Question 1

​For a given money demand curve,an increase in money supply:

Accepted Answer

A) drives up the real interest rate. 
B) lowers the opportunity cost of holding money. 
C) decreases the quantity of money demanded. 
D) drives down the price level in an economy. 
E) contracts the total output produced in an economy. 
A) drives up the real interest rate. 
B) lowers the opportunity cost of holding money. 
C) decreases the quantity of money demanded. 
D) drives down the price level in an economy. 
E) contracts the total output produced in an economy.

Question 2

​Which of these is most likely to lower the velocity of money?

Accepted Answer

A) A commercial innovation that facilitates exchange 
B) A low inflation rate 
C) A decline in the effectiveness of money as a store of wealth 
D) A high inflation rate 
E) A weekly pay for workers instead of a monthly pay 
A) A commercial innovation that facilitates exchange 
B) A low inflation rate 
C) A decline in the effectiveness of money as a store of wealth 
D) A high inflation rate 
E) A weekly pay for workers instead of a monthly pay

Question 3

​Identify the correct statement about changes in money supply.

Accepted Answer

A) A decrease in money supply causes interest rates to fall. 
B) A decrease in money supply causes investment spending to increase. 
C) A decrease in money supply causes gross domestic product to increase. 
D) A decrease in money supply causes investment spending to decrease. 
E) A decrease in money supply causes aggregate expenditure to increase. 
A) A decrease in money supply causes interest rates to fall. 
B) A decrease in money supply causes investment spending to increase. 
C) A decrease in money supply causes gross domestic product to increase. 
D) A decrease in money supply causes investment spending to decrease. 
E) A decrease in money supply causes aggregate expenditure to increase.

Question 4

​equation of exchange states that the quantity of money multiplied by the velocity of money equals:

Accepted Answer

A) real Gross Domestic Product. 
B) the price level. 
C) nominal Gross Domestic Product. 
D) the turnover rate. 
E) the demand for money. 
A) real Gross Domestic Product. 
B) the price level. 
C) nominal Gross Domestic Product. 
D) the turnover rate. 
E) the demand for money.

Question 5

​The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model.Which of the following policies will allow the Fed to close the GDP gap in the long run? Figure 15.3
  ​

Accepted Answer

A) A decrease in government spending 
B) A decrease in taxes 
C) A sale of U.S.government bonds 
D) An increase the discount rate 
E) An increase in the required reserve ratio 
A) A decrease in government spending 
B) A decrease in taxes 
C) A sale of U.S.government bonds 
D) An increase the discount rate 
E) An increase in the required reserve ratio

Question 6

​Movements along a money demand curve reflect the effects of changes in the:

Accepted Answer

A) price level on the quantity of money demanded. 
B) interest rate on the demand for money. 
C) real exchange rate on the demand for money. 
D) interest rate on the quantity of money demanded. 
E) potential GDP on the quantity of money demanded. 
A) price level on the quantity of money demanded. 
B) interest rate on the demand for money. 
C) real exchange rate on the demand for money. 
D) interest rate on the quantity of money demanded. 
E) potential GDP on the quantity of money demanded.

Question 7

​All other things constant,when the interest rate increases:

Accepted Answer

A) the demand for investment curve shifts to the right 
B) the demand for investment curve shifts to the left. 
C) there is a movement downward along the demand for investment curve. 
D) there is a movement upward along the demand for investment curve. 
E) GDP increases. 
A) the demand for investment curve shifts to the right 
B) the demand for investment curve shifts to the left. 
C) there is a movement downward along the demand for investment curve. 
D) there is a movement upward along the demand for investment curve. 
E) GDP increases.

Question 8

​In the aggregate demand-aggregate supply model in the short run,a decrease in the money supply is likely to cause 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

​The Fed seeks a target rate of inflation of around _____.

Accepted Answer

A) 1 percent 
B) 2 percent 
C) 3 percent 
D) 4 percent 
E) 5 percent 
A) 1 percent 
B) 2 percent 
C) 3 percent 
D) 4 percent 
E) 5 percent

Question 10

​The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r? Figure 15.2

Accepted Answer

A) There will be an excess demand for money. 
B) There will be an excess supply of money. 
C) The Fed will sell U.S.Treasury securities. 
D) The money market equilibrium will move from point B to point C. 
E) The money market equilibrium will move from point C to point A. 
A) There will be an excess demand for money. 
B) There will be an excess supply of money. 
C) The Fed will sell U.S.Treasury securities. 
D) The money market equilibrium will move from point B to point C. 
E) The money market equilibrium will move from point C to point A.

For a given money demand curve,an increase in money supply:

Which of these is most likely to lower the velocity of money?

Identify the correct statement about changes in money supply.

equation of exchange states that the quantity of money multiplied by the velocity of money equals:

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model.Which of the following policies will allow the Fed to close the GDP gap in the long run? Figure 15.3

Movements along a money demand curve reflect the effects of changes in the:

All other things constant,when the interest rate increases:

In the aggregate demand-aggregate supply model in the short run,a decrease in the money supply is likely to cause a(n):

The Fed seeks a target rate of inflation of around _____.

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r? Figure 15.2

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