Question 1

In the long run,the interest rate is determined in the money market.

Accepted Answer

A) True 
 B)False

Question 2

The money demand curve is

Accepted Answer

A)  downward sloping 
B)  upward sloping 
C)  horizontal 
D)  vertical 
E)  has an inverted V-shape 
A)  downward sloping 
B)  upward sloping 
C)  horizontal 
D)  vertical 
E)  has an inverted V-shape

Question 3

Whenever spending changes,which of the following dampens the overall effect on GDP?

Accepted Answer

A)  A change in the money supply. 
B)  A change in taxes. 
C)  A change in the interest rate. 
D)  A change in the public's expectations. 
E)  None of the above. 
A)  A change in the money supply. 
B)  A change in taxes. 
C)  A change in the interest rate. 
D)  A change in the public's expectations. 
E)  None of the above.

Question 4

Which of the following will increase both money supply and money demand in the short run?

Accepted Answer

A)  An open market sale of bonds by the Fed 
B)  An open market purchase of bonds by the Fed 
C)  An increase in government purchases 
D)  A decrease in taxes 
E)  An increase in autonomous consumption 
A)  An open market sale of bonds by the Fed 
B)  An open market purchase of bonds by the Fed 
C)  An increase in government purchases 
D)  A decrease in taxes 
E)  An increase in autonomous consumption

Question 5

One consequence of an increase in government spending is that

Accepted Answer

A)  autonomous consumption will increase 
B)  autonomous consumption and investment spending will decrease 
C)  the increase in GDP will equal the size of the amount of spending 
D)  autonomous consumption and investment spending will increase 
E)  investment spending will increase. 
A)  autonomous consumption will increase 
B)  autonomous consumption and investment spending will decrease 
C)  the increase in GDP will equal the size of the amount of spending 
D)  autonomous consumption and investment spending will increase 
E)  investment spending will increase.

Question 6

-To cause the interest rate to fall,the Fed can

Accepted Answer

A)  decrease the money supply 
B)  stabilize the money supply to increase investor confidence 
C)  decrease the price of bonds 
D)  increase the money supply 
E)  increase the demand for money 
A)  decrease the money supply 
B)  stabilize the money supply to increase investor confidence 
C)  decrease the price of bonds 
D)  increase the money supply 
E)  increase the demand for money

Question 7

The federal funds rate is not just targeted by the Fed but is determined by the Fed.Market forces are irrelevant.

Accepted Answer

A) True 
 B)False

Question 8

If the Fed wants to lower the interest rate,it will

Accepted Answer

A)  buy bonds and decrease the money supply. 
B)  buy bonds and increase the money supply. 
C)  sell bonds and decrease the money supply. 
D)  sell bonds and increase the money supply. 
E)  sell bonds and decrease money demand. 
A)  buy bonds and decrease the money supply. 
B)  buy bonds and increase the money supply. 
C)  sell bonds and decrease the money supply. 
D)  sell bonds and increase the money supply. 
E)  sell bonds and decrease money demand.

Question 9

If the actual interest rate is below the equilibrium interest rate,the

Accepted Answer

A)  Fed must intervene in financial markets to restore the interest rate to its equilibrium value 
B)  price of bonds will increase 
C)  price of bonds will decrease 
D)  money supply will increase until the interest rate rises 
E)  money supply will decrease until the interest rate rises 
A)  Fed must intervene in financial markets to restore the interest rate to its equilibrium value 
B)  price of bonds will increase 
C)  price of bonds will decrease 
D)  money supply will increase until the interest rate rises 
E)  money supply will decrease until the interest rate rises

Question 10

A larger controversy of the financial crisis among both members of Congress and the general public had to do with the Fed's expanded role in the economy.

Accepted Answer

A) True 
 B)False

Question 11

If Pat pays $500 for a one-year bond that carries an interest rate of 10 percent per year,how much will she be repaid at the end of the year?

Accepted Answer

A)  $600 
B)  $510 
C)  $620 
D)  $550 
E)  $500 
A)  $600 
B)  $510 
C)  $620 
D)  $550 
E)  $500

Question 12

If the price of bonds falls,the

Accepted Answer

A)  demand for bonds will rise 
B)  supply of bonds will fall 
C)  supply of bonds will rise 
D)  interest rate will rise 
E)  interest rate will fall 
A)  demand for bonds will rise 
B)  supply of bonds will fall 
C)  supply of bonds will rise 
D)  interest rate will rise 
E)  interest rate will fall

Question 13

An increase in the money supply will increase both the amount of money demanded and output.

Accepted Answer

A) True 
 B)False

Question 14

If Johanna purchases a bond for $4,500 that promises to pay her $5,000 one year later,what is the interest rate on the bond?

Accepted Answer

A)  5.3 percent 
B)  5.6 percent 
C)  10.0 percent 
D)  11.1 percent 
E)  10.5 percent 
A)  5.3 percent 
B)  5.6 percent 
C)  10.0 percent 
D)  11.1 percent 
E)  10.5 percent

Question 15

-Refer to Figure 14-1.If the economy is currently at point X,a decrease 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 16

Suppose the current interest rate is 5% and you pay $250 for a bond.What is the total payment that should be made to you in one year?

Accepted Answer

A)  $12.50 
B)  $262.50 
C)  $237.50 
D)  $255.00 
E)  $267.50 
A)  $12.50 
B)  $262.50 
C)  $237.50 
D)  $255.00 
E)  $267.50

Question 17

-Refer to Figure 14-6.Suppose the Fed increases the money supply (to $\left. \mathrm { M } _ { 2 } ^ { \mathrm { S } } \right)$ ).As a result,the interest rate falls initially to 6 percent.After spending and GDP change,what will happen to the interest rate?

Accepted Answer

A)  It will remain at 6 percent. 
B)  It will rise as the money supply curve shifts back toward $\mathrm { M } _ { 1 } ^ { \mathrm { S } }$ 
C)  It will rise as the money demand curve shifts to the right. 
D)  It will fall as the money supply curve shifts farther to the right. 
E)  It will fall as the money demand curve shifts to the left. 
A)  It will remain at 6 percent. 
B)  It will rise as the money supply curve shifts back toward $\mathrm { M } _ { 1 } ^ { \mathrm { S } }$ 
C)  It will rise as the money demand curve shifts to the right. 
D)  It will fall as the money supply curve shifts farther to the right. 
E)  It will fall as the money demand curve shifts to the left.

Question 18

If the price of bonds rises,

Accepted Answer

A)  the Fed will decrease the money supply 
B)  the Fed will increase the money supply 
C)  the interest rate will rise 
D)  the interest rate will fall 
E)  inflation must be accelerating 
A)  the Fed will decrease the money supply 
B)  the Fed will increase the money supply 
C)  the interest rate will rise 
D)  the interest rate will fall 
E)  inflation must be accelerating

Question 19

An increase in government spending leads to a(n)

Accepted Answer

A)  downward shift of the aggregate expenditure line and a leftward shift of the money demand curve 
B)  upward shift of the aggregate expenditure line and a rightward shift of the money demand curve 
C)  downward shift of the aggregate expenditure line and a rightward shift of the money demand curve 
D)  upward shift of the aggregate expenditure line and a leftward shift of the money demand curve 
E)  upward shift of the aggregate expenditure line but no shift of the money demand curve 
A)  downward shift of the aggregate expenditure line and a leftward shift of the money demand curve 
B)  upward shift of the aggregate expenditure line and a rightward shift of the money demand curve 
C)  downward shift of the aggregate expenditure line and a rightward shift of the money demand curve 
D)  upward shift of the aggregate expenditure line and a leftward shift of the money demand curve 
E)  upward shift of the aggregate expenditure line but no shift of the money demand curve

Question 20

If the Fed wishes to raise the interest rate,it will

Accepted Answer

A)  increase the money supply 
B)  decrease the money supply 
C)  increase money demand 
D)  decrease money demand 
E)  simply set a higher market interest rate 
A)  increase the money supply 
B)  decrease the money supply 
C)  increase money demand 
D)  decrease money demand 
E)  simply set a higher market interest rate

In the long run,the interest rate is determined in the money market.

The money demand curve is

Whenever spending changes,which of the following dampens the overall effect on GDP?

Which of the following will increase both money supply and money demand in the short run?

One consequence of an increase in government spending is that

-To cause the interest rate to fall,the Fed can

The federal funds rate is not just targeted by the Fed but is determined by the Fed.Market forces are irrelevant.

If the Fed wants to lower the interest rate,it will

If the actual interest rate is below the equilibrium interest rate,the

A larger controversy of the financial crisis among both members of Congress and the general public had to do with the Fed's expanded role in the economy.

If Pat pays $500 for a one-year bond that carries an interest rate of 10 percent per year,how much will she be repaid at the end of the year?

If the price of bonds falls,the

An increase in the money supply will increase both the amount of money demanded and output.

If Johanna purchases a bond for $4,500 that promises to pay her $5,000 one year later,what is the interest rate on the bond?

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

Suppose the current interest rate is 5% and you pay $250 for a bond.What is the total payment that should be made to you in one year?

If the price of bonds rises,

An increase in government spending leads to a(n)

If the Fed wishes to raise the interest rate,it will

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

In the long run,the interest rate is determined in the money market.

The money demand curve is

Whenever spending changes,which of the following dampens the overall effect on GDP?

Which of the following will increase both money supply and money demand in the short run?

One consequence of an increase in government spending is that

-To cause the interest rate to fall,the Fed can

The federal funds rate is not just targeted by the Fed but is determined by the Fed.Market forces are irrelevant.

If the Fed wants to lower the interest rate,it will

If the actual interest rate is below the equilibrium interest rate,the

A larger controversy of the financial crisis among both members of Congress and the general public had to do with the Fed's expanded role in the economy.

If Pat pays $500 for a one-year bond that carries an interest rate of 10 percent per year,how much will she be repaid at the end of the year?

If the price of bonds falls,the

An increase in the money supply will increase both the amount of money demanded and output.

If Johanna purchases a bond for $4,500 that promises to pay her $5,000 one year later,what is the interest rate on the bond?

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

Suppose the current interest rate is 5% and you pay $250 for a bond.What is the total payment that should be made to you in one year?

-Refer to Figure 14-6.Suppose the Fed increases the money supply (to M2S)\left. \mathrm { M } _ { 2 } ^ { \mathrm { S } } \right)M2S​) ).As a result,the interest rate falls initially to 6 percent.After spending and GDP change,what will happen to the interest rate?

If the price of bonds rises,

An increase in government spending leads to a(n)

If the Fed wishes to raise the interest rate,it will

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