Question 1

If the Fed sells bonds,we should expect to see the money supply

Accepted Answer

A)  decrease,the interest rate increase,autonomous consumption decrease,business investment decrease,and real GDP decrease 
B)  increase,the interest rate decrease,autonomous consumption decrease,business investment decrease,and real GDP decrease 
C)  increase,the interest rate decrease,autonomous consumption increase,business investment increase,and real GDP increase 
D)  decrease,the interest rate decrease,autonomous consumption increase,business investment increase,and real GDP decrease 
E)  decrease,the interest rate increase,autonomous consumption increase,business investment increase,and real GDP increase 
A)  decrease,the interest rate increase,autonomous consumption decrease,business investment decrease,and real GDP decrease 
B)  increase,the interest rate decrease,autonomous consumption decrease,business investment decrease,and real GDP decrease 
C)  increase,the interest rate decrease,autonomous consumption increase,business investment increase,and real GDP increase 
D)  decrease,the interest rate decrease,autonomous consumption increase,business investment increase,and real GDP decrease 
E)  decrease,the interest rate increase,autonomous consumption increase,business investment increase,and real GDP increase

Question 2

The money supply curve is

Accepted Answer

A)  upward sloping 
B)  downward sloping 
C)  vertical 
D)  horizontal 
E)  parallel to the money demand curve 
A)  upward sloping 
B)  downward sloping 
C)  vertical 
D)  horizontal 
E)  parallel to the money demand curve

Question 3

In the short-run macro model,rising GDP and a falling interest rate are most likely to be the result of a(n)

Accepted Answer

A)  increase in the money supply 
B)  decrease in the money supply 
C)  increase in government purchases 
D)  decrease in government purchases 
E)  decrease in taxes 
A)  increase in the money supply 
B)  decrease in the money supply 
C)  increase in government purchases 
D)  decrease in government purchases 
E)  decrease in taxes

Question 4

When the money market is in equilibrium,the bond market is in equilibrium as well.

Accepted Answer

A) True 
 B)False

Question 5

If income changes,that leads to a movement along the money demand curve.

Accepted Answer

A) True 
 B)False

Question 6

The federal funds rate is determined in a market and targeted by the Fed

Accepted Answer

A) True 
 B)False

Question 7

If the price level increases,the money demand curve will

Accepted Answer

A)  shift leftward 
B)  become steeper 
C)  remain in the same position;however,there will be movement upward along the curve 
D)  shift rightward 
E)  remain in the same position;however,there will be movement downward along the curve 
A)  shift leftward 
B)  become steeper 
C)  remain in the same position;however,there will be movement upward along the curve 
D)  shift rightward 
E)  remain in the same position;however,there will be movement downward along the curve

Question 8

The federal funds rate is the rate at which

Accepted Answer

A)  banks loan money to the Fed 
B)  the Fed loans money to banks 
C)  one regional Federal Reserve bank loans money to another regional Federal Reserve bank 
D)  one bank loans money to another 
E)  regional Federal Reserve banks loan money to a local bank 
A)  banks loan money to the Fed 
B)  the Fed loans money to banks 
C)  one regional Federal Reserve bank loans money to another regional Federal Reserve bank 
D)  one bank loans money to another 
E)  regional Federal Reserve banks loan money to a local bank

Question 9

-Refer to Figure 14-2.If the interest rate is 8 percent,

Accepted Answer

A)  there is an excess supply of money equal to $100 billion 
B)  there is an excess demand for money 
C)  there is an excess supply of money equal to $400 billion 
D)  the Fed will decrease the money supply 
E)  the interest rate will tend to rise 
A)  there is an excess supply of money equal to $100 billion 
B)  there is an excess demand for money 
C)  there is an excess supply of money equal to $400 billion 
D)  the Fed will decrease the money supply 
E)  the interest rate will tend to rise

Question 10

A new tool that the Fed started using in late 2008 was that it began to pay interest on the reserves banks hold in their federal reserve accounts.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Figure 14-1.If the economy is currently at point X,an increase in the interest rate will

Accepted Answer

A)  increase the quantity of money demanded (moving the economy toward point 
A)  
B)  decrease the quantity of money demanded (moving the economy toward point 
B)  
C)  increase money demand (shifting the curve toward curve 
C)  
D)  decrease money demand (shifting the curve toward curve 
D)  
E)  leave the economy at point X 
A)  increase the quantity of money demanded (moving the economy toward point 
A)  
B)  decrease the quantity of money demanded (moving the economy toward point 
B)  
C)  increase money demand (shifting the curve toward curve 
C)  
D)  decrease money demand (shifting the curve toward curve 
D)  
E)  leave the economy at point X

Question 12

If the interest rate increases due to an increase in government purchases,the rise in real GDP will be greater than what would have occurred if the interest rate had remained stable.

Accepted Answer

A) True 
 B)False

Question 13

The federal funds rate is

Accepted Answer

A)  determined in a market but targeted by the Fed. 
B)  chosen by the Fed and enforced on the banks. 
C)  chosen by Congress and enforced on the Fed. 
D)  chosen by Congress and enforced on the banks. 
E)  determined in the market and beyond the control of the Fed. 
A)  determined in a market but targeted by the Fed. 
B)  chosen by the Fed and enforced on the banks. 
C)  chosen by Congress and enforced on the Fed. 
D)  chosen by Congress and enforced on the banks. 
E)  determined in the market and beyond the control of the Fed.

Question 14

The secondary market for bonds is

Accepted Answer

A)  where new issues of bonds are purchased 
B)  of less importance to our economy than is the primary market 
C)  of less importance to our economy than the stock market 
D)  where bonds that were issued in previous periods are purchased 
E)  a key determinant of the money supply 
A)  where new issues of bonds are purchased 
B)  of less importance to our economy than is the primary market 
C)  of less importance to our economy than the stock market 
D)  where bonds that were issued in previous periods are purchased 
E)  a key determinant of the money supply

Question 15

Which of the following would be most likely to increase the demand for money?

Accepted Answer

A)  An increase in the price level 
B)  A decrease in real income 
C)  An increase in the interest rate 
D)  A decrease in the cost of converting other assets into money 
E)  A decrease in the price level 
A)  An increase in the price level 
B)  A decrease in real income 
C)  An increase in the interest rate 
D)  A decrease in the cost of converting other assets into money 
E)  A decrease in the price level

Question 16

Suppose the quantity of bonds demanded exceeds the quantity supplied at a given interest rate.What will happen to restore equilibrium?

Accepted Answer

A)  Bond prices will increase and the interest rate will rise. 
B)  Bond prices will decrease and the interest rate will fall. 
C)  Bond prices will increase and the interest rate will fall. 
D)  Bond prices will decrease and the interest rate will rise. 
E)  Bond prices will increase and the interest rate will stay the same,as bond prices are independent of the interest rate. 
A)  Bond prices will increase and the interest rate will rise. 
B)  Bond prices will decrease and the interest rate will fall. 
C)  Bond prices will increase and the interest rate will fall. 
D)  Bond prices will decrease and the interest rate will rise. 
E)  Bond prices will increase and the interest rate will stay the same,as bond prices are independent of the interest rate.

Question 17

If the Fed wishes to maintain its interest rate target in the face of increased money demand it would likely

Accepted Answer

A)  increase the money supply. 
B)  decrease the money supply. 
C)  more stringently enforce already existing banking regulations. 
D)  propose new banking regulations. 
E)  become more lax when it enforces already existing banking regulations. 
A)  increase the money supply. 
B)  decrease the money supply. 
C)  more stringently enforce already existing banking regulations. 
D)  propose new banking regulations. 
E)  become more lax when it enforces already existing banking regulations.

Question 18

An individual's wealth constraint is determined by

Accepted Answer

A)  the individual's level of education 
B)  the facts that wealth is given and so she must give up one kind of wealth in order to acquire another 
C)  overall conditions in the economy 
D)  the amount of wealth the individual chooses to hold in the form of money 
E)  the value of corporate stock. 
A)  the individual's level of education 
B)  the facts that wealth is given and so she must give up one kind of wealth in order to acquire another 
C)  overall conditions in the economy 
D)  the amount of wealth the individual chooses to hold in the form of money 
E)  the value of corporate stock.

Question 19

If government spending increases,which of the following is most likely to occur?

Accepted Answer

A)  GDP,money demand,the interest rate,and investment spending will all increase. 
B)  GDP,money demand,the interest rate,and investment spending will all decrease. 
C)  GDP,money demand and the interest rate will increase,while investment spending will decrease. 
D)  GDP,money demand and the interest rate will decrease,while investment spending will increase. 
E)  GDP and money demand will increase,but the interest rate will not change. 
A)  GDP,money demand,the interest rate,and investment spending will all increase. 
B)  GDP,money demand,the interest rate,and investment spending will all decrease. 
C)  GDP,money demand and the interest rate will increase,while investment spending will decrease. 
D)  GDP,money demand and the interest rate will decrease,while investment spending will increase. 
E)  GDP and money demand will increase,but the interest rate will not change.

Question 20

The opportunity cost of holding money is

Accepted Answer

A)  the dollar cost necessary to change other assets into money 
B)  the time cost of accessing funds 
C)  the value of the goods and services a person is able to obtain with the money 
D)  the interest a person could have earned by holding other forms of wealth instead 
E)  zero,because opportunity costs only apply to real assets,goods and services. 
A)  the dollar cost necessary to change other assets into money 
B)  the time cost of accessing funds 
C)  the value of the goods and services a person is able to obtain with the money 
D)  the interest a person could have earned by holding other forms of wealth instead 
E)  zero,because opportunity costs only apply to real assets,goods and services.

If the Fed sells bonds,we should expect to see the money supply

The money supply curve is

In the short-run macro model,rising GDP and a falling interest rate are most likely to be the result of a(n)

When the money market is in equilibrium,the bond market is in equilibrium as well.

If income changes,that leads to a movement along the money demand curve.

The federal funds rate is determined in a market and targeted by the Fed

If the price level increases,the money demand curve will

The federal funds rate is the rate at which

-Refer to Figure 14-2.If the interest rate is 8 percent,

A new tool that the Fed started using in late 2008 was that it began to pay interest on the reserves banks hold in their federal reserve accounts.

-Refer to Figure 14-1.If the economy is currently at point X,an increase in the interest rate will

If the interest rate increases due to an increase in government purchases,the rise in real GDP will be greater than what would have occurred if the interest rate had remained stable.

The federal funds rate is

The secondary market for bonds is

Which of the following would be most likely to increase the demand for money?

Suppose the quantity of bonds demanded exceeds the quantity supplied at a given interest rate.What will happen to restore equilibrium?

If the Fed wishes to maintain its interest rate target in the face of increased money demand it would likely

An individual's wealth constraint is determined by

If government spending increases,which of the following is most likely to occur?

The opportunity cost of holding money is

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 14: The Money Market and Monetary Policy

If the Fed sells bonds,we should expect to see the money supply

The money supply curve is

In the short-run macro model,rising GDP and a falling interest rate are most likely to be the result of a(n)

When the money market is in equilibrium,the bond market is in equilibrium as well.

If income changes,that leads to a movement along the money demand curve.

The federal funds rate is determined in a market and targeted by the Fed

If the price level increases,the money demand curve will

The federal funds rate is the rate at which

-Refer to Figure 14-2.If the interest rate is 8 percent,

A new tool that the Fed started using in late 2008 was that it began to pay interest on the reserves banks hold in their federal reserve accounts.

-Refer to Figure 14-1.If the economy is currently at point X,an increase in the interest rate will

If the interest rate increases due to an increase in government purchases,the rise in real GDP will be greater than what would have occurred if the interest rate had remained stable.

The federal funds rate is

The secondary market for bonds is

Which of the following would be most likely to increase the demand for money?

Suppose the quantity of bonds demanded exceeds the quantity supplied at a given interest rate.What will happen to restore equilibrium?

If the Fed wishes to maintain its interest rate target in the face of increased money demand it would likely

An individual's wealth constraint is determined by

If government spending increases,which of the following is most likely to occur?

The opportunity cost of holding money is

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters