose the interest rate increases.What will this move cause?

How will a decrease in the interest rate affect the quantity of money people want to hold?

Exhibit 14-3 -Refer to the graph in the exhibit.In this situation, how could the Bank of Canada return the economy to potential output?

Suppose the Bank of Canada decreases the money supply.What would be expected to happen to the aggregate demand curve and the aggregate supply curve?

In the aggregate demand-aggregate supply model, what will be the effects of an increase in the money supply in the short run?

Which of the following would be claimed by individuals who argue against interest rate targets for monetary policy?

Which of the following is NOT assumed to be constant along the money demand curve?

Which of the following would cause a movement upward and to the left along the money demand curve?

Exhibit 14-3 -Refer to the graph in the exhibit.How could the Bank of Canada return the economy to potential output?

Suppose the government wants to eliminate a recessionary gap.Which of the following strategies should the Bank of Canada implement?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

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Exam 15: Monetary Theory and Policy in an Open Economy

Suppose the money supply equals $1,000 and nominal GDP equals $3,000.What does V equal?

How is the money demand curve affected when price level increases?

In the long run, why do changes in the money supply affect only the price level?

Money has several roles.Which role is the demand for money based on?

If the Bank of Canada buys bonds, what are the effects on money supply, interest rates, and the quantity of money demanded?

Exhibit 14-4 -Refer to the graph in the exhibit.What can the Bank of Canada do to return the economy to its potential output?

Suppose a shift in the aggregate demand curve causes prices to increase a lot and real output to increase by a little.What does this suggest about the shape of short-run aggregate supply curve?

What does velocity measure?

Which of the following would most likely lower the velocity of money?

What happens to aggregate expenditure and demand as a result of expansionary monetary policy?

Exhibit 14-1 -Refer to the graph in the exhibit.Suppose the interest rate increases.What will this move cause?

How will a decrease in the interest rate affect the quantity of money people want to hold?

Exhibit 14-3 -Refer to the graph in the exhibit.In this situation, how could the Bank of Canada return the economy to potential output?

Suppose the Bank of Canada decreases the money supply.What would be expected to happen to the aggregate demand curve and the aggregate supply curve?

In the aggregate demand-aggregate supply model, what will be the effects of an increase in the money supply in the short run?

Which of the following would be claimed by individuals who argue against interest rate targets for monetary policy?

Which of the following is NOT assumed to be constant along the money demand curve?

Which of the following would cause a movement upward and to the left along the money demand curve?

Exhibit 14-3 -Refer to the graph in the exhibit.How could the Bank of Canada return the economy to potential output?

Suppose the government wants to eliminate a recessionary gap.Which of the following strategies should the Bank of Canada implement?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters