Question 1

​If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

Accepted Answer

A) The demand for money will increase and the interest rate will rise. 
B) The money supply will increase and the interest rate will fall. 
C) The interest rate will rise and the quantity of money demanded will fall. 
D) The money supply will decrease and the interest rate will fall. 
E) The interest rate will fall and the quantity of money demanded will increase. 
A) The demand for money will increase and the interest rate will rise. 
B) The money supply will increase and the interest rate will fall. 
C) The interest rate will rise and the quantity of money demanded will fall. 
D) The money supply will decrease and the interest rate will fall. 
E) The interest rate will fall and the quantity of money demanded will increase.

Question 2

​A decrease in the market interest rate,other things constant,will result in:

Accepted Answer

A) a rightward shift of the money demand curve. 
B) a leftward shift of the money demand curve. 
C) an increase in the slope of the money demand curve. 
D) a movement up along the money demand curve. 
E) a movement down along the money demand curve. 
A) a rightward shift of the money demand curve. 
B) a leftward shift of the money demand curve. 
C) an increase in the slope of the money demand curve. 
D) a movement up along the money demand curve. 
E) a movement down along the money demand curve.

Question 3

If the money supply in an economy is increased,the interest rate will fall,and real GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 4

​The quantity theory of money states that if the velocity of money is stable or at least predictable,then:

Accepted Answer

A) the quantity of money in circulation determines real GDP in the short run. 
B) the quantity of money in circulation determines aggregate spending. 
C) the quantity of money in circulation determines both real GDP and the price level in the long run. 
D) the quantity of money in circulation determines only the price level in the long run. 
E) the quantity of money in circulation determines the potential output in the long run. 
A) the quantity of money in circulation determines real GDP in the short run. 
B) the quantity of money in circulation determines aggregate spending. 
C) the quantity of money in circulation determines both real GDP and the price level in the long run. 
D) the quantity of money in circulation determines only the price level in the long run. 
E) the quantity of money in circulation determines the potential output in the long run.

Question 5

The higher the interest rate,the greater the preference for liquidity.

Accepted Answer

A) True 
 B)False

Question 6

​According to the equation of exchange,if nominal GDP equals $6 trillion and the money supply equals $1 trillion,the velocity of money:

Accepted Answer

A) must be 6. 
B) must be 1/6. 
C) must be 6 trillion. 
D) must be 1/6 trillion. 
E) cannot be determined unless we know the price level. 
A) must be 6. 
B) must be 1/6. 
C) must be 6 trillion. 
D) must be 1/6 trillion. 
E) cannot be determined unless we know the price level.

Question 7

​In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

Accepted Answer

A) a constant price level. 
B) a slowly increasing price level. 
C) a rapidly increasing price level. 
D) constant real GDP. 
E) constant nominal GDP. 
A) a constant price level. 
B) a slowly increasing price level. 
C) a rapidly increasing price level. 
D) constant real GDP. 
E) constant nominal GDP.

Question 8

​In the money market,if the money supply decreases,the opportunity cost of holding money:

Accepted Answer

A) decreases and the quantity of money demanded increases. 
B) decreases and the quantity of money demanded falls. 
C) increases and the quantity of money demanded falls. 
D) increases but the quantity of money demanded remains unchanged. 
E) increases and the quantity of money demanded also increases. 
A) decreases and the quantity of money demanded increases. 
B) decreases and the quantity of money demanded falls. 
C) increases and the quantity of money demanded falls. 
D) increases but the quantity of money demanded remains unchanged. 
E) increases and the quantity of money demanded also increases.

Question 9

In the long run,an expansionary monetary policy will lead to:

Accepted Answer

A) a decrease in aggregate expenditure. 
B) an increase in unemployment. 
C) an increase in the price level. 
D) an increase in potential output. 
E) a decrease in the price level. 
A) a decrease in aggregate expenditure. 
B) an increase in unemployment. 
C) an increase in the price level. 
D) an increase in potential output. 
E) a decrease in the price level.

Question 10

​As a result of an expansionary monetary policy:

Accepted Answer

A) both aggregate expenditure and aggregate demand increase. 
B) both aggregate expenditure and aggregate demand decrease. 
C) aggregate expenditure increases and aggregate demand decreases. 
D) aggregate expenditure decreases and aggregate demand increases. 
E) aggregate expenditure remains unchanged; aggregate demand increases. 
A) both aggregate expenditure and aggregate demand increase. 
B) both aggregate expenditure and aggregate demand decrease. 
C) aggregate expenditure increases and aggregate demand decreases. 
D) aggregate expenditure decreases and aggregate demand increases. 
E) aggregate expenditure remains unchanged; aggregate demand increases.

Question 11

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

Accepted Answer

A) True 
 B)False

Question 12

​Which of these is a flow variable?

Accepted Answer

A) Money 
B) Income 
C) Jewelry 
D) Bank deposit 
E) Foreign currency reserve 
A) Money 
B) Income 
C) Jewelry 
D) Bank deposit 
E) Foreign currency reserve

Question 13

For a given shift of the aggregate demand curve,the steeper the short-run aggregate supply curve,the larger the change in real GDP.

Accepted Answer

A) True 
 B)False

Question 14

​The figure given below shows equilibrium in a money market.If S is the initial supply curve,the movement from S to S* can be attributed to: Figure 152

Accepted Answer

A) a decrease in the required reserve ratio. 
B) the purchase of U.S.Treasury securities by the Fed. 
C) the sale of U.S.Treasury securities by the Fed. 
D) a decrease in the discount rate. 
E) a decrease in excess reserves in the banking system. 
A) a decrease in the required reserve ratio. 
B) the purchase of U.S.Treasury securities by the Fed. 
C) the sale of U.S.Treasury securities by the Fed. 
D) a decrease in the discount rate. 
E) a decrease in excess reserves in the banking system.

Question 15

According to the equation of exchange,if real GDP is $2 trillion and the money supply is $0.5 trillion,the velocity of money:

Accepted Answer

A) must be 4. 
B) must be 1/4. 
C) must be 4 trillion. 
D) must be 1/4 trillion. 
E) cannot be determined unless we know the price level. 
A) must be 4. 
B) must be 1/4. 
C) must be 4 trillion. 
D) must be 1/4 trillion. 
E) cannot be determined unless we know the price level.

Question 16

​The demand curve for investment depicts:

Accepted Answer

A) an inverse relationship between interest rate and aggregate demand. 
B) an inverse relationship between interest rate and investment. 
C) an inverse relationship between price level and real GDP. 
D) a direct relationship between interest rate and quantity of money. 
E) a direct relationship between aggregate demand and real GDP 
A) an inverse relationship between interest rate and aggregate demand. 
B) an inverse relationship between interest rate and investment. 
C) an inverse relationship between price level and real GDP. 
D) a direct relationship between interest rate and quantity of money. 
E) a direct relationship between aggregate demand and real GDP

Question 17

​Which of the following is true of the equation of exchange?

Accepted Answer

A) It states that the product of the price level and velocity of money is equal to real GDP. 
B) It states that aggregate demand in an economy is equal to total investment spending. 
C) It states that money supply times velocity of money equals real GDP. 
D) It states that velocity of money is equal to the ratio of nominal GDP and money supply. 
E) It changes to the quantity theory of money if the price level is assumed to be constant. 
A) It states that the product of the price level and velocity of money is equal to real GDP. 
B) It states that aggregate demand in an economy is equal to total investment spending. 
C) It states that money supply times velocity of money equals real GDP. 
D) It states that velocity of money is equal to the ratio of nominal GDP and money supply. 
E) It changes to the quantity theory of money if the price level is assumed to be constant.

Question 18

​Which of the following identities describe the equation of exchange?

Accepted Answer

A) Money in circulation × prices = velocity × income 
B) Money in circulation × income = velocity × prices 
C) Real GDP = money in circulation × velocity 
D) Nominal GDP = money in circulation × velocity 
E) Real GDP = prices × money in circulation × velocity 
A) Money in circulation × prices = velocity × income 
B) Money in circulation × income = velocity × prices 
C) Real GDP = money in circulation × velocity 
D) Nominal GDP = money in circulation × velocity 
E) Real GDP = prices × money in circulation × velocity

Question 19

​If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

Accepted Answer

A) $1,200 
B) $4,500 
C) $6,000 
D) $180,000 
E) $500 
A) $1,200 
B) $4,500 
C) $6,000 
D) $180,000 
E) $500

Question 20

​The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called:

Accepted Answer

A) structural adjustments. 
B) financial strengthening. 
C) quantitative easing. 
D) inflation targeting. 
E) stress testing 
A) structural adjustments. 
B) financial strengthening. 
C) quantitative easing. 
D) inflation targeting. 
E) stress testing

If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

A decrease in the market interest rate,other things constant,will result in:

If the money supply in an economy is increased,the interest rate will fall,and real GDP will decrease.

The quantity theory of money states that if the velocity of money is stable or at least predictable,then:

The higher the interest rate,the greater the preference for liquidity.

According to the equation of exchange,if nominal GDP equals $6 trillion and the money supply equals $1 trillion,the velocity of money:

In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

In the money market,if the money supply decreases,the opportunity cost of holding money:

In the long run,an expansionary monetary policy will lead to:

As a result of an expansionary monetary policy:

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

Which of these is a flow variable?

For a given shift of the aggregate demand curve,the steeper the short-run aggregate supply curve,the larger the change in real GDP.

The figure given below shows equilibrium in a money market.If S is the initial supply curve,the movement from S to S* can be attributed to: Figure 152

According to the equation of exchange,if real GDP is $2 trillion and the money supply is $0.5 trillion,the velocity of money:

The demand curve for investment depicts:

Which of the following is true of the equation of exchange?

Which of the following identities describe the equation of exchange?

If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called:

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 15: Monetary Theory and Policy

​If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

​A decrease in the market interest rate,other things constant,will result in:

If the money supply in an economy is increased,the interest rate will fall,and real GDP will decrease.

​The quantity theory of money states that if the velocity of money is stable or at least predictable,then:

The higher the interest rate,the greater the preference for liquidity.

​According to the equation of exchange,if nominal GDP equals $6 trillion and the money supply equals $1 trillion,the velocity of money:

​In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

​In the money market,if the money supply decreases,the opportunity cost of holding money:

In the long run,an expansionary monetary policy will lead to:

​As a result of an expansionary monetary policy:

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

​Which of these is a flow variable?

For a given shift of the aggregate demand curve,the steeper the short-run aggregate supply curve,the larger the change in real GDP.

​The figure given below shows equilibrium in a money market.If S is the initial supply curve,the movement from S to S* can be attributed to: Figure 152

According to the equation of exchange,if real GDP is $2 trillion and the money supply is $0.5 trillion,the velocity of money:

​The demand curve for investment depicts:

​Which of the following is true of the equation of exchange?

​Which of the following identities describe the equation of exchange?

​If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

​The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called:

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

If the Fed sells U.S.government securities to drain reserves from banks,which of the following is most likely to occur?

A decrease in the market interest rate,other things constant,will result in:

The quantity theory of money states that if the velocity of money is stable or at least predictable,then:

According to the equation of exchange,if nominal GDP equals $6 trillion and the money supply equals $1 trillion,the velocity of money:

In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year,a 4 percent average rate of growth in the money supply would result in:

In the money market,if the money supply decreases,the opportunity cost of holding money:

As a result of an expansionary monetary policy:

Which of these is a flow variable?

The figure given below shows equilibrium in a money market.If S is the initial supply curve,the movement from S to S* can be attributed to: Figure 152

The demand curve for investment depicts:

Which of the following is true of the equation of exchange?

Which of the following identities describe the equation of exchange?

If the money supply in an economy is $300,the price level is $4,and real GDP is $1,500,what is the nominal value of output?

The Fed purchases of long-term assets to stabilize financial markets,reduce long-term interest rates,and improve the investment environment are called: