Question 1

The effect of an increase in the nominal interest rate on the demand for money curve is to

Accepted Answer

A)  shift the demand for money curve rightward. 
B)  create a movement upward along the demand for money curve. 
C)  create a movement downward along the demand for money curve. 
D)  shift the demand for money curve leftward. 
A)  shift the demand for money curve rightward. 
B)  create a movement upward along the demand for money curve. 
C)  create a movement downward along the demand for money curve. 
D)  shift the demand for money curve leftward.

Question 2

The demand for nominal money

Accepted Answer

A)  is the same as the demand for real money. 
B)  depends on the quantity of money. 
C)  increases as the price level increases. 
D)  decreases as the price level increases. 
A)  is the same as the demand for real money. 
B)  depends on the quantity of money. 
C)  increases as the price level increases. 
D)  decreases as the price level increases.

Question 3

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

Accepted Answer

The bank can make new loans equal to the

Question 4

The table below shows data for Brazil.
$$\begin{array} { | l | l | l | } 
\hline & 2006 & 2007 \
\hline \begin{array} { l } 
\text { Real GDP grow th } \
\text { rate }
\end{array} & 3.8 & 5.4 \
\hline \text { Inflation rate } & 4.2 & 3.7 \
\hline
\end{array}$$
Assuming the rate of velocity change is constant,

Accepted Answer

A)  the money growth rate was -0.4 percent in 2006. 
B)  the growth rate of nominal GDP was 1.7 percent in 2006. 
C)  the demand for money curve shifted leftward in 2006. 
D)  the growth rate of money increased between 2006 and 2007. 
A)  the money growth rate was -0.4 percent in 2006. 
B)  the growth rate of nominal GDP was 1.7 percent in 2006. 
C)  the demand for money curve shifted leftward in 2006. 
D)  the growth rate of money increased between 2006 and 2007.

Question 5

The quantity of money is $1 billion, the price level is 1.10, and real GDP is $10 billion. What is the velocity of circulation?

Accepted Answer

The veloci

Question 6

When the nominal interest rate rises, the

Accepted Answer

A)  quantity of money demanded decreases. 
B)  quantity of money demanded increases. 
C)  demand for money increases. 
D)  demand for money decreases. 
A)  quantity of money demanded decreases. 
B)  quantity of money demanded increases. 
C)  demand for money increases. 
D)  demand for money decreases.

Question 7

When the Fed wants to undertake open market operations, it

Accepted Answer

A)  buys securities from or sells securities to the federal government. 
B)  can require all commercial banks to buy from or sell to it. 
C)  buys or sells securities. 
D)  can require all member banks to buy from or sell to it. 
A)  buys securities from or sells securities to the federal government. 
B)  can require all commercial banks to buy from or sell to it. 
C)  buys or sells securities. 
D)  can require all member banks to buy from or sell to it.

Question 8

In the United States, the central bank is the__________.

Accepted Answer

A)  Bank of America 
B)  Federal Reserve Bank of New York 
C)  Federal Reserve System 
D)  Federal Reserve Bank of Washington D.C. 
A)  Bank of America 
B)  Federal Reserve Bank of New York 
C)  Federal Reserve System 
D)  Federal Reserve Bank of Washington D.C.

Question 9

Federal Reserve policy tools include all of the following EXCEPT

Accepted Answer

A)  excess reserve ratios. 
B)  last resort loans. 
C)  open market operations. 
D)  required reserve ratios. 
A)  excess reserve ratios. 
B)  last resort loans. 
C)  open market operations. 
D)  required reserve ratios.

Question 10

Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is

Accepted Answer

A)  22.5. 
B)  3. 
C)  2.5. 
D)  10.5. 
A)  22.5. 
B)  3. 
C)  2.5. 
D)  10.5.

Question 11

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the ________.

Accepted Answer

A)  the quantity of money; growth rate of real GDP 
B)  real GDP; inflation rate 
C)  real GDP; growth rate of velocity 
D)  the quantity of money; inflation rate 
A)  the quantity of money; growth rate of real GDP 
B)  real GDP; inflation rate 
C)  real GDP; growth rate of velocity 
D)  the quantity of money; inflation rate

Question 12

The term ʺcurrency drainʺ refers to an increase in currency held outside banks.

Accepted Answer

A) True 
 B)False

Question 13

Describe how financial innovation has affected the demand for money.

Accepted Answer

Financial innovation is the development

Question 14

The Chairman of the Fed is appointed by .

Accepted Answer

A)  the U.S. Senate 
B)  the President of the United States 
C)  Congress 
D)  the Board of Governors of the Federal Reserve System 
A)  the U.S. Senate 
B)  the President of the United States 
C)  Congress 
D)  the Board of Governors of the Federal Reserve System

Question 15

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

Accepted Answer

A)  more money than the quantity supplied and bond prices will rise. 
B)  less money than the quantity supplied and bond prices will fall. 
C)  more money than the quantity supplied and bond prices will fall. 
D)  less money than the quantity supplied and bond prices will rise. 
A)  more money than the quantity supplied and bond prices will rise. 
B)  less money than the quantity supplied and bond prices will fall. 
C)  more money than the quantity supplied and bond prices will fall. 
D)  less money than the quantity supplied and bond prices will rise.

Question 16

The higher the nominal interest rate, the

Accepted Answer

A)  lower the quantity of money demanded. 
B)  greater the opportunity cost of holding money. 
C)  more the demand for money curve shifts leftward. 
D)  Both answers A and B are correct. 
A)  lower the quantity of money demanded. 
B)  greater the opportunity cost of holding money. 
C)  more the demand for money curve shifts leftward. 
D)  Both answers A and B are correct.

Question 17

An open market sale of securities by the Fed

Accepted Answer

A)  increases banksʹ reserves and decreases banksʹ securities. 
B)  decreases banksʹ reserves and increases banksʹ securities. 
C)  involves a bank selling government securities to the Fed. 
D)  increases banksʹ total assets. 
A)  increases banksʹ reserves and decreases banksʹ securities. 
B)  decreases banksʹ reserves and increases banksʹ securities. 
C)  involves a bank selling government securities to the Fed. 
D)  increases banksʹ total assets.

Question 18

The fraction of deposits that banks must keep on hand or at the Federal Reserve is called the

Accepted Answer

A)  discount rate. 
B)  money multiplier. 
C)  deposit multiplier. 
D)  required reserve ratio. 
A)  discount rate. 
B)  money multiplier. 
C)  deposit multiplier. 
D)  required reserve ratio.

Question 19

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,

Accepted Answer

A)  real GDP increases. 
B)  people buy bonds and the interest rate falls. 
C)  the interest rate rises. 
D)  the demand for money curve shifts rightward. 
A)  real GDP increases. 
B)  people buy bonds and the interest rate falls. 
C)  the interest rate rises. 
D)  the demand for money curve shifts rightward.

Question 20

The opportunity cost of holding money is the nominal interest rate.

Accepted Answer

A) True 
 B)False

The effect of an increase in the nominal interest rate on the demand for money curve is to

The demand for nominal money

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

The table below shows data for Brazil. 2006 2007 Real GDP grow th rate 3.8 5.4 Inflation rate 4.2 3.7 Assuming the rate of velocity change is constant,

The quantity of money is $1 billion, the price level is 1.10, and real GDP is $10 billion. What is the velocity of circulation?

When the nominal interest rate rises, the

When the Fed wants to undertake open market operations, it

In the United States, the central bank is the__________.

Federal Reserve policy tools include all of the following EXCEPT

Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the ________.

The term ʺcurrency drainʺ refers to an increase in currency held outside banks.

Describe how financial innovation has affected the demand for money.

The Chairman of the Fed is appointed by .

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

The higher the nominal interest rate, the

An open market sale of securities by the Fed

The fraction of deposits that banks must keep on hand or at the Federal Reserve is called the

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,

The opportunity cost of holding money is the nominal interest rate.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 8: Money, the Price Level, and Inflation

The effect of an increase in the nominal interest rate on the demand for money curve is to

The demand for nominal money

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

The table below shows data for Brazil. 2006 2007 Real GDP grow th rate 3.8 5.4 Inflation rate 4.2 3.7 Assuming the rate of velocity change is constant,

The quantity of money is $1 billion, the price level is 1.10, and real GDP is $10 billion. What is the velocity of circulation?

When the nominal interest rate rises, the

When the Fed wants to undertake open market operations, it

In the United States, the central bank is the__________.

Federal Reserve policy tools include all of the following EXCEPT

Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the ________.

The term ʺcurrency drainʺ refers to an increase in currency held outside banks.

Describe how financial innovation has affected the demand for money.

The Chairman of the Fed is appointed by .

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

The higher the nominal interest rate, the

An open market sale of securities by the Fed

The fraction of deposits that banks must keep on hand or at the Federal Reserve is called the

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,

The opportunity cost of holding money is the nominal interest rate.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters