Question 1

The speculative motive for holding money is closely tied to what function of money?

Accepted Answer

A) Store of wealth 
B) Unit of account 
C) Medium of exchange 
D) Standard of deferred payment 
A) Store of wealth 
B) Unit of account 
C) Medium of exchange 
D) Standard of deferred payment

Question 2

If there are economies of scale in the transactions demand for money,as income increases,money demand

Accepted Answer

A) increases proportionately. 
B) increases less than proportionately. 
C) increases more than proportionately. 
D) does not change. 
A) increases proportionately. 
B) increases less than proportionately. 
C) increases more than proportionately. 
D) does not change.

Question 3

Tobin's model of the speculative demand for money shows that people hold money as a ________ as a way of reducing ________.

Accepted Answer

A) medium of exchange; transaction costs 
B) medium of exchange; risk 
C) store of wealth; transaction costs 
D) store of wealth; risk 
A) medium of exchange; transaction costs 
B) medium of exchange; risk 
C) store of wealth; transaction costs 
D) store of wealth; risk

Question 4

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; decrease 
D) decrease; increase 
A) increase; increase 
B) increase; decrease 
C) decrease; decrease 
D) decrease; increase

Question 5

Irving Fisher's view that velocity is fairly constant in the short run transforms the equation of exchange into the

Accepted Answer

A) Friedman's theory of income determination. 
B) quantity theory of money. 
C) Keynesian theory of income determination. 
D) monetary theory of income determination. 
A) Friedman's theory of income determination. 
B) quantity theory of money. 
C) Keynesian theory of income determination. 
D) monetary theory of income determination.

Question 6

According to the quantity theory of money demand,

Accepted Answer

A) an increase in interest rates will cause the demand for money to fall. 
B) a decrease in interest rates will cause the demand for money to increase. 
C) interest rates have no effect on the demand for money. 
D) an increase in money will cause the demand for money to fall. 
A) an increase in interest rates will cause the demand for money to fall. 
B) a decrease in interest rates will cause the demand for money to increase. 
C) interest rates have no effect on the demand for money. 
D) an increase in money will cause the demand for money to fall.

Question 7

The view that velocity is constant in the short run transforms the equation of exchange into the quantity theory of money.According to the quantity theory of money,when the money supply doubles

Accepted Answer

A) velocity falls by 50 percent. 
B) velocity doubles. 
C) nominal incomes falls by 50 percent. 
D) nominal income doubles. 
A) velocity falls by 50 percent. 
B) velocity doubles. 
C) nominal incomes falls by 50 percent. 
D) nominal income doubles.

Question 8

The speculative demand for money may not exist because

Accepted Answer

A) banks now pay interest on some types of checkable deposits. 
B) there are alternative riskless assets paying higher returns than the return on money. 
C) the transactions demand can be shown to depend on interest rates. 
D) government regulations have eliminated risk in the financial markets. 
A) banks now pay interest on some types of checkable deposits. 
B) there are alternative riskless assets paying higher returns than the return on money. 
C) the transactions demand can be shown to depend on interest rates. 
D) government regulations have eliminated risk in the financial markets.

Question 9

The quantity theory of inflation indicates that the inflation rate equals

Accepted Answer

A) the growth rate of the money supply minus the growth rate of aggregate output. 
B) the level of the money supply minus the level of aggregate output. 
C) the growth rate of the money supply plus the growth rate of aggregate output. 
D) the level of the money supply plus the level of aggregate output. 
A) the growth rate of the money supply minus the growth rate of aggregate output. 
B) the level of the money supply minus the level of aggregate output. 
C) the growth rate of the money supply plus the growth rate of aggregate output. 
D) the level of the money supply plus the level of aggregate output.

Question 10

This method of financing government spending is frequently called printing money because high-powered money (the monetary base)is created in the process.

Accepted Answer

A) Financing government spending with taxes. 
B) Financing government spending through a Treasury sale of bonds that are then purchased by the Fed. 
C) Financing government spending by selling bonds to the public,which pays for the bonds with currency. 
D) Financing government spending by selling bonds to the public,which pays for the bonds with checks. 
A) Financing government spending with taxes. 
B) Financing government spending through a Treasury sale of bonds that are then purchased by the Fed. 
C) Financing government spending by selling bonds to the public,which pays for the bonds with currency. 
D) Financing government spending by selling bonds to the public,which pays for the bonds with checks.

Question 11

In the liquidity trap,the money demand curve

Accepted Answer

A) is horizontal. 
B) is vertical. 
C) is negatively sloped. 
D) is positively sloped. 
A) is horizontal. 
B) is vertical. 
C) is negatively sloped. 
D) is positively sloped.

Question 12

Keynes's theory of the demand for money implies that velocity is

Accepted Answer

A) not constant but fluctuates with movements in interest rates. 
B) not constant but fluctuates with movements in the price level. 
C) not constant but fluctuates with movements in the time of year. 
D) a constant. 
A) not constant but fluctuates with movements in interest rates. 
B) not constant but fluctuates with movements in the price level. 
C) not constant but fluctuates with movements in the time of year. 
D) a constant.

The speculative motive for holding money is closely tied to what function of money?

If there are economies of scale in the transactions demand for money,as income increases,money demand

Tobin's model of the speculative demand for money shows that people hold money as a as a way of reducing .

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ,so the quantity of money demanded would .

Irving Fisher's view that velocity is fairly constant in the short run transforms the equation of exchange into the

According to the quantity theory of money demand,

The view that velocity is constant in the short run transforms the equation of exchange into the quantity theory of money.According to the quantity theory of money,when the money supply doubles

The speculative demand for money may not exist because

The quantity theory of inflation indicates that the inflation rate equals

This method of financing government spending is frequently called printing money because high-powered money (the monetary base)is created in the process.

In the liquidity trap,the money demand curve

Keynes's theory of the demand for money implies that velocity is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

Exam 19: Quantity Theory,inflation and the Demand for Money

The speculative motive for holding money is closely tied to what function of money?

If there are economies of scale in the transactions demand for money,as income increases,money demand

Tobin's model of the speculative demand for money shows that people hold money as a ________ as a way of reducing ________.

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

Irving Fisher's view that velocity is fairly constant in the short run transforms the equation of exchange into the

According to the quantity theory of money demand,

The view that velocity is constant in the short run transforms the equation of exchange into the quantity theory of money.According to the quantity theory of money,when the money supply doubles

The speculative demand for money may not exist because

The quantity theory of inflation indicates that the inflation rate equals

This method of financing government spending is frequently called printing money because high-powered money (the monetary base)is created in the process.

In the liquidity trap,the money demand curve

Keynes's theory of the demand for money implies that velocity is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

Tobin's model of the speculative demand for money shows that people hold money as a as a way of reducing .

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ,so the quantity of money demanded would .