Question 1

Holding money to meet unplanned expenditures and emergencies is known as

Accepted Answer

A) transactions demand. 
B) precautionary demand. 
C) asset demand. 
D) aggregate demand. 
A) transactions demand. 
B) precautionary demand. 
C) asset demand. 
D) aggregate demand. B

Question 2

A key causal link in the interest-rate-based transmission mechanism for monetary policy is from

Accepted Answer

A) investment to the interest rate. 
B) the money supply to excess reserves. 
C) a monetary policy action to excess reserves. 
D) real GDP to investment. 
A) investment to the interest rate. 
B) the money supply to excess reserves. 
C) a monetary policy action to excess reserves. 
D) real GDP to investment. C

Question 3

-Refer to the above figure.Suppose point A is the original equilibrium.If there is an increase in the money supply,the new long-run equilibrium is given by point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D. C

Question 4

It is the responsibility of the Trading Desk at the Federal Reserve Bank of New York to implement policies in the form of

Accepted Answer

A) changes in the spread between the federal funds rate and the discount rate that are consistent with rules established by the twelve Federal Reserve bank presidents. 
B) variations in reserve requirements that are consistent with the announcements by the Chair of the Fed's Board of Governors. 
C) changes in foreign exchange rates that are consistent with policies established by the Secretary of the Treasury. 
D) buying or selling government securities that are consistent with the FOMC Directive. 
A) changes in the spread between the federal funds rate and the discount rate that are consistent with rules established by the twelve Federal Reserve bank presidents. 
B) variations in reserve requirements that are consistent with the announcements by the Chair of the Fed's Board of Governors. 
C) changes in foreign exchange rates that are consistent with policies established by the Secretary of the Treasury. 
D) buying or selling government securities that are consistent with the FOMC Directive.

Question 5

According to the equation of exchange,if V = 5,P = 3,and Y = $50,then the money supply equals

Accepted Answer

A) $10. 
B) $30. 
C) $150. 
D) $300. 
A) $10. 
B) $30. 
C) $150. 
D) $300.

Question 6

If both nominal and real GDP are increasing when the money supply is constant,than we can conclude that

Accepted Answer

A) velocity has increased. 
B) velocity has decreased. 
C) interest rate has fallen. 
D) interest rate has increased. 
A) velocity has increased. 
B) velocity has decreased. 
C) interest rate has fallen. 
D) interest rate has increased.

Question 7

Holding money as a medium of exchange to make payments is

Accepted Answer

A) the transactions demand for money. 
B) the capital demand for money. 
C) the precautionary demand for money. 
D) the asset demand for money. 
A) the transactions demand for money. 
B) the capital demand for money. 
C) the precautionary demand for money. 
D) the asset demand for money.

Question 8

According to the interest-rate-based monetary policy transmission mechanism,an increase in the money supply will

Accepted Answer

A) lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending. 
B) lead to a decrease in investment spending and an increase in real GDP which is greater than the decrease in investment spending. 
C) lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending. 
D) lead to an increase in investment spending and an increase in real GDP which is greater than the increase in investment spending. 
A) lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending. 
B) lead to a decrease in investment spending and an increase in real GDP which is greater than the decrease in investment spending. 
C) lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending. 
D) lead to an increase in investment spending and an increase in real GDP which is greater than the increase in investment spending.

Question 9

When the U.S.dollar appreciates,

Accepted Answer

A) foreign residents demand more of U.S.goods,and U.S.residents desire to purchase more foreign goods. 
B) foreign residents demand more of U.S.goods,and U.S.residents desire to purchase fewer foreign goods. 
C) foreign residents demand fewer of U.S.goods,and U.S.residents desire to purchase more foreign goods. 
D) foreign residents demand fewer of U.S.goods,and U.S.residents desire to purchase fewer foreign goods. 
A) foreign residents demand more of U.S.goods,and U.S.residents desire to purchase more foreign goods. 
B) foreign residents demand more of U.S.goods,and U.S.residents desire to purchase fewer foreign goods. 
C) foreign residents demand fewer of U.S.goods,and U.S.residents desire to purchase more foreign goods. 
D) foreign residents demand fewer of U.S.goods,and U.S.residents desire to purchase fewer foreign goods.

Question 10

To close a recessionary gap,the Fed would

Accepted Answer

A) decrease the money supply. 
B) increase interest rates. 
C) sell bonds. 
D) increase the money supply. 
A) decrease the money supply. 
B) increase interest rates. 
C) sell bonds. 
D) increase the money supply.

Question 11

In the market for bank reserves,a reduction in the required reserve ratio will cause

Accepted Answer

A) a reduction in the federal funds rate. 
B) an increase in the equilibrium quantity of reserves. 
C) a reduction in the demand for reserves. 
D) all of the above. 
A) a reduction in the federal funds rate. 
B) an increase in the equilibrium quantity of reserves. 
C) a reduction in the demand for reserves. 
D) all of the above.

Question 12

Expansionary monetary policy during periods of underutilized resources can cause

Accepted Answer

A) real Gross Domestic Product (GDP)to increase without an increase in the price level. 
B) real Gross Domestic Product (GDP)to increase with a decrease in the price level. 
C) real Gross Domestic Product (GDP)to increase with an increase in the price level. 
D) nominal Gross Domestic Product (GDP)to increase but cannot affect real Gross Domestic Product (GDP). 
A) real Gross Domestic Product (GDP)to increase without an increase in the price level. 
B) real Gross Domestic Product (GDP)to increase with a decrease in the price level. 
C) real Gross Domestic Product (GDP)to increase with an increase in the price level. 
D) nominal Gross Domestic Product (GDP)to increase but cannot affect real Gross Domestic Product (GDP).

Question 13

An open market sale of government securities by the Fed will cause which of the following?

Accepted Answer

A) an excess quantity of reserves supplied and an increase in the federal funds rate 
B) an excess quantity of reserves supplied and a reduction in the federal funds rate 
C) an excess quantity of reserves demanded and an increase in the federal funds rate 
D) an excess quantity of reserves demanded and a reduction in the federal funds rate 
A) an excess quantity of reserves supplied and an increase in the federal funds rate 
B) an excess quantity of reserves supplied and a reduction in the federal funds rate 
C) an excess quantity of reserves demanded and an increase in the federal funds rate 
D) an excess quantity of reserves demanded and a reduction in the federal funds rate

Question 14

The transactions demand for money is the demand to hold money to

Accepted Answer

A) make regular,expected purchases. 
B) meet unplanned expenditures. 
C) store one's wealth. 
D) purchase bonds when interest rates increase. 
A) make regular,expected purchases. 
B) meet unplanned expenditures. 
C) store one's wealth. 
D) purchase bonds when interest rates increase.

Question 15

-In the above figure,assume the economy starts out in equilibrium at point d.If the Fed increases the money supply so that the new aggregate demand curve is AD3,then the long-run equilibrium will be at point

Accepted Answer

A) a. 
B) b. 
C) c. 
D) i. 
A) a. 
B) b. 
C) c. 
D) i.

Question 16

Open market operations by the Fed cause

Accepted Answer

A) changes in the difference between the discount rate.and the federal funds rate. 
B) aggregate supply to change. 
C) the prices of bonds to change. 
D) changes in the required reserve ratio. 
A) changes in the difference between the discount rate.and the federal funds rate. 
B) aggregate supply to change. 
C) the prices of bonds to change. 
D) changes in the required reserve ratio.

Question 17

In the long run,a decrease in the money supply will

Accepted Answer

A) decrease real Gross Domestic Product (GDP). 
B) increase real Gross Domestic Product (GDP). 
C) increase the price level. 
D) decrease the price level. 
A) decrease real Gross Domestic Product (GDP). 
B) increase real Gross Domestic Product (GDP). 
C) increase the price level. 
D) decrease the price level.

Question 18

The transactions demand for money exists because households

Accepted Answer

A) are insensitive to interest rate changes. 
B) must save for unexpected emergencies. 
C) do not like the fact that money is a liquid asset. 
D) do not receive their incomes at the same time they wish to make purchases. 
A) are insensitive to interest rate changes. 
B) must save for unexpected emergencies. 
C) do not like the fact that money is a liquid asset. 
D) do not receive their incomes at the same time they wish to make purchases.

Question 19

The quantity theory of money and prices rests on the assumption that

Accepted Answer

A) the velocity of money is constant. 
B) the minimum wage is constant. 
C) the nominal interest rate is constant. 
D) the foreign exchange rate is constant. 
A) the velocity of money is constant. 
B) the minimum wage is constant. 
C) the nominal interest rate is constant. 
D) the foreign exchange rate is constant.

Question 20

Which of the following is a variable in the equation of exchange?

Accepted Answer

A) the price level. 
B) the money supply. 
C) the velocity of money. 
D) real GDP. 
E) all of the above. 
A) the price level. 
B) the money supply. 
C) the velocity of money. 
D) real GDP. 
E) all of the above.

Holding money to meet unplanned expenditures and emergencies is known as

A key causal link in the interest-rate-based transmission mechanism for monetary policy is from

-Refer to the above figure.Suppose point A is the original equilibrium.If there is an increase in the money supply,the new long-run equilibrium is given by point

It is the responsibility of the Trading Desk at the Federal Reserve Bank of New York to implement policies in the form of

According to the equation of exchange,if V = 5,P = 3,and Y = $50,then the money supply equals

If both nominal and real GDP are increasing when the money supply is constant,than we can conclude that

Holding money as a medium of exchange to make payments is

According to the interest-rate-based monetary policy transmission mechanism,an increase in the money supply will

When the U.S.dollar appreciates,

To close a recessionary gap,the Fed would

In the market for bank reserves,a reduction in the required reserve ratio will cause

Expansionary monetary policy during periods of underutilized resources can cause

An open market sale of government securities by the Fed will cause which of the following?

The transactions demand for money is the demand to hold money to

-In the above figure,assume the economy starts out in equilibrium at point d.If the Fed increases the money supply so that the new aggregate demand curve is AD3,then the long-run equilibrium will be at point

Open market operations by the Fed cause

In the long run,a decrease in the money supply will

The transactions demand for money exists because households

The quantity theory of money and prices rests on the assumption that

Which of the following is a variable in the equation of exchange?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 16: Domestic and International Dimensions of Monetary Policy

Holding money to meet unplanned expenditures and emergencies is known as

A key causal link in the interest-rate-based transmission mechanism for monetary policy is from

-Refer to the above figure.Suppose point A is the original equilibrium.If there is an increase in the money supply,the new long-run equilibrium is given by point

It is the responsibility of the Trading Desk at the Federal Reserve Bank of New York to implement policies in the form of

According to the equation of exchange,if V = 5,P = 3,and Y = $50,then the money supply equals

If both nominal and real GDP are increasing when the money supply is constant,than we can conclude that

Holding money as a medium of exchange to make payments is

According to the interest-rate-based monetary policy transmission mechanism,an increase in the money supply will

When the U.S.dollar appreciates,

To close a recessionary gap,the Fed would

In the market for bank reserves,a reduction in the required reserve ratio will cause

Expansionary monetary policy during periods of underutilized resources can cause

An open market sale of government securities by the Fed will cause which of the following?

The transactions demand for money is the demand to hold money to

-In the above figure,assume the economy starts out in equilibrium at point d.If the Fed increases the money supply so that the new aggregate demand curve is AD3,then the long-run equilibrium will be at point

Open market operations by the Fed cause

In the long run,a decrease in the money supply will

The transactions demand for money exists because households

The quantity theory of money and prices rests on the assumption that

Which of the following is a variable in the equation of exchange?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters