Question 1

A household's quantity of money demanded is defined as

Accepted Answer

A)  the amount of income that the household chooses to hold in the form of money,at each possible interest rate 
B)  the amount of wealth that the household chooses to hold as money,rather than as other assets 
C)  the household's desire to have greater financial wealth 
D)  the percentage of each dollar of income that the household wishes to spend 
E)  the total amount the household decides to hold in cash,bonds,and other assets,at each possible interest rate. 
A)  the amount of income that the household chooses to hold in the form of money,at each possible interest rate 
B)  the amount of wealth that the household chooses to hold as money,rather than as other assets 
C)  the household's desire to have greater financial wealth 
D)  the percentage of each dollar of income that the household wishes to spend 
E)  the total amount the household decides to hold in cash,bonds,and other assets,at each possible interest rate.

Question 2

If there is a decrease in the price level,

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 3

If the demand for bonds increases,the

Accepted Answer

A)  price and quantity of bonds in existence both increase 
B)  price of bonds increases,but the quantity of bonds in existence decreases 
C)  price of bonds increases,but the quantity of bonds in existence remains unchanged 
D)  interest rate and quantity of bonds in existence both increase 
E)  interest rate increases,but the quantity of bonds in existence remains unchanged 
A)  price and quantity of bonds in existence both increase 
B)  price of bonds increases,but the quantity of bonds in existence decreases 
C)  price of bonds increases,but the quantity of bonds in existence remains unchanged 
D)  interest rate and quantity of bonds in existence both increase 
E)  interest rate increases,but the quantity of bonds in existence remains unchanged

Question 4

Which of the following is the most sensitive to interest rate changes?

Accepted Answer

A)  The demand for non-durable goods. 
B)  The demand for inexpensive goods. 
C)  The demand for durable goods. 
D)  The demand for necessities. 
E)  The demand for services. 
A)  The demand for non-durable goods. 
B)  The demand for inexpensive goods. 
C)  The demand for durable goods. 
D)  The demand for necessities. 
E)  The demand for services.

Question 5

If the Fed increases the money supply,the interest rate

Accepted Answer

A)  rises and spending increases 
B)  rises and spending decreases 
C)  falls and spending increases 
D)  falls and spending decreases 
E)  falls,business spending increases,and consumer spending decreases 
A)  rises and spending increases 
B)  rises and spending decreases 
C)  falls and spending increases 
D)  falls and spending decreases 
E)  falls,business spending increases,and consumer spending decreases

Question 6

The classical model's theory of the interest rate does not apply in the short run.

Accepted Answer

A) True 
 B)False

Question 7

The fact that total wealth is fixed at any point in time is referred to as the

Accepted Answer

A)  budget constraint. 
B)  wealth constraint. 
C)  wealth effect. 
D)  hard asset effect. 
E)  income effect. 
A)  budget constraint. 
B)  wealth constraint. 
C)  wealth effect. 
D)  hard asset effect. 
E)  income effect.

Question 8

In the short-run macro model,an increase in government spending

Accepted Answer

A)  may reduce real GDP 
B)  partially crowds out private investment spending 
C)  usually crowds out exports 
D)  usually crowds out spending on services 
E)  requires an increase in taxes. 
A)  may reduce real GDP 
B)  partially crowds out private investment spending 
C)  usually crowds out exports 
D)  usually crowds out spending on services 
E)  requires an increase in taxes.

Question 9

An increase in government purchases will increase GDP by an amount equal to the change in government purchases times the expenditure multiplier.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

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

Question 12

Which of the following dampens the effect on GDP of a change in government spending?

Accepted Answer

A)  The money supply changes when real income changes. 
B)  Taxes change when government spending changes. 
C)  Money demand changes when real income changes. 
D)  People do not expect much from the government. 
E)  Aggregate spending does not respond to changes in the interest rate. 
A)  The money supply changes when real income changes. 
B)  Taxes change when government spending changes. 
C)  Money demand changes when real income changes. 
D)  People do not expect much from the government. 
E)  Aggregate spending does not respond to changes in the interest rate.

Question 13

Which of the following is a stock variable?

Accepted Answer

A)  Saving 
B)  Consumption 
C)  Income 
D)  Investment 
E)  Money. 
A)  Saving 
B)  Consumption 
C)  Income 
D)  Investment 
E)  Money.

Question 14

In the long run,the crowding-out effect of an increase in government purchases is

Accepted Answer

A)  more complete than in the short run 
B)  canceled out by increases in infrastructure spending 
C)  less complete than in the short run 
D)  canceled out by improved consumer confidence 
E)  a multiple of the initial change in spending 
A)  more complete than in the short run 
B)  canceled out by increases in infrastructure spending 
C)  less complete than in the short run 
D)  canceled out by improved consumer confidence 
E)  a multiple of the initial change in spending

Question 15

A decrease in the interest rate reduces the opportunity cost of holding money.

Accepted Answer

A) True 
 B)False

Question 16

An increase in the interest rate shifts the money demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 17

Open market sales of bonds by the Federal Reserve drain reserves from the banking system and shift

Accepted Answer

A)  the allocation of wealth between bonds and stocks 
B)  the economy toward a trough in the business cycle 
C)  the money supply curve leftward 
D)  reserves to nonmember banks 
E)  the demand for money curve leftward 
A)  the allocation of wealth between bonds and stocks 
B)  the economy toward a trough in the business cycle 
C)  the money supply curve leftward 
D)  reserves to nonmember banks 
E)  the demand for money curve leftward

Question 18

If the quantity of money demanded exceeds the quantity of money supplied at a given interest rate,what will happen to restore the market to equilibrium?

Accepted Answer

A)  The public will try to buy bonds,the price of bonds will increase,and the interest rate will fall until equilibrium is attained where the money demand and supply curves intersect at the market interest rate. 
B)  The public will try to sell bonds,the price of bonds will decrease,and the interest rate will rise until equilibrium is attained where the money demand and supply curves intersect at the market interest rate. 
C)  The public will try to sell bonds,the price of bonds will increase,and the interest rate will fall until equilibrium is attained where the money demand and supply curves intersect. 
D)  The public will try to buy bonds,the price of bonds will increase,and the interest rate will rise until equilibrium is attained where the money demand and supply curves intersect. 
E)  The public will try to buy bonds,the price of bonds will decrease,and the interest rate will fall until equilibrium is attained where the money demand and supply curves intersect. 
A)  The public will try to buy bonds,the price of bonds will increase,and the interest rate will fall until equilibrium is attained where the money demand and supply curves intersect at the market interest rate. 
B)  The public will try to sell bonds,the price of bonds will decrease,and the interest rate will rise until equilibrium is attained where the money demand and supply curves intersect at the market interest rate. 
C)  The public will try to sell bonds,the price of bonds will increase,and the interest rate will fall until equilibrium is attained where the money demand and supply curves intersect. 
D)  The public will try to buy bonds,the price of bonds will increase,and the interest rate will rise until equilibrium is attained where the money demand and supply curves intersect. 
E)  The public will try to buy bonds,the price of bonds will decrease,and the interest rate will fall until equilibrium is attained where the money demand and supply curves intersect.

Question 19

Which of the following will lead to an increase in the quantity of money demanded?

Accepted Answer

A)  A decrease in the overall level of wealth in the economy 
B)  A decrease in the price level 
C)  A decrease in nominal income 
D)  An increase in real income 
E)  A decrease in real income 
A)  A decrease in the overall level of wealth in the economy 
B)  A decrease in the price level 
C)  A decrease in nominal income 
D)  An increase in real income 
E)  A decrease in real income

Question 20

References in the newspaper to the bond market are usually references to

Accepted Answer

A)  the primary bond market 
B)  the commodities market 
C)  the secondary bond market 
D)  the stock market 
E)  the futures market 
A)  the primary bond market 
B)  the commodities market 
C)  the secondary bond market 
D)  the stock market 
E)  the futures market

A household's quantity of money demanded is defined as

If there is a decrease in the price level,

If the demand for bonds increases,the

Which of the following is the most sensitive to interest rate changes?

If the Fed increases the money supply,the interest rate

The classical model's theory of the interest rate does not apply in the short run.

The fact that total wealth is fixed at any point in time is referred to as the

In the short-run macro model,an increase in government spending

An increase in government purchases will increase GDP by an amount equal to the change in government purchases times the expenditure multiplier.

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

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

Which of the following dampens the effect on GDP of a change in government spending?

Which of the following is a stock variable?

In the long run,the crowding-out effect of an increase in government purchases is

A decrease in the interest rate reduces the opportunity cost of holding money.

An increase in the interest rate shifts the money demand curve to the right.

Open market sales of bonds by the Federal Reserve drain reserves from the banking system and shift

If the quantity of money demanded exceeds the quantity of money supplied at a given interest rate,what will happen to restore the market to equilibrium?

Which of the following will lead to an increase in the quantity of money demanded?

References in the newspaper to the bond market are usually references to

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

A household's quantity of money demanded is defined as

If there is a decrease in the price level,

If the demand for bonds increases,the

Which of the following is the most sensitive to interest rate changes?

If the Fed increases the money supply,the interest rate

The classical model's theory of the interest rate does not apply in the short run.

The fact that total wealth is fixed at any point in time is referred to as the

In the short-run macro model,an increase in government spending

An increase in government purchases will increase GDP by an amount equal to the change in government purchases times the expenditure multiplier.

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

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

Which of the following dampens the effect on GDP of a change in government spending?

Which of the following is a stock variable?

In the long run,the crowding-out effect of an increase in government purchases is

A decrease in the interest rate reduces the opportunity cost of holding money.

An increase in the interest rate shifts the money demand curve to the right.

Open market sales of bonds by the Federal Reserve drain reserves from the banking system and shift

If the quantity of money demanded exceeds the quantity of money supplied at a given interest rate,what will happen to restore the market to equilibrium?

Which of the following will lead to an increase in the quantity of money demanded?

References in the newspaper to the bond market are usually references to

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