Question 1

​If the money supply is $1,000,the price level is 3,and real income (or output)is $5,000,then the velocity of money is _____.

Accepted Answer

A) 0.2 
B) 0.6 
C) 1.67 
D) 5 
E) 15 
A) 0.2 
B) 0.6 
C) 1.67 
D) 5 
E) 15

Question 2

​Which of the following changes will shift the money demand rightward?

Accepted Answer

A) An increase in the price level 
B) A decrease in real GDP 
C) A decrease in the nominal interest rate 
D) An increase in the nominal interest rate 
E) A decrease in the price level 
A) An increase in the price level 
B) A decrease in real GDP 
C) A decrease in the nominal interest rate 
D) An increase in the nominal interest rate 
E) A decrease in the price level

Question 3

​If the Fed adopts a contractionary monetary policy,eventually we can expect:

Accepted Answer

A) aggregate demand to increase. 
B) short-run aggregate supply to decrease. 
C) interest rates to decrease. 
D) planned investment expenditures to decrease. 
E) real Gross Domestic Product to increase. 
A) aggregate demand to increase. 
B) short-run aggregate supply to decrease. 
C) interest rates to decrease. 
D) planned investment expenditures to decrease. 
E) real Gross Domestic Product to increase.

Question 4

According to the quantity theory of money,if velocity of money is constant,a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

Accepted Answer

A) True 
 B)False

Question 5

​An increase in the money supply leads to a(n)

Accepted Answer

A) decline in interest rates,an increase in investment,and an increase in aggregate demand. 
B) decline in interest rates,a decrease in investment,and an increase in aggregate demand. 
C) decline in interest rates,an increase in investment,and a decline in aggregate demand. 
D) increase in interest rates,an increase in investment,and an increase in aggregate demand. 
E) decline in interest rates,a decline in investment,and a decline in aggregate demand. 
A) decline in interest rates,an increase in investment,and an increase in aggregate demand. 
B) decline in interest rates,a decrease in investment,and an increase in aggregate demand. 
C) decline in interest rates,an increase in investment,and a decline in aggregate demand. 
D) increase in interest rates,an increase in investment,and an increase in aggregate demand. 
E) decline in interest rates,a decline in investment,and a decline in aggregate demand.

Question 6

An identity is a relationship expressed in such a way that it is true by definition.

Accepted Answer

A) True 
 B)False

Question 7

​In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

Accepted Answer

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

Question 8

The quantity theory of money assumes that money supply and price level are the only variables in the equation of exchange that are free to fluctuate.

Accepted Answer

A) True 
 B)False

Question 9

​The opportunity cost of holding money is measured by the:

Accepted Answer

A) interest rate. 
B) liquidity lost by holding money. 
C) money supply curve. 
D) inflation rate. 
E) cost of cashing in financial assets. 
A) interest rate. 
B) liquidity lost by holding money. 
C) money supply curve. 
D) inflation rate. 
E) cost of cashing in financial assets.

Question 10

​The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is: ​
Figure 15.5
  ​

Accepted Answer

A) in a long-run equilibrium at the price level P and income level Y. 
B) in a short-run equilibrium at the price level P and income level Y. 
C) experiencing a contractionary gap at price level P and income level Y. 
D) experiencing an expansionary gap at price level P" and income level Y'. 
E) in a short-run equilibrium at the price level P' and income level Y. 
A) in a long-run equilibrium at the price level P and income level Y. 
B) in a short-run equilibrium at the price level P and income level Y. 
C) experiencing a contractionary gap at price level P and income level Y. 
D) experiencing an expansionary gap at price level P" and income level Y'. 
E) in a short-run equilibrium at the price level P' and income level Y.

Question 11

​An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

Accepted Answer

A) aggregate demand curve is flat. 
B) short-run aggregate supply curve is horizontal. 
C) economy is well below potential output. 
D) economy is already at potential output. 
E) aggregate demand curve is fairly steep. 
A) aggregate demand curve is flat. 
B) short-run aggregate supply curve is horizontal. 
C) economy is well below potential output. 
D) economy is already at potential output. 
E) aggregate demand curve is fairly steep.

Question 12

​Other things constant,the quantity of money demanded varies:

Accepted Answer

A) directly with the market interest rate. 
B) inversely with the market interest rate. 
C) inversely with the price level. 
D) directly with the price level. 
E) inversely with the unemployment rate. 
A) directly with the market interest rate. 
B) inversely with the market interest rate. 
C) inversely with the price level. 
D) directly with the price level. 
E) inversely with the unemployment rate.

Question 13

The supply of money is depicted as an upward sloping line that depends directly on the interest rate.

Accepted Answer

A) True 
 B)False

Question 14

​In the money market,an increase in money supply will:

Accepted Answer

A) increase the demand for money at each interest rate. 
B) decrease the demand for money at each interest rate. 
C) encourage people to exchange money for interest-bearing assets. 
D) encourage people to exchange interest-bearing assets for money. 
E) increase the interest rate. 
A) increase the demand for money at each interest rate. 
B) decrease the demand for money at each interest rate. 
C) encourage people to exchange money for interest-bearing assets. 
D) encourage people to exchange interest-bearing assets for money. 
E) increase the interest rate.

Question 15

​When the Fed purchases U.S.government securities through the open market,the money supply:

Accepted Answer

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

Question 16

​When the Fed decreases the money supply:

Accepted Answer

A) aggregate demand and aggregate supply both increase. 
B) aggregate demand increases,which leads to movement along the short-run aggregate supply curve. 
C) aggregate demand decreases,which leads to movement along the short-run aggregate supply curve. 
D) aggregate supply increases,which leads to movement along the aggregate demand curve. 
E) aggregate supply decreases,which leads to movement along the aggregate demand curve. 
A) aggregate demand and aggregate supply both increase. 
B) aggregate demand increases,which leads to movement along the short-run aggregate supply curve. 
C) aggregate demand decreases,which leads to movement along the short-run aggregate supply curve. 
D) aggregate supply increases,which leads to movement along the aggregate demand curve. 
E) aggregate supply decreases,which leads to movement along the aggregate demand curve.

Question 17

​The opportunity cost of holding money increases when:

Accepted Answer

A) the interest rate rises. 
B) the interest rate falls. 
C) the price level falls. 
D) nominal GDP rises. 
E) nominal GDP falls. 
A) the interest rate rises. 
B) the interest rate falls. 
C) the price level falls. 
D) nominal GDP rises. 
E) nominal GDP falls.

Question 18

An expansionary monetary policy is always capable of boosting aggregate investment.

Accepted Answer

A) True 
 B)False

Question 19

​Which of the following changes is observed when the Fed increases the federal funds rate?

Accepted Answer

A) Inflation is brought to an immediate halt. 
B) The inflation rate increases for several months,but then begins to decrease. 
C) Major banks try to offset this change by lowering the interest rates they charge on loans. 
D) Major banks try to offset this change by lowering the interest rates they pay on savings deposits. 
E) Major banks raise the prime interest rate that they charge to their best customers. 
A) Inflation is brought to an immediate halt. 
B) The inflation rate increases for several months,but then begins to decrease. 
C) Major banks try to offset this change by lowering the interest rates they charge on loans. 
D) Major banks try to offset this change by lowering the interest rates they pay on savings deposits. 
E) Major banks raise the prime interest rate that they charge to their best customers.

Question 20

​If the Fed targets the interest rate,then:

Accepted Answer

A) the money supply will grow at a more controlled rate. 
B) monetary policy will reinforce fluctuations in economic activity. 
C) the price level will be more stable in the long run. 
D) money demand will be more stable. 
E) velocity will be less stable. 
A) the money supply will grow at a more controlled rate. 
B) monetary policy will reinforce fluctuations in economic activity. 
C) the price level will be more stable in the long run. 
D) money demand will be more stable. 
E) velocity will be less stable.

If the money supply is $1,000,the price level is 3,and real income (or output)is $5,000,then the velocity of money is _____.

Which of the following changes will shift the money demand rightward?

If the Fed adopts a contractionary monetary policy,eventually we can expect:

According to the quantity theory of money,if velocity of money is constant,a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

An increase in the money supply leads to a(n)

An identity is a relationship expressed in such a way that it is true by definition.

In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

The quantity theory of money assumes that money supply and price level are the only variables in the equation of exchange that are free to fluctuate.

The opportunity cost of holding money is measured by the:

The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is: Figure 15.5

An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

Other things constant,the quantity of money demanded varies:

The supply of money is depicted as an upward sloping line that depends directly on the interest rate.

In the money market,an increase in money supply will:

When the Fed purchases U.S.government securities through the open market,the money supply:

When the Fed decreases the money supply:

The opportunity cost of holding money increases when:

An expansionary monetary policy is always capable of boosting aggregate investment.

Which of the following changes is observed when the Fed increases the federal funds rate?

If the Fed targets the interest rate,then:

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 money supply is $1,000,the price level is 3,and real income (or output)is $5,000,then the velocity of money is _____.

​Which of the following changes will shift the money demand rightward?

​If the Fed adopts a contractionary monetary policy,eventually we can expect:

According to the quantity theory of money,if velocity of money is constant,a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

​An increase in the money supply leads to a(n)

An identity is a relationship expressed in such a way that it is true by definition.

​In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

The quantity theory of money assumes that money supply and price level are the only variables in the equation of exchange that are free to fluctuate.

​The opportunity cost of holding money is measured by the:

​The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is: ​ Figure 15.5 ​

​An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

​Other things constant,the quantity of money demanded varies:

The supply of money is depicted as an upward sloping line that depends directly on the interest rate.

​In the money market,an increase in money supply will:

​When the Fed purchases U.S.government securities through the open market,the money supply:

​When the Fed decreases the money supply:

​The opportunity cost of holding money increases when:

An expansionary monetary policy is always capable of boosting aggregate investment.

​Which of the following changes is observed when the Fed increases the federal funds rate?

​If the Fed targets the interest rate,then:

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 money supply is $1,000,the price level is 3,and real income (or output)is $5,000,then the velocity of money is _____.

Which of the following changes will shift the money demand rightward?

If the Fed adopts a contractionary monetary policy,eventually we can expect:

An increase in the money supply leads to a(n)

In an economy in which velocity is constant and the same level of real output is produced year after year,a slow increase in the money supply would result in a:

The opportunity cost of holding money is measured by the:

The figure given below shows short run and long run equilibrium in an aggregate demand-aggregate supply model.The economy shown in this figure is: Figure 15.5

An increase in aggregate demand will have a smaller long-run effect on real GDP if the:

Other things constant,the quantity of money demanded varies:

In the money market,an increase in money supply will:

When the Fed purchases U.S.government securities through the open market,the money supply:

When the Fed decreases the money supply:

The opportunity cost of holding money increases when:

Which of the following changes is observed when the Fed increases the federal funds rate?

If the Fed targets the interest rate,then: