Question 1

According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

Accepted Answer

A) A lower interest rate. 
B) Greater investment. 
C) Lower real GDP. 
D) Higher real GDP. 
A) A lower interest rate. 
B) Greater investment. 
C) Lower real GDP. 
D) Higher real GDP.

Question 2

A graph illustrating the relationship between the quantity of money demanded and the interest rate would have a slope that is:

Accepted Answer

A) positive. 
B) negative. 
C) horizontal. 
D) vertical. 
A) positive. 
B) negative. 
C) horizontal. 
D) vertical.

Question 3

Assume a fixed demand for money curve and the Fed increases the money supply. In response, people will:

Accepted Answer

A) sell bonds, thus driving up the interest rate. 
B) sell bonds, thus driving down the interest rate. 
C) buy bonds, thus driving up the interest rate. 
D) buy bonds, thus driving down the interest rate. 
A) sell bonds, thus driving up the interest rate. 
B) sell bonds, thus driving down the interest rate. 
C) buy bonds, thus driving up the interest rate. 
D) buy bonds, thus driving down the interest rate.

Question 4

The quantity of money demanded to satisfy transactions needs:

Accepted Answer

A) is intended for unexpected expenditures. 
B) increases with the level of real GDP. 
C) decreases with the level of real GDP. 
D) is unrelated to either national income or the interest rate. 
E) varies inversely with the liquidity demand for money. 
A) is intended for unexpected expenditures. 
B) increases with the level of real GDP. 
C) decreases with the level of real GDP. 
D) is unrelated to either national income or the interest rate. 
E) varies inversely with the liquidity demand for money.

Question 5

The quantity theory of money assumes that the velocity of money:

Accepted Answer

A) is constant. 
B) will rise if the money supply rises and fall if the money supply falls. 
C) will rise if the money supply rises, but it will not change if the money supply falls. 
D) will fall if the money supply rises, and it will rise if the money supply falls. 
E) will fall if the money supply rises, but it will not change if the money supply falls. 
A) is constant. 
B) will rise if the money supply rises and fall if the money supply falls. 
C) will rise if the money supply rises, but it will not change if the money supply falls. 
D) will fall if the money supply rises, and it will rise if the money supply falls. 
E) will fall if the money supply rises, but it will not change if the money supply falls.

Question 6

Speculative demand for money is a(n):

Accepted Answer

A) positive function of prices. 
B) inverse function of prices. 
C) positive function of interest rates. 
D) inverse function of interest rates. 
E) function of unexpected needs. 
A) positive function of prices. 
B) inverse function of prices. 
C) positive function of interest rates. 
D) inverse function of interest rates. 
E) function of unexpected needs.

Question 7

The speculative demand for money:

Accepted Answer

A) varies inversely with income. 
B) is only concerned with active money. 
C) involves holding money for unexpected problems. 
D) varies directly with the transactions demand for money. 
E) varies inversely with the interest rate. 
A) varies inversely with income. 
B) is only concerned with active money. 
C) involves holding money for unexpected problems. 
D) varies directly with the transactions demand for money. 
E) varies inversely with the interest rate.

Question 8

Keynesians believe that an increase in the money supply will lead to:

Accepted Answer

A) both c and d. 
B) all of the following. 
C) an increase in the price level. 
D) a decrease in nominal GDP. 
E) an increase in real GDP. 
A) both c and d. 
B) all of the following. 
C) an increase in the price level. 
D) a decrease in nominal GDP. 
E) an increase in real GDP.

Question 9

According to Keynesians, an increase in the money supply will have its least impact on GDP when the aggregate demand curve intersects:

Accepted Answer

A) the horizontal portion of the aggregate supply curve. 
B) the vertical portion of the aggregate supply curve. 
C) the upward sloping portion of the aggregate supply curve. 
D) either the horizontal or upward sloping portion of the aggregate supply curve. 
A) the horizontal portion of the aggregate supply curve. 
B) the vertical portion of the aggregate supply curve. 
C) the upward sloping portion of the aggregate supply curve. 
D) either the horizontal or upward sloping portion of the aggregate supply curve.

Question 10

The equation specifying a direct relationship between the money supply and prices is the quantity theory of:

Accepted Answer

A) money. 
B) prices. 
C) exchange. 
D) spending. 
E) dollars. 
A) money. 
B) prices. 
C) exchange. 
D) spending. 
E) dollars.

Question 11

While the classicists believed that both velocity and output are stable, Keynesians believe:

Accepted Answer

A) velocity is stable and output is variable. 
B) velocity and output are both variable. 
C) output is stable and velocity is variable 
D) the same as the classical economists that both output and velocity are stable 
E) at low levels of income both velocity and output are stable, but at high levels of income velocity becomes variable. 
A) velocity is stable and output is variable. 
B) velocity and output are both variable. 
C) output is stable and velocity is variable 
D) the same as the classical economists that both output and velocity are stable 
E) at low levels of income both velocity and output are stable, but at high levels of income velocity becomes variable.

Question 12

The velocity of money is the:

Accepted Answer

A) number of times per year each dollar is used to transact an exchange. 
B) rapidity of price increases during inflation. 
C) number of times the price level increases during a year. 
D) time it takes for checks to clear banks. 
E) number of times per year each product is purchased during the year. 
A) number of times per year each dollar is used to transact an exchange. 
B) rapidity of price increases during inflation. 
C) number of times the price level increases during a year. 
D) time it takes for checks to clear banks. 
E) number of times per year each product is purchased during the year.

Question 13

Suppose that the current money market equilibrium has an interest rate of 5 percent and a quantity of $2 trillion. Suppose that at a 6 percent interest rate, the quantity of money demanded is $1.5 trillion, while at a 4 percent interest rate it is $2.5 trillion. If the Fed makes an open-market purchase of $50 billion, and the money multiplier is 10, what will be the new money market equilibrium?

Accepted Answer

A) An interest rate of 6 percent and a quantity of $1.5 trillion. 
B) An interest rate of 5 percent and a quantity of $2 trillion. 
C) An interest rate of 4 percent and a quantity of $2.5 trillion. 
D) None of the above. 
A) An interest rate of 6 percent and a quantity of $1.5 trillion. 
B) An interest rate of 5 percent and a quantity of $2 trillion. 
C) An interest rate of 4 percent and a quantity of $2.5 trillion. 
D) None of the above.

According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

A graph illustrating the relationship between the quantity of money demanded and the interest rate would have a slope that is:

Assume a fixed demand for money curve and the Fed increases the money supply. In response, people will:

The quantity of money demanded to satisfy transactions needs:

The quantity theory of money assumes that the velocity of money:

Speculative demand for money is a(n):

The speculative demand for money:

Keynesians believe that an increase in the money supply will lead to:

According to Keynesians, an increase in the money supply will have its least impact on GDP when the aggregate demand curve intersects:

The equation specifying a direct relationship between the money supply and prices is the quantity theory of:

While the classicists believed that both velocity and output are stable, Keynesians believe:

The velocity of money is the:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Exam 16: Monetary Policy

According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

A graph illustrating the relationship between the quantity of money demanded and the interest rate would have a slope that is:

Assume a fixed demand for money curve and the Fed increases the money supply. In response, people will:

The quantity of money demanded to satisfy transactions needs:

The quantity theory of money assumes that the velocity of money:

Speculative demand for money is a(n):

The speculative demand for money:

Keynesians believe that an increase in the money supply will lead to:

According to Keynesians, an increase in the money supply will have its least impact on GDP when the aggregate demand curve intersects:

The equation specifying a direct relationship between the money supply and prices is the quantity theory of:

While the classicists believed that both velocity and output are stable, Keynesians believe:

The velocity of money is the:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters