Question 1

​If the money supply is $600,the price level is $2,and real GDP is $300,the velocity of money is _____.

Accepted Answer

A) 1 
B) 150 
C) 300 
D) 600 
E) 1,200 
A) 1 
B) 150 
C) 300 
D) 600 
E) 1,200

Question 2

​If the Fed decreases the money supply,gross domestic product:

Accepted Answer

A) increases by the same amount as the increase in the interest rate. 
B) decreases by a greater amount than the increase in the interest rate because of the multiplier. 
C) decreases by the same amount as the decrease in investment. 
D) decreases by a greater amount than the decrease in investment because of the multiplier. 
E) decreases by a lesser amount than the decrease in investment because of the multiplier. 
A) increases by the same amount as the increase in the interest rate. 
B) decreases by a greater amount than the increase in the interest rate because of the multiplier. 
C) decreases by the same amount as the decrease in investment. 
D) decreases by a greater amount than the decrease in investment because of the multiplier. 
E) decreases by a lesser amount than the decrease in investment because of the multiplier.

Question 3

​The figure given below shows equilibrium in a money market.If S is the supply curve,the equilibrium interest rate and quantity of money will be: Figure 15.2

Accepted Answer

A) r and m,respectively. 
B) r* and m*,respectively. 
C) r' and m',respectively. 
D) r and m',respectively. 
E) r' and m*,respectively. 
A) r and m,respectively. 
B) r* and m*,respectively. 
C) r' and m',respectively. 
D) r and m',respectively. 
E) r' and m*,respectively.

Question 4

​The ultimate effect of a reduction in the money supply is:

Accepted Answer

A) a leftward shift of the aggregate demand curve. 
B) a rightward shift of the short-run aggregate supply curve. 
C) a movement upward along the aggregate demand curve. 
D) a movement downward along the aggregate demand curve. 
E) a movement upward along the short-run aggregate supply curve. 
A) a leftward shift of the aggregate demand curve. 
B) a rightward shift of the short-run aggregate supply curve. 
C) a movement upward along the aggregate demand curve. 
D) a movement downward along the aggregate demand curve. 
E) a movement upward along the short-run aggregate supply curve.

Question 5

​When the Fed adopts an expansionary monetary policy:

Accepted Answer

A) the demand for investment curve shifts to the left. 
B) the demand for investment curve shifts to the right. 
C) there is a downward movement along the demand for investment curve. 
D) there is an upward movement along the demand for investment curve. 
E) there is no impact on the demand for investment curve. 
A) the demand for investment curve shifts to the left. 
B) the demand for investment curve shifts to the right. 
C) there is a downward movement along the demand for investment curve. 
D) there is an upward movement along the demand for investment curve. 
E) there is no impact on the demand for investment curve.

Question 6

​For a given increase in aggregate demand,the steeper the short-run aggregate supply curve:

Accepted Answer

A) the larger the increase in investment expenditure. 
B) the smaller the increase in the price level. 
C) the smaller the increase in real GDP. 
D) the larger the increase in real GDP. 
E) the smaller the increase in real interest rate. 
A) the larger the increase in investment expenditure. 
B) the smaller the increase in the price level. 
C) the smaller the increase in real GDP. 
D) the larger the increase in real GDP. 
E) the smaller the increase in real interest rate.

Question 7

​Which of the following changes will cause a downward movement along the money demand curve?

Accepted Answer

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

Question 8

​In the aggregate demand-aggregate supply model in the short run,an increase in the money supply will lead to a(n):

Accepted Answer

A) increase in both the price level and real GDP. 
B) decrease in both the price level and real GDP. 
C) increase in real GDP and a decrease in the price level. 
D) decrease in real GDP and an increase in the price level. 
E) increase in the price level only. 
A) increase in both the price level and real GDP. 
B) decrease in both the price level and real GDP. 
C) increase in real GDP and a decrease in the price level. 
D) decrease in real GDP and an increase in the price level. 
E) increase in the price level only.

Question 9

​Other things constant,if the interest rate rises,people prefer to hold:

Accepted Answer

A) less money because the opportunity cost of holding money has increased. 
B) more money because the opportunity cost of holding money has increased. 
C) less money because the opportunity cost of holding money has declined. 
D) more money because the opportunity cost of holding money has declined. 
E) the same amount of money because the opportunity cost of holding money is zero. 
A) less money because the opportunity cost of holding money has increased. 
B) more money because the opportunity cost of holding money has increased. 
C) less money because the opportunity cost of holding money has declined. 
D) more money because the opportunity cost of holding money has declined. 
E) the same amount of money because the opportunity cost of holding money is zero.

Question 10

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

Accepted Answer

A) will have no effect on interest rates. 
B) will have no impact on the quantity of money demanded. 
C) will have no effect on the aggregate demand of an economy. 
D) will have a major impact on the aggregate demand of an economy. 
E) will have a major impact on the price level in an economy. 
A) will have no effect on interest rates. 
B) will have no impact on the quantity of money demanded. 
C) will have no effect on the aggregate demand of an economy. 
D) will have a major impact on the aggregate demand of an economy. 
E) will have a major impact on the price level in an economy.

Question 11

​The velocity of money increases with a _____,other things constant.

Accepted Answer

A) fall in the inflation rate 
B) rise in the inflation rate 
C) rise in the employment rate 
D) fall in the exchange rate 
E) rise in the real interest rate 
A) fall in the inflation rate 
B) rise in the inflation rate 
C) rise in the employment rate 
D) fall in the exchange rate 
E) rise in the real interest rate

Question 12

​In the long run,a change in the money supply does not affect the natural rate of unemployment because:

Accepted Answer

A) the aggregate demand curve is vertical. 
B) the aggregate demand curve is downward sloping. 
C) the long-run aggregate supply curve is vertical. 
D) the long-run aggregate supply curve is upward sloping. 
E) the long-run aggregate supply curve is horizontal. 
A) the aggregate demand curve is vertical. 
B) the aggregate demand curve is downward sloping. 
C) the long-run aggregate supply curve is vertical. 
D) the long-run aggregate supply curve is upward sloping. 
E) the long-run aggregate supply curve is horizontal.

Question 13

​The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the price level will cause a movement from: ​
Figure 5.1
​

Accepted Answer

A) point B to point A. 
B) point A to point B. 
C) DM to DM'. 
D) DM to DM*. 
E) point E to point F. 
A) point B to point A. 
B) point A to point B. 
C) DM to DM'. 
D) DM to DM*. 
E) point E to point F.

Question 14

​Which of the following forms of money will earn at least some interest income?

Accepted Answer

A) Gold coins 
B) Currency notes 
C) Traveler's checks 
D) Checkable deposits 
E) Gift checks 
A) Gold coins 
B) Currency notes 
C) Traveler's checks 
D) Checkable deposits 
E) Gift checks

Question 15

​Which one of these statements is correct?

Accepted Answer

A) The lower the interest rate,the higher the opportunity cost of holding assets in the form of money. 
B) The quantity of money supplied is independent of the interest rate. 
C) The larger the supply of money,the higher the interest rate,all things equal. 
D) Travelers checks and government bonds are equally liquid assets. 
E) The demand for money increases whenever the price level decreases. 
A) The lower the interest rate,the higher the opportunity cost of holding assets in the form of money. 
B) The quantity of money supplied is independent of the interest rate. 
C) The larger the supply of money,the higher the interest rate,all things equal. 
D) Travelers checks and government bonds are equally liquid assets. 
E) The demand for money increases whenever the price level decreases.

Question 16

​Over the past 40 years,the most frequent target for the Fed's monetary policy has been the:

Accepted Answer

A) prime interest rate. 
B) federal funds rate. 
C) M1 money supply. 
D) M2 money supply. 
E) required reserve ratio. 
A) prime interest rate. 
B) federal funds rate. 
C) M1 money supply. 
D) M2 money supply. 
E) required reserve ratio.

Question 17

​Suppose an individual can earn 3 percent interest on an annual term deposit.His opportunity cost of holding $100,000 in cash instead of investing in the term deposit will be:

Accepted Answer

A) $3,300. 
B) $330. 
C) $1,000. 
D) $6,000. 
E) $3,000. 
A) $3,300. 
B) $330. 
C) $1,000. 
D) $6,000. 
E) $3,000.

Question 18

​Which of the following is an example of a contractionary monetary policy?

Accepted Answer

A) Reduction in the amount of transfer payments made to poor families 
B) Purchase of U.S.government securities in the open market 
C) Increase in the discount rate 
D) Decrease in the required reserve ratio 
E) Increase in the tax rate 
A) Reduction in the amount of transfer payments made to poor families 
B) Purchase of U.S.government securities in the open market 
C) Increase in the discount rate 
D) Decrease in the required reserve ratio 
E) Increase in the tax rate

Question 19

​The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,a decrease in nominal GDP with no change in the price level will cause a movement from: Figure 15.1
  ​

Accepted Answer

A) point B to point A. 
B) point A to point B. 
C) DM to DM'. 
D) DM to DM*. 
E) point E to point F. 
A) point B to point A. 
B) point A to point B. 
C) DM to DM'. 
D) DM to DM*. 
E) point E to point F.

Question 20

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

Accepted Answer

A) decrease at a faster rate than the demand for money. 
B) grow at the same rate as money demand. 
C) grow at a faster rate than money demand. 
D) grow at a slower rate than money demand. 
E) decrease at a slower rate than the demand for money. 
A) decrease at a faster rate than the demand for money. 
B) grow at the same rate as money demand. 
C) grow at a faster rate than money demand. 
D) grow at a slower rate than money demand. 
E) decrease at a slower rate than the demand for money.

If the money supply is $600,the price level is $2,and real GDP is $300,the velocity of money is _____.

If the Fed decreases the money supply,gross domestic product:

The figure given below shows equilibrium in a money market.If S is the supply curve,the equilibrium interest rate and quantity of money will be: Figure 15.2

The ultimate effect of a reduction in the money supply is:

When the Fed adopts an expansionary monetary policy:

For a given increase in aggregate demand,the steeper the short-run aggregate supply curve:

Which of the following changes will cause a downward movement along the money demand curve?

In the aggregate demand-aggregate supply model in the short run,an increase in the money supply will lead to a(n):

Other things constant,if the interest rate rises,people prefer to hold:

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

The velocity of money increases with a _____,other things constant.

In the long run,a change in the money supply does not affect the natural rate of unemployment because:

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the price level will cause a movement from: Figure 5.1

Which of the following forms of money will earn at least some interest income?

Which one of these statements is correct?

Over the past 40 years,the most frequent target for the Fed's monetary policy has been the:

Suppose an individual can earn 3 percent interest on an annual term deposit.His opportunity cost of holding $100,000 in cash instead of investing in the term deposit will be:

Which of the following is an example of a contractionary monetary policy?

The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,a decrease in nominal GDP with no change in the price level will cause a movement from: Figure 15.1

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

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Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

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Federal Budgets and Public Policy

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Exam 15: Monetary Theory and Policy