Exam 16: Monetary Theory and Policy

If the money supply equals $1,000 and nominal GDP equals $3,000, then V

If investment is not sensitive to changes in the interest rate, then changes in the money supply

If the money supply is $600, the price level is $2, and real GDP is $300, what is velocity?

In order for changes in the money supply to affect real GDP, the aggregate supply curve cannot be vertical.

In October 1979 the Fed announced that it would focus on

To execute the policy of lowering the federal funds rate, the FOMC authorizes the New York Fed to make open-market sales to increase bank reserves until the federal funds rate falls to the target level.

If money demand increases and the Fed attempts to keep interest rates stable, then

Exhibit 16-6 -If the Federal Reserve is targeting the money supply when the demand for money decreases, their proper response is to

Which of the following, other things constant, will shift the money demand curve to the left?

If the Fed had to choose between fixing the interest rate and fixing the supply of money, it would

Exhibit 16-5 -The economy pictured in Exhibit 16-5 is

The velocity of M1 money has moved erratically in the past several years because

What happens to the aggregate demand curve when the Fed reduces the money supply?

The relationship between the interest rate and the quantity of money demanded

For interest rates to remain stable during economic expansions, the money supply should

Exhibit 16-1 -Referring to Exhibit 16-1, an increase in the price level will cause a move from

The interest rate that banks charge one another for overnight lending of reserves is the

The velocity of money is defined as

Exhibit 16-6 -If the Federal Reserve is targeting the interest rate when the demand for money increases, their proper response is to

Which of the following statements best describes the historical relationship between increases in the money supply (M1) and inflation in the U.S.?