Question 1

Over the past 40 years,the most frequent target for the Fed's monetary policy has been the:

Accepted Answer

A) prime interest rate. 
B) federal funds rate. 
C) M1 money supply. 
D) M2 money supply. 
E) required reserve ratio. 
A) prime interest rate. 
B) federal funds rate. 
C) M1 money supply. 
D) M2 money supply. 
E) required reserve ratio.

Question 2

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r?

Accepted Answer

A) There will be an excess demand for money. 
B) There will be an excess supply of money. 
C) The Fed will sell U.S.Treasury securities. 
D) The money market equilibrium will move from point B to point C. 
E) The money market equilibrium will move from point C to point A. 
A) There will be an excess demand for money. 
B) There will be an excess supply of money. 
C) The Fed will sell U.S.Treasury securities. 
D) The money market equilibrium will move from point B to point C. 
E) The money market equilibrium will move from point C to point A.

Question 3

For monetary policy to be effective in changing planned investment spending:

Accepted Answer

A) interest rates must not be responsive to changes in the money supply. 
B) interest rates must be sensitive to changes in Gross Domestic Product. 
C) investment must be sensitive to changes in interest rates. 
D) investment must be sensitive to changes in the price level. 
E) interest rates must be sensitive to changes in the price level. 
A) interest rates must not be responsive to changes in the money supply. 
B) interest rates must be sensitive to changes in Gross Domestic Product. 
C) investment must be sensitive to changes in interest rates. 
D) investment must be sensitive to changes in the price level. 
E) interest rates must be sensitive to changes in the price level.

Question 4

Other things constant,an increase in the price level will:

Accepted Answer

A) shift the money demand curve to the right. 
B) shift the money demand curve to the left. 
C) increase the quantity of money people want to hold. 
D) decrease the quantity of money people want to hold. 
E) have no impact on the money demand curve. 
A) shift the money demand curve to the right. 
B) shift the money demand curve to the left. 
C) increase the quantity of money people want to hold. 
D) decrease the quantity of money people want to hold. 
E) have no impact on the money demand curve.

Question 5

If the Fed purchases U.S.government securities,gross domestic product:

Accepted Answer

A) increases because the resulting increase in the interest rate leads to a decrease in investment. 
B) increases because the resulting decrease in the interest rate leads to an increase in investment. 
C) decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D) decreases because the resulting increase in the interest rate leads to an increase in investment. 
E) decreases because the resulting decrease in the interest rate leads to an increase in investment. 
A) increases because the resulting increase in the interest rate leads to a decrease in investment. 
B) increases because the resulting decrease in the interest rate leads to an increase in investment. 
C) decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D) decreases because the resulting increase in the interest rate leads to an increase in investment. 
E) decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 6

Which of these is an advantage of money as a store of value?

Accepted Answer

A) It can generate high interest income. 
B) It can facilitate hassle-free international exchange. 
C) It can be easily liquidated. 
D) It can signal a nation's economic health. 
E) It can increase potential output. 
A) It can generate high interest income. 
B) It can facilitate hassle-free international exchange. 
C) It can be easily liquidated. 
D) It can signal a nation's economic health. 
E) It can increase potential output.

Question 7

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy.In this figure,short-run equilibrium occurs at:

Accepted Answer

A) point b,where actual output exceeds potential output. 
B) point a,where actual output exceeds potential output. 
C) point c,where actual price level exceeds the expected price level. 
D) point c,where the actual price level is less than the expected price level. 
E) point b,where the actual price level exceeds the expected price level. 
A) point b,where actual output exceeds potential output. 
B) point a,where actual output exceeds potential output. 
C) point c,where actual price level exceeds the expected price level. 
D) point c,where the actual price level is less than the expected price level. 
E) point b,where the actual price level exceeds the expected price level.

Question 8

If the money supply in an economy is increased,the interest rate will fall,and real GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 9

If interest rates are to remain constant,the money supply should change:

Accepted Answer

A) in the opposite direction to a change in aggregate demand. 
B) in the same direction as a change in money demand. 
C) only when investment changes. 
D) only when the demand for money decreases. 
E) only when the inflation rate changes. 
A) in the opposite direction to a change in aggregate demand. 
B) in the same direction as a change in money demand. 
C) only when investment changes. 
D) only when the demand for money decreases. 
E) only when the inflation rate changes.

Question 10

Which of the following is true of the equation of exchange?

Accepted Answer

A) It states that the product of the price level and velocity of money is equal to real GDP. 
B) It states that aggregate demand in an economy is equal to total investment spending. 
C) It states that money supply times velocity of money equals real GDP. 
D) It states that velocity of money is equal to the ratio of nominal GDP and money supply. 
E) It changes to the quantity theory of money if the price level is assumed to be constant. 
A) It states that the product of the price level and velocity of money is equal to real GDP. 
B) It states that aggregate demand in an economy is equal to total investment spending. 
C) It states that money supply times velocity of money equals real GDP. 
D) It states that velocity of money is equal to the ratio of nominal GDP and money supply. 
E) It changes to the quantity theory of money if the price level is assumed to be constant.

Question 11

Which of the following is an example of a contractionary monetary policy?

Accepted Answer

A) Reduction in the amount of transfer payments made to poor families 
B) Purchase of U.S.government securities in the open market 
C) Increase in the discount rate 
D) Decrease in the required reserve ratio 
E) Increase in the tax rate 
A) Reduction in the amount of transfer payments made to poor families 
B) Purchase of U.S.government securities in the open market 
C) Increase in the discount rate 
D) Decrease in the required reserve ratio 
E) Increase in the tax rate

Question 12

A decrease in the money supply in the short run will cause an increase in planned investment spending.

Accepted Answer

A) True 
 B)False

Question 13

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is at point "e" in the short run,which of these policies adopted by the Fed is likely to return it to long-run equilibrium?

Accepted Answer

A) A decrease in government spending 
B) An increase in the tax rate 
C) A decrease in the tax rate 
D) A decrease in the money supply 
E) An increase in the money supply 
A) A decrease in government spending 
B) An increase in the tax rate 
C) A decrease in the tax rate 
D) A decrease in the money supply 
E) An increase in the money supply

Question 14

In the money market,an increase in money supply will:

Accepted Answer

A) increase the demand for money at each interest rate. 
B) decrease the demand for money at each interest rate. 
C) encourage people to exchange money for interest-bearing assets. 
D) encourage people to exchange interest-bearing assets for money. 
E) increase the interest rate. 
A) increase the demand for money at each interest rate. 
B) decrease the demand for money at each interest rate. 
C) encourage people to exchange money for interest-bearing assets. 
D) encourage people to exchange interest-bearing assets for money. 
E) increase the interest rate.

Question 15

The equation of exchange states that the quantity of money multiplied by the velocity of money equals:

Accepted Answer

A) real Gross Domestic Product. 
B) the price level. 
C) nominal Gross Domestic Product. 
D) the turnover rate. 
E) the demand for money. 
A) real Gross Domestic Product. 
B) the price level. 
C) nominal Gross Domestic Product. 
D) the turnover rate. 
E) the demand for money.

Question 16

Which of the following forms of money will earn at least some interest income?

Accepted Answer

A) Gold coins 
B) Currency notes 
C) Traveler's checks 
D) Checkable deposits 
E) Gift checks 
A) Gold coins 
B) Currency notes 
C) Traveler's checks 
D) Checkable deposits 
E) Gift checks

Question 17

All other things constant,when the interest rate increases:

Accepted Answer

A) the demand for investment curve shifts to the right. 
B) the demand for investment curve shifts to the left. 
C) there is a movement downward along the demand for investment curve. 
D) there is a movement upward along the demand for investment curve. 
E) GDP increases. 
A) the demand for investment curve shifts to the right. 
B) the demand for investment curve shifts to the left. 
C) there is a movement downward along the demand for investment curve. 
D) there is a movement upward along the demand for investment curve. 
E) GDP increases.

Question 18

When the Fed is targeting the money supply,it has complete control over the interest rate.

Accepted Answer

A) True 
 B)False

Question 19

In the long run,if the money supply increases:

Accepted Answer

A) most of the resulting rise in nominal GDP will be a result of increases in the exchange rate. 
B) most of the resulting rise in nominal GDP will be a result of increases in the price level. 
C) most of the resulting rise in real GDP will be a result of increases in the price level. 
D) most of the resulting rise in real GDP will be a result of increases in the interest rate. 
E) most of the resulting rise in real GDP will be a result of increases in aggregate expenditure. 
A) most of the resulting rise in nominal GDP will be a result of increases in the exchange rate. 
B) most of the resulting rise in nominal GDP will be a result of increases in the price level. 
C) most of the resulting rise in real GDP will be a result of increases in the price level. 
D) most of the resulting rise in real GDP will be a result of increases in the interest rate. 
E) most of the resulting rise in real GDP will be a result of increases in aggregate expenditure.

Question 20

The Fed seeks a target rate of inflation of around _____.

Accepted Answer

A) 1 percent 
B) 2 percent 
C) 3 percent 
D) 4 percent 
E) 5 percent 
A) 1 percent 
B) 2 percent 
C) 3 percent 
D) 4 percent 
E) 5 percent

Over the past 40 years,the most frequent target for the Fed's monetary policy has been the:

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r?

For monetary policy to be effective in changing planned investment spending:

Other things constant,an increase in the price level will:

If the Fed purchases U.S.government securities,gross domestic product:

Which of these is an advantage of money as a store of value?

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy.In this figure,short-run equilibrium occurs at:

If the money supply in an economy is increased,the interest rate will fall,and real GDP will decrease.

If interest rates are to remain constant,the money supply should change:

Which of the following is true of the equation of exchange?

Which of the following is an example of a contractionary monetary policy?

A decrease in the money supply in the short run will cause an increase in planned investment spending.

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is at point "e" in the short run,which of these policies adopted by the Fed is likely to return it to long-run equilibrium?

In the money market,an increase in money supply will:

The equation of exchange states that the quantity of money multiplied by the velocity of money equals:

Which of the following forms of money will earn at least some interest income?

All other things constant,when the interest rate increases:

When the Fed is targeting the money supply,it has complete control over the interest rate.

In the long run,if the money supply increases:

The Fed seeks a target rate of inflation of around _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 15: Monetary Theory and Policy

Over the past 40 years,the most frequent target for the Fed's monetary policy has been the:

The figure given below shows equilibrium in a money market.Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r?

For monetary policy to be effective in changing planned investment spending:

Other things constant,an increase in the price level will:

If the Fed purchases U.S.government securities,gross domestic product:

Which of these is an advantage of money as a store of value?

The figure given below shows the aggregate demand curve and the short-run aggregate supply curve of an economy.In this figure,short-run equilibrium occurs at:

If the money supply in an economy is increased,the interest rate will fall,and real GDP will decrease.

If interest rates are to remain constant,the money supply should change:

Which of the following is true of the equation of exchange?

Which of the following is an example of a contractionary monetary policy?

A decrease in the money supply in the short run will cause an increase in planned investment spending.

The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model.If the economy is at point "e" in the short run,which of these policies adopted by the Fed is likely to return it to long-run equilibrium?

In the money market,an increase in money supply will:

The equation of exchange states that the quantity of money multiplied by the velocity of money equals:

Which of the following forms of money will earn at least some interest income?

All other things constant,when the interest rate increases:

When the Fed is targeting the money supply,it has complete control over the interest rate.

In the long run,if the money supply increases:

The Fed seeks a target rate of inflation of around _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters