Question 1

The secondary market for bonds is a market for

Accepted Answer

A)  bonds that is smaller than the primary market 
B)  bonds that are not first-class 
C)  previously issued bonds 
D)  bonds that are not substitutes for bonds found in the primary market 
E)  newly issued bonds 
A)  bonds that is smaller than the primary market 
B)  bonds that are not first-class 
C)  previously issued bonds 
D)  bonds that are not substitutes for bonds found in the primary market 
E)  newly issued bonds

Question 2

A decrease in the interest rate shifts the money demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 3

If the Fed decreases the money supply,the interest rate

Accepted Answer

A)  decreases and aggregate spending increases. 
B)  decreases and aggregate spending decreases. 
C)  increases and aggregate spending decreases. 
D)  increases and aggregate spending increases. 
E)  increases and money demand decreases. 
A)  decreases and aggregate spending increases. 
B)  decreases and aggregate spending decreases. 
C)  increases and aggregate spending decreases. 
D)  increases and aggregate spending increases. 
E)  increases and money demand decreases.

Question 4

When economists speak of the demand for money,they refer to the amount of money people would like to hold

Accepted Answer

A)  given that it can only be printed slowly 
B)  in the best of all possible worlds 
C)  in their bank accounts rather than their wallets 
D)  at each interest rate 
E)  rather than spend. 
A)  given that it can only be printed slowly 
B)  in the best of all possible worlds 
C)  in their bank accounts rather than their wallets 
D)  at each interest rate 
E)  rather than spend.

Question 5

An open market purchase of bonds by the Fed

Accepted Answer

A)  drains reserves from the banking system and decreases the money supply 
B)  injects reserves into the banking system and increases money demand 
C)  injects reserves into the banking system and increases the money supply 
D)  drains reserves from the banking system and increases the money supply 
E)  injects reserves into the banking system and decreases the money supply 
A)  drains reserves from the banking system and decreases the money supply 
B)  injects reserves into the banking system and increases money demand 
C)  injects reserves into the banking system and increases the money supply 
D)  drains reserves from the banking system and increases the money supply 
E)  injects reserves into the banking system and decreases the money supply

Question 6

In the short-run macro model,which of the following increases when government spending increases?

Accepted Answer

A)  The interest rate 
B)  Investment spending 
C)  Taxes 
D)  Spending on consumer durables 
E)  The money supply. 
A)  The interest rate 
B)  Investment spending 
C)  Taxes 
D)  Spending on consumer durables 
E)  The money supply.

Question 7

Increases in the interest rate reduce the multiplier effect of an increase in government purchases.

Accepted Answer

A) True 
 B)False

Question 8

If the Fed wishes to maintain its interest rate target in the face of decreased 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 9

If the interest rate increases,the money demand curve

Accepted Answer

A)  shifts to the right. 
B)  shifts to the left. 
C)  neither shifts nor changes slope. 
D)  gets steeper. 
E)  becomes horizontal. 
A)  shifts to the right. 
B)  shifts to the left. 
C)  neither shifts nor changes slope. 
D)  gets steeper. 
E)  becomes horizontal.

Question 10

Which of the following would shift the money demand curve to the left?

Accepted Answer

A)  A decrease in the price level. 
B)  An increase in the interest rate. 
C)  An increase in the price level. 
D)  An increase in real income. 
E)  None of the above. 
A)  A decrease in the price level. 
B)  An increase in the interest rate. 
C)  An increase in the price level. 
D)  An increase in real income. 
E)  None of the above.

Question 11

If Mike buys a bond today for $400 that pays him $500 in one year,what is the implied interest rate?

Accepted Answer

A)  80 percent. 
B)  125 percent. 
C)  20 percent. 
D)  25 percent. 
E)  22 percent. 
A)  80 percent. 
B)  125 percent. 
C)  20 percent. 
D)  25 percent. 
E)  22 percent.

Question 12

An open market purchase of bonds by the Fed

Accepted Answer

A)  will shift the money supply curve to the left. 
B)  will drain reserves from the banking system and shift the money supply curve to the right. 
C)  will inject reserves into the banking system and shift the money supply curve to the left. 
D)  will shift the money supply curve to the right. 
E)  will change the slope of the money supply curve. 
A)  will shift the money supply curve to the left. 
B)  will drain reserves from the banking system and shift the money supply curve to the right. 
C)  will inject reserves into the banking system and shift the money supply curve to the left. 
D)  will shift the money supply curve to the right. 
E)  will change the slope of the money supply curve.

Question 13

Which of the following would be most likely to increase the quantity of money demanded?

Accepted Answer

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

Question 14

An excess supply of money in the economy implies an excess demand for

Accepted Answer

A)  stocks 
B)  mortgages 
C)  consumer nondurables 
D)  consumer durables 
E)  bonds 
A)  stocks 
B)  mortgages 
C)  consumer nondurables 
D)  consumer durables 
E)  bonds

Question 15

The equilibrium interest rate will change if

Accepted Answer

A)  the money demand curve shifts 
B)  there is a movement along the money demand curve 
C)  crowding out becomes so serious that the dollar loses value 
D)  the federal funds rate fluctuates rapidly 
E)  Congress threatens to put a cap on interest rates 
A)  the money demand curve shifts 
B)  there is a movement along the money demand curve 
C)  crowding out becomes so serious that the dollar loses value 
D)  the federal funds rate fluctuates rapidly 
E)  Congress threatens to put a cap on interest rates

Question 16

On a short-run macro model diagram,the impact of a decrease in government purchases (G)is illustrated by

Accepted Answer

A)  a downward shift of the aggregate expenditure line by the full amount of the change in G 
B)  an upward shift of the aggregate expenditure line followed by an equal downward shift of that line 
C)  a leftward shift of the money supply curve 
D)  a downward shift of the aggregate expenditure line by an amount less than the change in G 
E)  the increase in real income 
A)  a downward shift of the aggregate expenditure line by the full amount of the change in G 
B)  an upward shift of the aggregate expenditure line followed by an equal downward shift of that line 
C)  a leftward shift of the money supply curve 
D)  a downward shift of the aggregate expenditure line by an amount less than the change in G 
E)  the increase in real income

Question 17

Many of the Fed's actions were aimed squarely at stopping the downward spiral of falling assets prices.

Accepted Answer

A) True 
 B)False

Question 18

If Chris pays $500 for a bond that will return $750 in one year,what is the interest rate?

Accepted Answer

A)  50 percent 
B)  10 percent 
C)  25 percent 
D)  250 percent 
E)  33 percent 
A)  50 percent 
B)  10 percent 
C)  25 percent 
D)  250 percent 
E)  33 percent

Question 19

The economy's money supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 20

If the Fed wants to lower 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 lower 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 lower market interest rate

The secondary market for bonds is a market for

A decrease in the interest rate shifts the money demand curve to the right.

If the Fed decreases the money supply,the interest rate

When economists speak of the demand for money,they refer to the amount of money people would like to hold

An open market purchase of bonds by the Fed

In the short-run macro model,which of the following increases when government spending increases?

Increases in the interest rate reduce the multiplier effect of an increase in government purchases.

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

If the interest rate increases,the money demand curve

Which of the following would shift the money demand curve to the left?

If Mike buys a bond today for $400 that pays him $500 in one year,what is the implied interest rate?

An open market purchase of bonds by the Fed

Which of the following would be most likely to increase the quantity of money demanded?

An excess supply of money in the economy implies an excess demand for

The equilibrium interest rate will change if

On a short-run macro model diagram,the impact of a decrease in government purchases (G)is illustrated by

Many of the Fed's actions were aimed squarely at stopping the downward spiral of falling assets prices.

If Chris pays $500 for a bond that will return $750 in one year,what is the interest rate?

The economy's money supply curve is vertical.

If the Fed wants to lower 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

The secondary market for bonds is a market for

A decrease in the interest rate shifts the money demand curve to the right.

If the Fed decreases the money supply,the interest rate

When economists speak of the demand for money,they refer to the amount of money people would like to hold

An open market purchase of bonds by the Fed

In the short-run macro model,which of the following increases when government spending increases?

Increases in the interest rate reduce the multiplier effect of an increase in government purchases.

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

If the interest rate increases,the money demand curve

Which of the following would shift the money demand curve to the left?

If Mike buys a bond today for $400 that pays him $500 in one year,what is the implied interest rate?

An open market purchase of bonds by the Fed

Which of the following would be most likely to increase the quantity of money demanded?

An excess supply of money in the economy implies an excess demand for

The equilibrium interest rate will change if

On a short-run macro model diagram,the impact of a decrease in government purchases (G)is illustrated by

Many of the Fed's actions were aimed squarely at stopping the downward spiral of falling assets prices.

If Chris pays $500 for a bond that will return $750 in one year,what is the interest rate?

The economy's money supply curve is vertical.

If the Fed wants to lower 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