Exam 17: Monetary Theory and Policy

The equation of exchange

Those who argue against interest rate targets for monetary policy claim that

The steeper the short-run aggregate supply curve, the __________ the change in price level and the __________ the change in real Gross Domestic Product for a given shift in the aggregate demand curve.

If the Fed is targeting the money supply, it loses control over the interest rate.

If there is a decrease in the supply of money, which one of the following is most likely to happen?

Planned investment expenditures will eventually decrease after

While monetary targets are important, also significant is what Fed officials have to say. Sometimes reassurance is all that's required to calm market jitters.

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

In the long run, an increase in aggregate demand

If the Federal Reserve is targeting the interest rate when the demand for money increases, their proper response is to

If the quantity of money supplied exceeds the quantity of money demanded,

An increase in aggregate demand will have the greatest short-run effect on real output if the

The equation of exchange is

According to the equation of exchange, if the amount of money in the economy of Monetania times the velocity of money equals 800 million Monetanian dollars ($), then Monetania's

If the money supply decreases, the opportunity cost of holding money __________ and people will want to hold __________ quantity of money.

If money demand increases and the Fed attempts to keep interest rates stable, then

In October 1979 the Fed announced that it would focus on

The money demand curve will shift when there is a change in

For interest rates to remain stable during economic contractions, monetary authorities should

In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n)