Question 1

According to Baumol and Tobin, the transactions demand for money is

Accepted Answer

A) negatively related to market interest rates, but the velocity of money is positively related to market interest rates. 
B) positively related to market interest rates, but the velocity of money is negatively related to market interest rates. 
C) negatively related to market interest rates, as is the velocity of money. 
D) positively related to market interest rates, as is the velocity of money. 
A) negatively related to market interest rates, but the velocity of money is positively related to market interest rates. 
B) positively related to market interest rates, but the velocity of money is negatively related to market interest rates. 
C) negatively related to market interest rates, as is the velocity of money. 
D) positively related to market interest rates, as is the velocity of money.

Question 2

During the 1980s, the velocity of M1

Accepted Answer

A) was constant. 
B) fluctuated, but within a narrow band. 
C) experienced significant instability. 
D) fell to zero. 
A) was constant. 
B) fluctuated, but within a narrow band. 
C) experienced significant instability. 
D) fell to zero.

Question 3

Money's convenience yield is

Accepted Answer

A) the nominal interest rate paid on money balances minus the expected inflation rate. 
B) the nominal interest rate paid on money balances plus the expected inflation rate. 
C) the amount of interest sacrificed in exchange for money's safety, liquidity, and low information costs. 
D) the interest rate on T-bills minus the interest rate on money. 
A) the nominal interest rate paid on money balances minus the expected inflation rate. 
B) the nominal interest rate paid on money balances plus the expected inflation rate. 
C) the amount of interest sacrificed in exchange for money's safety, liquidity, and low information costs. 
D) the interest rate on T-bills minus the interest rate on money.

Question 4

The interest rate is a measure of

Accepted Answer

A) the opportunity cost of holding real money balances. 
B) the inflation rate. 
C) the opportunity cost of holding bonds. 
D) the growth rate of output in the long run. 
A) the opportunity cost of holding real money balances. 
B) the inflation rate. 
C) the opportunity cost of holding bonds. 
D) the growth rate of output in the long run.

Question 5

In the quantity theory of money demand,

Accepted Answer

A) velocity is assumed to be constant. 
B) the demand for real balances is determined by the price level. 
C) the price level is assumed to be constant. 
D) velocity is assumed to vary with the price level. 
A) velocity is assumed to be constant. 
B) the demand for real balances is determined by the price level. 
C) the price level is assumed to be constant. 
D) velocity is assumed to vary with the price level.

Question 6

According to Keynes, if the interest rate on bond falls, but aggregate income doesn't change,

Accepted Answer

A) the demand for money will decrease. 
B) velocity will decrease. 
C) velocity will increase. 
D) the price level will decrease. 
A) the demand for money will decrease. 
B) velocity will decrease. 
C) velocity will increase. 
D) the price level will decrease.

Question 7

What are substitutes for money in transactions called?

Accepted Answer

A) Transactions factors 
B) Substitution factors 
C) Payment system factors 
D) Credit clearing factors 
A) Transactions factors 
B) Substitution factors 
C) Payment system factors 
D) Credit clearing factors

Question 8

If the quantity of money is $4 trillion and nominal GDP is $8 trillion, velocity is

Accepted Answer

A) 0.5. 
B) 2. 
C) $32 trillion. 
D) not computable unless the value of the price level is given. 
A) 0.5. 
B) 2. 
C) $32 trillion. 
D) not computable unless the value of the price level is given.

Question 9

According to Friedman, the opportunity cost of holding money depends on all of the following EXCEPT

Accepted Answer

A) the return on money. 
B) the return on durable goods. 
C) permanent income. 
D) expected return on financial assets. 
A) the return on money. 
B) the return on durable goods. 
C) permanent income. 
D) expected return on financial assets.

Question 10

If the quantity of money is $1 trillion and real GDP is $4 trillion, velocity is

Accepted Answer

A) 0.25. 
B) 4. 
C) $4 trillion. 
D) not computable unless the value of the price level is given. 
A) 0.25. 
B) 4. 
C) $4 trillion. 
D) not computable unless the value of the price level is given.

Question 11

The fact that in addition to being a medium of exchange, money serves as a store of value means that

Accepted Answer

A) movements in the interest rate should not affect the demand for money. 
B) movements in the price level should not affect the demand for money. 
C) money competes with other assets in the portfolios of businesses and households. 
D) the demand for real balances should increase more than proportionately with increases in real income. 
A) movements in the interest rate should not affect the demand for money. 
B) movements in the price level should not affect the demand for money. 
C) money competes with other assets in the portfolios of businesses and households. 
D) the demand for real balances should increase more than proportionately with increases in real income.

Question 12

When did Irving Fisher first develop the quantity theory of money demand?

Accepted Answer

A) Late 1700s 
B) Early 1800s 
C) Early 1900s 
D) Late 1990s 
A) Late 1700s 
B) Early 1800s 
C) Early 1900s 
D) Late 1990s

According to Baumol and Tobin, the transactions demand for money is

During the 1980s, the velocity of M1

Money's convenience yield is

The interest rate is a measure of

In the quantity theory of money demand,

According to Keynes, if the interest rate on bond falls, but aggregate income doesn't change,

What are substitutes for money in transactions called?

If the quantity of money is $4 trillion and nominal GDP is $8 trillion, velocity is

According to Friedman, the opportunity cost of holding money depends on all of the following EXCEPT

If the quantity of money is $1 trillion and real GDP is $4 trillion, velocity is

The fact that in addition to being a medium of exchange, money serves as a store of value means that

When did Irving Fisher first develop the quantity theory of money demand?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters

Exam 23: The Demand for Money

According to Baumol and Tobin, the transactions demand for money is

During the 1980s, the velocity of M1

Money's convenience yield is

The interest rate is a measure of

In the quantity theory of money demand,

According to Keynes, if the interest rate on bond falls, but aggregate income doesn't change,

What are substitutes for money in transactions called?

If the quantity of money is $4 trillion and nominal GDP is $8 trillion, velocity is

According to Friedman, the opportunity cost of holding money depends on all of the following EXCEPT

If the quantity of money is $1 trillion and real GDP is $4 trillion, velocity is

The fact that in addition to being a medium of exchange, money serves as a store of value means that

When did Irving Fisher first develop the quantity theory of money demand?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters