Question 1

An increase in real aggregate spending will shift the money:

Accepted Answer

A)  demand curve rightward. 
B)  demand curve leftward. 
C)  supply curve rightward. 
D)  supply curve leftward. 
A)  demand curve rightward. 
B)  demand curve leftward. 
C)  supply curve rightward. 
D)  supply curve leftward.

Question 2

The Fed prints money only when it is conducting monetary policy.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that the economy is operating at potential output and the money supply increases. Aggregate output will _____ potential output, nominal wages will _____, and the SRAS will shift _____.

Accepted Answer

A)  rise above; rise; leftward 
B)  fall below; rise; leftward 
C)  rise above; fall; leftward 
D)  rise above; rise; rightward 
A)  rise above; rise; leftward 
B)  fall below; rise; leftward 
C)  rise above; fall; leftward 
D)  rise above; rise; rightward

Question 4

If the economy is at potential output and the Fed increases the money supply, in the short run the price level will likely:

Accepted Answer

A)  fluctuate randomly. 
B)  remain the same. 
C)  decrease. 
D)  increase. 
A)  fluctuate randomly. 
B)  remain the same. 
C)  decrease. 
D)  increase.

Question 5

Contractionary monetary policy:

Accepted Answer

A)  is appropriate during a recessionary gap. 
B)  decreases aggregate demand. 
C)  increases aggregate demand. 
D)  helps solve the problem of unemployment. 
A)  is appropriate during a recessionary gap. 
B)  decreases aggregate demand. 
C)  increases aggregate demand. 
D)  helps solve the problem of unemployment.

Question 6

The higher the short-term interest rate, the lower the opportunity cost of holding money.

Accepted Answer

A) True 
 B)False

Question 7

Available international evidence for the period 1970-2015 shows that the:

Accepted Answer

A)  increases in the quantity of money led to a proportionate increase in the aggregate price level. 
B)  relationship between money and the aggregate price level changes over time and across countries. 
C)  concept of monetary neutrality applies only to developing countries. 
D)  increases in the money supply in the long run led to equal percent rises in the aggregate price level. 
A)  increases in the quantity of money led to a proportionate increase in the aggregate price level. 
B)  relationship between money and the aggregate price level changes over time and across countries. 
C)  concept of monetary neutrality applies only to developing countries. 
D)  increases in the money supply in the long run led to equal percent rises in the aggregate price level.

Question 8

If the money supply increases by 10%, in the long run:

Accepted Answer

A)  unemployment drops by 10%. 
B)  the price level increases by 10%. 
C)  real GDP increases by 10%. 
D)  unemployment drops by 20%. 
A)  unemployment drops by 10%. 
B)  the price level increases by 10%. 
C)  real GDP increases by 10%. 
D)  unemployment drops by 20%.

Question 9

Use the following to answer questions:
Figure: Money Market I  
-(Figure: Money Market I) Refer to Figure: Money Market I. If the money market is initially in equilibrium at point E and the central bank sells Treasury bills, then the interest rate will:

Accepted Answer

A)  move toward rH. 
B)  move toward rL 
C)  remain at rE. 
D)  shift rightward. 
A)  move toward rH. 
B)  move toward rL 
C)  remain at rE. 
D)  shift rightward.

Question 10

The loanable funds model focuses on the:

Accepted Answer

A)  demand for money. 
B)  supply of funds from lenders. 
C)  supply of funds from borrowers and the demand by lenders. 
D)  supply of funds from lenders and the demand from borrowers. 
A)  demand for money. 
B)  supply of funds from lenders. 
C)  supply of funds from borrowers and the demand by lenders. 
D)  supply of funds from lenders and the demand from borrowers.

Question 11

If the equilibrium interest rate in the money market is 5%, at an interest rate of 2% the quantity of nonmonetary interest-bearing financial assets demanded is _____ the quantity supplied.

Accepted Answer

A)  less than 
B)  greater than 
C)  equal to 
D)  irrelevant to 
A)  less than 
B)  greater than 
C)  equal to 
D)  irrelevant to

Question 12

If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers.

Accepted Answer

A)  must offer higher 
B)  can offer lower 
C)  can offer 2% 
D)  Sales of financial assets do not depend on the rate offered. 
A)  must offer higher 
B)  can offer lower 
C)  can offer 2% 
D)  Sales of financial assets do not depend on the rate offered.

Question 13

A 20% increase in the aggregate price level will increase the quantity of money demanded by:

Accepted Answer

A)  20%. 
B)  the money multiplier. 
C)  10%. 
D)  half of the money multiplier. 
A)  20%. 
B)  the money multiplier. 
C)  10%. 
D)  half of the money multiplier.

Question 14

The concept of monetary neutrality means that changes in the money supply have no real effects on real output in the long run.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions:
Figure: Changes in the Money Supply  
-(Figure: Changes in the Money Supply) Refer to Figure: Changes in the Money Supply. Federal Reserve policy to increase the supply of money, hence to lower the interest rate from 6% to 4%, is accomplished by action that ________ Treasury bills.

Accepted Answer

A)  lowers the price of 
B)  increases the interest rate on 
C)  increases the demand for 
D)  increases the supply of 
A)  lowers the price of 
B)  increases the interest rate on 
C)  increases the demand for 
D)  increases the supply of

Question 16

If the target rate of interest is higher than the equilibrium interest rate, the Federal Reserve will _____ Treasury bills in the open market, _____ the supply of money, and _____ the interest rate to the target rate.

Accepted Answer

A)  sell; increase; lower 
B)  buy; increase; lower 
C)  sell; decrease; raise 
D)  buy; decrease; raise 
A)  sell; increase; lower 
B)  buy; increase; lower 
C)  sell; decrease; raise 
D)  buy; decrease; raise

Question 17

An increase in the money supply that will decrease interest rates causes a shift of the:

Accepted Answer

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

Question 18

In the short run:

Accepted Answer

A)  only the supply of money determines the interest rate. 
B)  only the demand for money determines the interest rate. 
C)  the supply and demand for money determine the interest rate, and the loanable funds market follows the lead of the money market. 
D)  the supply and demand for money determine the interest rate, and the money market follows the lead of the loanable funds market. 
A)  only the supply of money determines the interest rate. 
B)  only the demand for money determines the interest rate. 
C)  the supply and demand for money determine the interest rate, and the loanable funds market follows the lead of the money market. 
D)  the supply and demand for money determine the interest rate, and the money market follows the lead of the loanable funds market.

Question 19

A decrease in the supply of money will lead to a(n) _____ in equilibrium real GDP and a _____ equilibrium interest rate.

Accepted Answer

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

Question 20

Suppose that the economy is in long-run equilibrium at full employment levels of real GDP. In the long run, if the money supply increases, we would expect _____ in the price level and _____ in real GDP.

Accepted Answer

A)  an increase; no change 
B)  an increase; an increase 
C)  a decrease; no change 
D)  no change; an increase 
A)  an increase; no change 
B)  an increase; an increase 
C)  a decrease; no change 
D)  no change; an increase

An increase in real aggregate spending will shift the money:

The Fed prints money only when it is conducting monetary policy.

Suppose that the economy is operating at potential output and the money supply increases. Aggregate output will ___ potential output, nominal wages will _, and the SRAS will shift ___.

If the economy is at potential output and the Fed increases the money supply, in the short run the price level will likely:

Contractionary monetary policy:

The higher the short-term interest rate, the lower the opportunity cost of holding money.

Available international evidence for the period 1970-2015 shows that the:

If the money supply increases by 10%, in the long run:

Use the following to answer questions: Figure: Money Market I -(Figure: Money Market I) Refer to Figure: Money Market I. If the money market is initially in equilibrium at point E and the central bank sells Treasury bills, then the interest rate will:

The loanable funds model focuses on the:

If the equilibrium interest rate in the money market is 5%, at an interest rate of 2% the quantity of nonmonetary interest-bearing financial assets demanded is _____ the quantity supplied.

If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers.

A 20% increase in the aggregate price level will increase the quantity of money demanded by:

The concept of monetary neutrality means that changes in the money supply have no real effects on real output in the long run.

If the target rate of interest is higher than the equilibrium interest rate, the Federal Reserve will ___ Treasury bills in the open market, _ the supply of money, and ___ the interest rate to the target rate.

An increase in the money supply that will decrease interest rates causes a shift of the:

In the short run:

A decrease in the supply of money will lead to a(n) _ in equilibrium real GDP and a _ equilibrium interest rate.

Suppose that the economy is in long-run equilibrium at full employment levels of real GDP. In the long run, if the money supply increases, we would expect _ in the price level and _ in real GDP.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 15: Monetary Policy

An increase in real aggregate spending will shift the money:

The Fed prints money only when it is conducting monetary policy.

Suppose that the economy is operating at potential output and the money supply increases. Aggregate output will _____ potential output, nominal wages will _____, and the SRAS will shift _____.

If the economy is at potential output and the Fed increases the money supply, in the short run the price level will likely:

Contractionary monetary policy:

The higher the short-term interest rate, the lower the opportunity cost of holding money.

Available international evidence for the period 1970-2015 shows that the:

If the money supply increases by 10%, in the long run:

Use the following to answer questions: Figure: Money Market I -(Figure: Money Market I) Refer to Figure: Money Market I. If the money market is initially in equilibrium at point E and the central bank sells Treasury bills, then the interest rate will:

The loanable funds model focuses on the:

If the equilibrium interest rate in the money market is 5%, at an interest rate of 2% the quantity of nonmonetary interest-bearing financial assets demanded is _____ the quantity supplied.

If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers.

A 20% increase in the aggregate price level will increase the quantity of money demanded by:

The concept of monetary neutrality means that changes in the money supply have no real effects on real output in the long run.

If the target rate of interest is higher than the equilibrium interest rate, the Federal Reserve will _____ Treasury bills in the open market, _____ the supply of money, and _____ the interest rate to the target rate.

An increase in the money supply that will decrease interest rates causes a shift of the:

In the short run:

A decrease in the supply of money will lead to a(n) _____ in equilibrium real GDP and a _____ equilibrium interest rate.

Suppose that the economy is in long-run equilibrium at full employment levels of real GDP. In the long run, if the money supply increases, we would expect _____ in the price level and _____ in real GDP.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Suppose that the economy is operating at potential output and the money supply increases. Aggregate output will ___ potential output, nominal wages will _, and the SRAS will shift ___.

If the target rate of interest is higher than the equilibrium interest rate, the Federal Reserve will ___ Treasury bills in the open market, _ the supply of money, and ___ the interest rate to the target rate.

A decrease in the supply of money will lead to a(n) _ in equilibrium real GDP and a _ equilibrium interest rate.

Suppose that the economy is in long-run equilibrium at full employment levels of real GDP. In the long run, if the money supply increases, we would expect _ in the price level and _ in real GDP.