Question 1

Why is there a negative relationship between the interest rate and the quantity of money demanded?

Accepted Answer

The negative relationship between the in

Question 2

The demand for money is negatively related to

Accepted Answer

A)  the interest rate and positively related to real GDP. 
B)  the interest rate and positively related to unemployment. 
C)  real GDP and positively related to the interest rate. 
D)  real GDP and positively related to the money supply. 
A)  the interest rate and positively related to real GDP. 
B)  the interest rate and positively related to unemployment. 
C)  real GDP and positively related to the interest rate. 
D)  real GDP and positively related to the money supply.

Question 3

An increase in the money supply will reduce interest rates and increase the price of bonds.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions.
Exhibit: The Money Market  
-(Exhibit: The Money Market) If the rate of interest is below the equilibrium rate, there will be

Accepted Answer

A)  an excess demand for money and the interest rate will rise. 
B)  an excess supply of money and the interest rate will fall. 
C)  an excess demand for money and the interest rate will fall. 
D)  an excess supply of money and the interest rate will rise. 
A)  an excess demand for money and the interest rate will rise. 
B)  an excess supply of money and the interest rate will fall. 
C)  an excess demand for money and the interest rate will fall. 
D)  an excess supply of money and the interest rate will rise.

Question 5

The _______ demand for money is holding money in expectation that bond prices and the prices of other assets might change.

Accepted Answer

A)  speculative 
B)  exchange 
C)  transactions 
D)  precautionary 
A)  speculative 
B)  exchange 
C)  transactions 
D)  precautionary

Question 6

Use the following to answer questions .
Exhibit: Economic Adjustments  
-(Exhibit: Economic Adjustments) If the economy is at point a,

Accepted Answer

A)  employment is greater than the natural level of employment. 
B)  it is at the natural level of employment. 
C)  it is in a recessionary gap. 
D)  the unemployment rate is negative. 
A)  employment is greater than the natural level of employment. 
B)  it is at the natural level of employment. 
C)  it is in a recessionary gap. 
D)  the unemployment rate is negative.

Question 7

Use the following to answer questions .
Exhibit: Economic Adjustments  
-(Exhibit: Economic Adjustments) If the economy is at point c, an open market purchase would cause

Accepted Answer

A)  a shift of the short run aggregate supply curve from AS1 to AS2. 
B)  a shift of the short run aggregate supply curve from AS2 to AS1. 
C)  a shift of the aggregate demand curve from AD1 to AD2. 
D)  a shift of the aggregate demand curve from AD2 to AD1. 
A)  a shift of the short run aggregate supply curve from AS1 to AS2. 
B)  a shift of the short run aggregate supply curve from AS2 to AS1. 
C)  a shift of the aggregate demand curve from AD1 to AD2. 
D)  a shift of the aggregate demand curve from AD2 to AD1.

Question 8

If financial investors believe that the prices of bonds and other assets will fall,

Accepted Answer

A)  their precautionary demand for money goes up. 
B)  their speculative demand for money goes up. 
C)  their precautionary demand for money goes down. 
D)  their speculative demand for money goes down. 
A)  their precautionary demand for money goes up. 
B)  their speculative demand for money goes up. 
C)  their precautionary demand for money goes down. 
D)  their speculative demand for money goes down.

Question 9

Use the following to answer questions .
Exhibit: Foreign Exchange Market  
-(Exhibit: Foreign Exchange Market) Who generates a demand for dollars in the foreign exchange market?

Accepted Answer

A)  U.S. residents who demand foreign goods, services, and assets. 
B)  U.S. residents who demand domestically produced goods, services, and assets. 
C)  Foreign residents abroad who demand U.S. goods, services, and assets. 
D)  Foreign banks and citizens who wish to reduce their holdings of foreign currencies. 
A)  U.S. residents who demand foreign goods, services, and assets. 
B)  U.S. residents who demand domestically produced goods, services, and assets. 
C)  Foreign residents abroad who demand U.S. goods, services, and assets. 
D)  Foreign banks and citizens who wish to reduce their holdings of foreign currencies.

Question 10

Which of the following would cause the price of the dollar to rise?

Accepted Answer

A)  a fall in bond prices 
B)  an increase in bond prices 
C)  a decrease in interest rates 
D)  a fall in the exchange rate 
A)  a fall in bond prices 
B)  an increase in bond prices 
C)  a decrease in interest rates 
D)  a fall in the exchange rate

Question 11

Which of the following decreases the demand for money?

Accepted Answer

A)  an increase in income 
B)  a decrease in real GDP 
C)  an increase in the price level 
D)  expectations of higher bond prices 
A)  an increase in income 
B)  a decrease in real GDP 
C)  an increase in the price level 
D)  expectations of higher bond prices

Question 12

An increase in the supply of bonds

Accepted Answer

A)  raises the interest rate and increases equilibrium quantity of bonds. 
B)  raises the interest rate and decreases equilibrium quantity of bonds. 
C)  lowers the interest rate and decreases equilibrium quantity of bonds. 
D)  lowers the interest rate and increases equilibrium quantity of bonds. 
A)  raises the interest rate and increases equilibrium quantity of bonds. 
B)  raises the interest rate and decreases equilibrium quantity of bonds. 
C)  lowers the interest rate and decreases equilibrium quantity of bonds. 
D)  lowers the interest rate and increases equilibrium quantity of bonds.

Question 13

Use the following to answer questions .
Exhibit: A Shift in Money Demand  
-(Exhibit: A Shift in Money Demand) What happens in the product market as a result of the increase in money demand?

Accepted Answer

A)  The aggregate demand curve shifts to the left. 
B)  The aggregate demand curve shifts to the right. 
C)  The short-run aggregate supply curve shifts to the left. 
D)  The short-run aggregate supply curve shifts to the right. 
A)  The aggregate demand curve shifts to the left. 
B)  The aggregate demand curve shifts to the right. 
C)  The short-run aggregate supply curve shifts to the left. 
D)  The short-run aggregate supply curve shifts to the right.

Question 14

The demand for bonds curve slopes downwards because

Accepted Answer

A)  at higher prices, bonds pay higher interest which makes them more attractive to buyers. 
B)  lower prices reduce the cost of borrowing which makes them less attractive to buyers. 
C)  at lower prices, bonds pay higher interest which makes them more attractive to buyers. 
D)  higher prices raise the cost of borrowing which makes them less attractive to buyers. 
A)  at higher prices, bonds pay higher interest which makes them more attractive to buyers. 
B)  lower prices reduce the cost of borrowing which makes them less attractive to buyers. 
C)  at lower prices, bonds pay higher interest which makes them more attractive to buyers. 
D)  higher prices raise the cost of borrowing which makes them less attractive to buyers.

Question 15

All else constant, an increase in the supply of money will lead to _______

Accepted Answer

A)  an increase in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
B)  an increase in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. 
C)  a decrease in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
D)  a decrease in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. 
A)  an increase in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
B)  an increase in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. 
C)  a decrease in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
D)  a decrease in the equilibrium quantity of money and a decrease in the equilibrium price of bonds.

Why is there a negative relationship between the interest rate and the quantity of money demanded?

The demand for money is negatively related to

An increase in the money supply will reduce interest rates and increase the price of bonds.

Use the following to answer questions. Exhibit: The Money Market -(Exhibit: The Money Market) If the rate of interest is below the equilibrium rate, there will be

The _______ demand for money is holding money in expectation that bond prices and the prices of other assets might change.

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) If the economy is at point a,

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) If the economy is at point c, an open market purchase would cause

If financial investors believe that the prices of bonds and other assets will fall,

Use the following to answer questions . Exhibit: Foreign Exchange Market -(Exhibit: Foreign Exchange Market) Who generates a demand for dollars in the foreign exchange market?

Which of the following would cause the price of the dollar to rise?

Which of the following decreases the demand for money?

An increase in the supply of bonds

Use the following to answer questions . Exhibit: A Shift in Money Demand -(Exhibit: A Shift in Money Demand) What happens in the product market as a result of the increase in money demand?

The demand for bonds curve slopes downwards because

All else constant, an increase in the supply of money will lead to _______

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 10: Financial Markets and the Economy

Why is there a negative relationship between the interest rate and the quantity of money demanded?

The demand for money is negatively related to

An increase in the money supply will reduce interest rates and increase the price of bonds.

Use the following to answer questions. Exhibit: The Money Market -(Exhibit: The Money Market) If the rate of interest is below the equilibrium rate, there will be

The _______ demand for money is holding money in expectation that bond prices and the prices of other assets might change.

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) If the economy is at point a,

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) If the economy is at point c, an open market purchase would cause

If financial investors believe that the prices of bonds and other assets will fall,

Use the following to answer questions . Exhibit: Foreign Exchange Market -(Exhibit: Foreign Exchange Market) Who generates a demand for dollars in the foreign exchange market?

Which of the following would cause the price of the dollar to rise?

Which of the following decreases the demand for money?

An increase in the supply of bonds

Use the following to answer questions . Exhibit: A Shift in Money Demand -(Exhibit: A Shift in Money Demand) What happens in the product market as a result of the increase in money demand?

The demand for bonds curve slopes downwards because

All else constant, an increase in the supply of money will lead to _______

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters