Question 1

-Refer to Figure 14-5.If the Fed wishes to reduce the interest rate,it will

Accepted Answer

A)  shift the demand curve to the right 
B)  shift the demand curve to the left 
C)  shift the supply curve of money to the right 
D)  shift the supply curve of money to the left 
E)  simply set a lower market interest rate 
A)  shift the demand curve to the right 
B)  shift the demand curve to the left 
C)  shift the supply curve of money to the right 
D)  shift the supply curve of money to the left 
E)  simply set a lower market interest rate

Question 2

Which of the following statements about interest rate determination is most accurate?

Accepted Answer

A)  In both the long run and the short run,the interest rate is determined in the market for loanable funds. 
B)  In both the long run and the short run,the interest rate is determined in the money market. 
C)  In the short run the interest rate is determined in the market for loanable funds,and in the long run it is are determined in the money market. 
D)  In the short run the interest rate is determined in the money market,and in the long run it is determined in the market for loanable funds. 
E)  The interest rate is determined through an interaction between the money market and the loanable funds market. 
A)  In both the long run and the short run,the interest rate is determined in the market for loanable funds. 
B)  In both the long run and the short run,the interest rate is determined in the money market. 
C)  In the short run the interest rate is determined in the market for loanable funds,and in the long run it is are determined in the money market. 
D)  In the short run the interest rate is determined in the money market,and in the long run it is determined in the market for loanable funds. 
E)  The interest rate is determined through an interaction between the money market and the loanable funds market.

Question 3

The amount of wealth that an individual wishes to hold as money is determined by

Accepted Answer

A)  the price level 
B)  the price level and real income 
C)  real income 
D)  real income and the interest rate 
E)  the price level,real income,and the interest rate 
A)  the price level 
B)  the price level and real income 
C)  real income 
D)  real income and the interest rate 
E)  the price level,real income,and the interest rate

Question 4

If there is an excess supply of money in the economy,

Accepted Answer

A)  there is also an excess demand for money 
B)  there is also an excess demand for bonds 
C)  there is also an excess supply of bonds 
D)  the interest rate will rise 
E)  the Fed must intervene to restore equilibrium 
A)  there is also an excess demand for money 
B)  there is also an excess demand for bonds 
C)  there is also an excess supply of bonds 
D)  the interest rate will rise 
E)  the Fed must intervene to restore equilibrium

Question 5

If autonomous consumption decreases,which of the following is the most likely effect in the short run?

Accepted Answer

A)  a decrease in output,an increase in money demand,and an increase in the interest rate 
B)  an increase in output,a decrease in money demand,and a decrease in the interest rate 
C)  a decrease in output,a decrease in money demand,and a decrease in the interest rate 
D)  an increase in output,an increase in money demand,and a decrease in the interest rate 
E)  an increase in output,an increase in money demand,and an increase in the interest rate 
A)  a decrease in output,an increase in money demand,and an increase in the interest rate 
B)  an increase in output,a decrease in money demand,and a decrease in the interest rate 
C)  a decrease in output,a decrease in money demand,and a decrease in the interest rate 
D)  an increase in output,an increase in money demand,and a decrease in the interest rate 
E)  an increase in output,an increase in money demand,and an increase in the interest rate

Question 6

The equilibrium short-run interest rate is determined at the intersection of the demand and supply curves in the market for

Accepted Answer

A)  labor 
B)  money 
C)  capital goods 
D)  mortgage funds 
E)  corporate bonds 
A)  labor 
B)  money 
C)  capital goods 
D)  mortgage funds 
E)  corporate bonds

Question 7

The supply of bonds to the bond market

Accepted Answer

A)  is positively related to the demand for stocks 
B)  is inversely related to the interest rate 
C)  is positively related to income 
D)  is positively related to the demand for bonds 
E)  only changes if new bonds are issued 
A)  is positively related to the demand for stocks 
B)  is inversely related to the interest rate 
C)  is positively related to income 
D)  is positively related to the demand for bonds 
E)  only changes if new bonds are issued

Question 8

People's decision about whether to hold money or bonds can be influenced by the interest rate.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about the effects of an increase in government purchases is most accurate?

Accepted Answer

A)  In the classical model,it will cause complete crowding out.In the short-run macro model,crowding out will be incomplete. 
B)  In the classical model,it will cause incomplete crowding out.In the short-run macro model,crowding out will be complete. 
C)  Crowding out will be complete in both the classical and short-run macro model. 
D)  Crowding out will be incomplete in both the classical and short-run macro model. 
E)  In the classical model,the increase in government spending will lead to a decrease in investment spending and autonomous consumption.In the short-run macro model,it will not. 
A)  In the classical model,it will cause complete crowding out.In the short-run macro model,crowding out will be incomplete. 
B)  In the classical model,it will cause incomplete crowding out.In the short-run macro model,crowding out will be complete. 
C)  Crowding out will be complete in both the classical and short-run macro model. 
D)  Crowding out will be incomplete in both the classical and short-run macro model. 
E)  In the classical model,the increase in government spending will lead to a decrease in investment spending and autonomous consumption.In the short-run macro model,it will not.

Question 10

If the price of a bond increases,the interest rate (or rate of return on the bond)decreases.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Figure 14-4.If the interest rate is currently 12 percent,we would expect the

Accepted Answer

A)  interest rate to fall to 10 percent 
B)  interest rate to remain at 12 percent 
C)  interest rate to fall to 6 percent 
D)  quantity of money held to decrease to $500 billion 
E)  money supply to increase to $700 billion 
A)  interest rate to fall to 10 percent 
B)  interest rate to remain at 12 percent 
C)  interest rate to fall to 6 percent 
D)  quantity of money held to decrease to $500 billion 
E)  money supply to increase to $700 billion

Question 12

If there is an increase in the interest rate,

Accepted Answer

A)  there will be a rightward movement along a stationary money demand curve 
B)  there will be a leftward movement along a stationary money demand curve 
C)  the demand curve for money will shift rightward 
D)  the demand curve for money will shift leftward 
E)  there will be no movement of the demand curve for money and no movement along it 
A)  there will be a rightward movement along a stationary money demand curve 
B)  there will be a leftward movement along a stationary money demand curve 
C)  the demand curve for money will shift rightward 
D)  the demand curve for money will shift leftward 
E)  there will be no movement of the demand curve for money and no movement along it

Question 13

Which of the following determines how much money an individual will decide to hold?

Accepted Answer

A)  Investment spending 
B)  Income taxes 
C)  The price level 
D)  The supply of money 
E)  Real GDP 
A)  Investment spending 
B)  Income taxes 
C)  The price level 
D)  The supply of money 
E)  Real GDP

Question 14

Which of the following would lead to a rightward movement along a stationary money demand curve?

Accepted Answer

A)  A decrease in the interest rate 
B)  A decrease in the price level 
C)  An increase in the interest rate 
D)  An increase in the price level 
E)  An increase in real income 
A)  A decrease in the interest rate 
B)  A decrease in the price level 
C)  An increase in the interest rate 
D)  An increase in the price level 
E)  An increase in real income

Question 15

If the equilibrium interest rate is 4% but the current interest rate is 6%,

Accepted Answer

A)  bond prices will rise. 
B)  money demand will decrease. 
C)  money demand will increase. 
D)  bond prices will fall. 
E)  the money supply will decrease. 
A)  bond prices will rise. 
B)  money demand will decrease. 
C)  money demand will increase. 
D)  bond prices will fall. 
E)  the money supply will decrease.

Question 16

An increase in the demand for bonds will increase both the price of bonds and the quantity of bonds held.

Accepted Answer

A) True 
 B)False

Question 17

By December 2008,the federal funds rate was approaching the zero lower bound.

Accepted Answer

A) True 
 B)False

Question 18

If the Fed changes the interest rate,there will be

Accepted Answer

A)  a movement along the aggregate expenditure line followed by a shift in the line 
B)  no movement along the aggregate expenditure line because the effect is on investment 
C)  a shift in the aggregate supply curve 
D)  an increase in the money supply 
E)  a shift in the aggregate expenditure line 
A)  a movement along the aggregate expenditure line followed by a shift in the line 
B)  no movement along the aggregate expenditure line because the effect is on investment 
C)  a shift in the aggregate supply curve 
D)  an increase in the money supply 
E)  a shift in the aggregate expenditure line

Question 19

A rise in the interest rate tends to

Accepted Answer

A)  reduce many kinds of spending 
B)  stimulate investment in high-profit industries 
C)  cause bond prices to increase 
D)  encourage confidence in the Fed's control over the economy 
E)  suggest a downturn in the economy is coming within 6 months 
A)  reduce many kinds of spending 
B)  stimulate investment in high-profit industries 
C)  cause bond prices to increase 
D)  encourage confidence in the Fed's control over the economy 
E)  suggest a downturn in the economy is coming within 6 months

Question 20

Where is the interest rate determined in the classical model?

Accepted Answer

A)  In the goods market 
B)  In the loanable funds market 
C)  By the federal government 
D)  By the Fed 
E)  Where aggregate expenditure equals GDP. 
A)  In the goods market 
B)  In the loanable funds market 
C)  By the federal government 
D)  By the Fed 
E)  Where aggregate expenditure equals GDP.

-Refer to Figure 14-5.If the Fed wishes to reduce the interest rate,it will

Which of the following statements about interest rate determination is most accurate?

The amount of wealth that an individual wishes to hold as money is determined by

If there is an excess supply of money in the economy,

If autonomous consumption decreases,which of the following is the most likely effect in the short run?

The equilibrium short-run interest rate is determined at the intersection of the demand and supply curves in the market for

The supply of bonds to the bond market

People's decision about whether to hold money or bonds can be influenced by the interest rate.

Which of the following statements about the effects of an increase in government purchases is most accurate?

If the price of a bond increases,the interest rate (or rate of return on the bond)decreases.

-Refer to Figure 14-4.If the interest rate is currently 12 percent,we would expect the

If there is an increase in the interest rate,

Which of the following determines how much money an individual will decide to hold?

Which of the following would lead to a rightward movement along a stationary money demand curve?

If the equilibrium interest rate is 4% but the current interest rate is 6%,

An increase in the demand for bonds will increase both the price of bonds and the quantity of bonds held.

By December 2008,the federal funds rate was approaching the zero lower bound.

If the Fed changes the interest rate,there will be

A rise in the interest rate tends to

Where is the interest rate determined in the classical model?

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

-Refer to Figure 14-5.If the Fed wishes to reduce the interest rate,it will

Which of the following statements about interest rate determination is most accurate?

The amount of wealth that an individual wishes to hold as money is determined by

If there is an excess supply of money in the economy,

If autonomous consumption decreases,which of the following is the most likely effect in the short run?

The equilibrium short-run interest rate is determined at the intersection of the demand and supply curves in the market for

The supply of bonds to the bond market

People's decision about whether to hold money or bonds can be influenced by the interest rate.

Which of the following statements about the effects of an increase in government purchases is most accurate?

If the price of a bond increases,the interest rate (or rate of return on the bond)decreases.

-Refer to Figure 14-4.If the interest rate is currently 12 percent,we would expect the

If there is an increase in the interest rate,

Which of the following determines how much money an individual will decide to hold?

Which of the following would lead to a rightward movement along a stationary money demand curve?

If the equilibrium interest rate is 4% but the current interest rate is 6%,

An increase in the demand for bonds will increase both the price of bonds and the quantity of bonds held.

By December 2008,the federal funds rate was approaching the zero lower bound.

If the Fed changes the interest rate,there will be

A rise in the interest rate tends to

Where is the interest rate determined in the classical model?

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