Question 1

A decrease in income ________.

Accepted Answer

A) lowers money demand for any given interest rate 
B) lowers interest rates ceteris paribus 
C) leads to a leftward shift of the money demand curve 
D) all of the above 
E) none of the above 
A) lowers money demand for any given interest rate 
B) lowers interest rates ceteris paribus 
C) leads to a leftward shift of the money demand curve 
D) all of the above 
E) none of the above

Question 2

Factors that shift the AD Curve include ________.

Accepted Answer

A) the inflation rate 
B) aggregate output 
C) taxes 
D) all of the above 
E) none of the above 
A) the inflation rate 
B) aggregate output 
C) taxes 
D) all of the above 
E) none of the above

Question 3

The exogenous variable in the monetary policy curve is ________.

Accepted Answer

A) the policy parameter,λ 
B) the real interest rate 
C) the autonomous component,   
D) the federal funds rate 
E) the inflation rate 
A) the policy parameter,λ 
B) the real interest rate 
C) the autonomous component,   
D) the federal funds rate 
E) the inflation rate

Question 4

As income rises ________.

Accepted Answer

A) the number of transactions households and firms undertake should increase 
B) wealth also rises 
C) demand for real money balances should increase 
D) all of the above 
E) none of the above 
A) the number of transactions households and firms undertake should increase 
B) wealth also rises 
C) demand for real money balances should increase 
D) all of the above 
E) none of the above

Question 5

As the nominal interest rate increases ________.

Accepted Answer

A) it becomes more costly to hold bonds instead of money 
B) the quantity of money demanded rises 
C) the opportunity cost of holding money rises 
D) all of the above 
E) none of the above 
A) it becomes more costly to hold bonds instead of money 
B) the quantity of money demanded rises 
C) the opportunity cost of holding money rises 
D) all of the above 
E) none of the above

Question 6

A leftward shift of the money supply ________.

Accepted Answer

A) may come about from an increase in the quantity of money supplied by the Federal Reserve 
B) may come about from an increase in the price level 
C) leads to a decrease in interest rates ceteris paribus 
D) all of the above 
E) none of the above 
A) may come about from an increase in the quantity of money supplied by the Federal Reserve 
B) may come about from an increase in the price level 
C) leads to a decrease in interest rates ceteris paribus 
D) all of the above 
E) none of the above

Question 7

Autonomous easing of monetary policy involves ________.

Accepted Answer

A) raising interest rates and shifting the MP curve to the right 
B) lowering interest rates and shifting the MP curve to the left 
C) raising interest rates and shifting the MP curve to the left 
D) lowering interest rates and shifting the MP curve to the right 
E) none of the above 
A) raising interest rates and shifting the MP curve to the right 
B) lowering interest rates and shifting the MP curve to the left 
C) raising interest rates and shifting the MP curve to the left 
D) lowering interest rates and shifting the MP curve to the right 
E) none of the above

Question 8

According to liquidity preference theory,an increase in the price level would ________.

Accepted Answer

A) increase the demand for real money balances 
B) decrease the supply of real money balances 
C) decrease the real interest rate 
D) all of the above 
E) none of the above 
A) increase the demand for real money balances 
B) decrease the supply of real money balances 
C) decrease the real interest rate 
D) all of the above 
E) none of the above

Question 9

A decrease in the real interest rate occurs when ________.

Accepted Answer

A) there is an autonomous tightening of monetary policy 
B) expected inflation increases,relative to the nominal interest rate 
C) a decrease in autonomous spending causes a decrease in equilibrium output 
D) all of the above 
E) none of the above 
A) there is an autonomous tightening of monetary policy 
B) expected inflation increases,relative to the nominal interest rate 
C) a decrease in autonomous spending causes a decrease in equilibrium output 
D) all of the above 
E) none of the above

Question 10

Suppose real output is 12,500,and the demand for real money balances is   
=   
- 125i.If the equilibrium interest rate is 7 percent,calculate the money supply.If the central bank sets the interest rate at 8 percent,what is the new money supply?

Accepted Answer

Plugging the given output and

Question 11

If the monetary policy curve is correct,then policy makers care only about inflation and not at all about aggregate output and unemployment.Comment.

Accepted Answer

The monetary policy curve is a concise e

Question 12

When the Federal Reserve increases the money supply,people ________.

Accepted Answer

A) decrease their purchases of bonds and other financial assets 
B) may,in the short run,increase their purchases of goods and services 
C) decrease the quantity of money holdings 
D) all of the above 
E) none of the above 
A) decrease their purchases of bonds and other financial assets 
B) may,in the short run,increase their purchases of goods and services 
C) decrease the quantity of money holdings 
D) all of the above 
E) none of the above

Question 13

A rightward shift of the money supply ________.

Accepted Answer

A) may come about from an increase in the quantity of money supplied by the Federal Reserve 
B) may come about from a decrease in the price level 
C) leads to a decrease in interest rates ceteris paribus 
D) all of the above 
E) none of the above 
A) may come about from an increase in the quantity of money supplied by the Federal Reserve 
B) may come about from a decrease in the price level 
C) leads to a decrease in interest rates ceteris paribus 
D) all of the above 
E) none of the above

Question 14

Changes in liquidity in the banking system affect ________.

Accepted Answer

A) the nominal interest rate 
B) the real interest rate 
C) the federal funds rate 
D) all of the above 
E) none of the above 
A) the nominal interest rate 
B) the real interest rate 
C) the federal funds rate 
D) all of the above 
E) none of the above

Question 15

The IS Curve ________.

Accepted Answer

A) demonstrates how central banks respond to changes in inflation with changes in the interest rate 
B) shows how changes in interest rates affect equilibrium output 
C) explains short run fluctuations in output and inflation 
D) all of the above 
E) none of the above 
A) demonstrates how central banks respond to changes in inflation with changes in the interest rate 
B) shows how changes in interest rates affect equilibrium output 
C) explains short run fluctuations in output and inflation 
D) all of the above 
E) none of the above

Question 16

A key concern of monetary policy makers is credibility.In particular,that people believe that inflation will not deviate far from a rate consistent with a healthy macroeconomy.How might credibility affect the slope of the monetary policy curve?

Accepted Answer

Credibility implies that the monetary po

Question 17

Throughout 2008,inflation and the real interest rate declined together.The cause is a combination of ________.

Accepted Answer

A) monetary policy easing and declining autonomous spending 
B) declining autonomous spending and movement along a fixed MP curve 
C) monetary policy tightening and inversion of the MP curve 
D) increased government spending and movement along a fixed MP curve 
E) none of the above 
A) monetary policy easing and declining autonomous spending 
B) declining autonomous spending and movement along a fixed MP curve 
C) monetary policy tightening and inversion of the MP curve 
D) increased government spending and movement along a fixed MP curve 
E) none of the above

Question 18

The liquidity preference theory distinguishes between ________.

Accepted Answer

A) nominal and real quantities 
B) money and financial assets 
C) buying goods and earning interest income 
D) all of the above 
E) none of the above 
A) nominal and real quantities 
B) money and financial assets 
C) buying goods and earning interest income 
D) all of the above 
E) none of the above

Question 19

Autonomous tightening of monetary policy involves ________.

Accepted Answer

A) raising interest rates and shifting the MP curve to the right 
B) lowering interest rates and shifting the MP curve to the left 
C) raising interest rates and shifting the MP curve to the left 
D) lowering interest rates and shifting the MP curve to the right 
E) none of the above 
A) raising interest rates and shifting the MP curve to the right 
B) lowering interest rates and shifting the MP curve to the left 
C) raising interest rates and shifting the MP curve to the left 
D) lowering interest rates and shifting the MP curve to the right 
E) none of the above

Question 20

If the central bank did not follow the Taylor principle,an increase in inflation would lead to ________.

Accepted Answer

A) a decrease in the nominal interest rate 
B) an increase in inflation 
C) a decrease in aggregate expenditure 
D) all of the above 
E) none of the above 
A) a decrease in the nominal interest rate 
B) an increase in inflation 
C) a decrease in aggregate expenditure 
D) all of the above 
E) none of the above

Exam 10: Monetary Policy and Aggregate Demand

A decrease in income ________.

Factors that shift the AD Curve include ________.

The exogenous variable in the monetary policy curve is ________.

As income rises ________.

As the nominal interest rate increases ________.

A leftward shift of the money supply ________.

Autonomous easing of monetary policy involves ________.

According to liquidity preference theory,an increase in the price level would ________.

A decrease in the real interest rate occurs when ________.

Suppose real output is 12,500,and the demand for real money balances is = - 125i.If the equilibrium interest rate is 7 percent,calculate the money supply.If the central bank sets the interest rate at 8 percent,what is the new money supply?

If the monetary policy curve is correct,then policy makers care only about inflation and not at all about aggregate output and unemployment.Comment.

When the Federal Reserve increases the money supply,people ________.

A rightward shift of the money supply ________.

Changes in liquidity in the banking system affect ________.

The IS Curve ________.

A key concern of monetary policy makers is credibility.In particular,that people believe that inflation will not deviate far from a rate consistent with a healthy macroeconomy.How might credibility affect the slope of the monetary policy curve?

Throughout 2008,inflation and the real interest rate declined together.The cause is a combination of ________.

The liquidity preference theory distinguishes between ________.

Autonomous tightening of monetary policy involves ________.

If the central bank did not follow the Taylor principle,an increase in inflation would lead to ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

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