Question 1

According to the quantity theory of money demand, ________.

Accepted Answer

A) an increase in interest rates will cause the demand for money to fall 
B) a decrease in interest rates will cause the demand for money to increase 
C) interest rates have no effect on the demand for money 
D) an increase in money will cause the demand for money to fall 
A) an increase in interest rates will cause the demand for money to fall 
B) a decrease in interest rates will cause the demand for money to increase 
C) interest rates have no effect on the demand for money 
D) an increase in money will cause the demand for money to fall

Question 2

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

Accepted Answer

A) reduces real GDP to $2.5 trillion 
B) causes velocity to rise to 10 
C) decreases the price level to 1 
D) decreases the price level to 1 and decreases velocity to 2.5 
A) reduces real GDP to $2.5 trillion 
B) causes velocity to rise to 10 
C) decreases the price level to 1 
D) decreases the price level to 1 and decreases velocity to 2.5

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

In March 2007, the inflation rate in Zimbabwe reached ________.

Accepted Answer

A) over 1500 percent 
B) over 150 percent 
C) over 15 percent 
D) over 15000 percent 
A) over 1500 percent 
B) over 150 percent 
C) over 15 percent 
D) over 15000 percent

Question 5

Starting in 1974, the conventional M1 money demand function began to ________.

Accepted Answer

A) severely underpredict the demand for money 
B) severely overpredict the demand for money 
C) predict more precisely the demand for money 
D) do none of the above 
A) severely underpredict the demand for money 
B) severely overpredict the demand for money 
C) predict more precisely the demand for money 
D) do none of the above

Question 6

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 7

Keynes hypothesized that the speculative component of money demand was primarily determined by the level of ________.

Accepted Answer

A) interest rates 
B) velocity 
C) income 
D) stock market prices 
A) interest rates 
B) velocity 
C) income 
D) stock market prices

Question 8

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 9

One part of monetizing the debt is for the central bank to ________.

Accepted Answer

A) conduct an open market purchase 
B) conduct an open market sale 
C) increasing the overnight rate 
D) decreasing the overnight rate 
A) conduct an open market purchase 
B) conduct an open market sale 
C) increasing the overnight rate 
D) decreasing the overnight rate

Question 10

Velocity is defined as ________.

Accepted Answer

A) P + M + Y 
B) (P × M)/Y 
C) (Y × M)/P 
D) (P × Y)/M 
A) P + M + Y 
B) (P × M)/Y 
C) (Y × M)/P 
D) (P × Y)/M

Question 11

The velocity of money is ________.

Accepted Answer

A) the average number of times that a dollar is spent in buying the total amount of final goods and services 
B) the ratio of the money stock to high-powered money 
C) the ratio of the money stock to interest rates 
D) the average number of times a dollar is spent in buying financial assets 
A) the average number of times that a dollar is spent in buying the total amount of final goods and services 
B) the ratio of the money stock to high-powered money 
C) the ratio of the money stock to interest rates 
D) the average number of times a dollar is spent in buying financial assets

According to the quantity theory of money demand, ________.

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

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

In March 2007, the inflation rate in Zimbabwe reached ________.

Starting in 1974, the conventional M1 money demand function began to ________.

In the liquidity trap, the money demand curve ________.

Keynes hypothesized that the speculative component of money demand was primarily determined by the level of ________.

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

One part of monetizing the debt is for the central bank to ________.

Velocity is defined as ________.

The velocity of money is ________.

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

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

Exam 20: Quantity Theory, Inflation, and the Demand for Money

According to the quantity theory of money demand, ________.

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

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

In March 2007, the inflation rate in Zimbabwe reached ________.

Starting in 1974, the conventional M1 money demand function began to ________.

In the liquidity trap, the money demand curve ________.

Keynes hypothesized that the speculative component of money demand was primarily determined by the level of ________.

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

One part of monetizing the debt is for the central bank to ________.

Velocity is defined as ________.

The velocity of money is ________.

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

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

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