Question 1

If the Fed conducts open market purchases,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

Increases in government purchases,investment spending,and autonomous consumption all tend to

Accepted Answer

A)  increase real GDP and raise the interest rate 
B)  increase real GDP and lower the interest rate 
C)  increase real GDP but leave the interest rate unchanged 
D)  decrease real GDP and lower the interest rate 
E)  decrease real GDP and raise the interest rate 
A)  increase real GDP and raise the interest rate 
B)  increase real GDP and lower the interest rate 
C)  increase real GDP but leave the interest rate unchanged 
D)  decrease real GDP and lower the interest rate 
E)  decrease real GDP and raise the interest rate

Question 3

If the interest rate decreases,there will be

Accepted Answer

A)  a movement leftward from one point on the money demand curve to another point on the same curve 
B)  no change in the quantity of money demanded 
C)  a leftward shift of the entire money demand curve caused by a demand shock 
D)  a rightward shift of the entire money demand curve 
E)  a movement rightward from one point on the money demand curve to another point on the same curve 
A)  a movement leftward from one point on the money demand curve to another point on the same curve 
B)  no change in the quantity of money demanded 
C)  a leftward shift of the entire money demand curve caused by a demand shock 
D)  a rightward shift of the entire money demand curve 
E)  a movement rightward from one point on the money demand curve to another point on the same curve

Question 4

The rise in equilibrium GDP shifts the money demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 5

Changes in the interest rate

Accepted Answer

A)  change business spending,but not consumption spending 
B)  shift the consumption function 
C)  cause a movement along the consumption function 
D)  change consumption spending but not business spending 
E)  have no impact on autonomous consumption or business spending. 
A)  change business spending,but not consumption spending 
B)  shift the consumption function 
C)  cause a movement along the consumption function 
D)  change consumption spending but not business spending 
E)  have no impact on autonomous consumption or business spending.

Question 6

Which of the following is correct with regard to the supply of money?

Accepted Answer

A)  The money supply is inversely related to the interest rate. 
B)  The money supply is independent of the interest rate. 
C)  The money supply is positively related to the interest rate with a relatively flat slope. 
D)  The money supply curve is horizontal. 
E)  The money supply is positively related to the interest rate with a relatively steep slope. 
A)  The money supply is inversely related to the interest rate. 
B)  The money supply is independent of the interest rate. 
C)  The money supply is positively related to the interest rate with a relatively flat slope. 
D)  The money supply curve is horizontal. 
E)  The money supply is positively related to the interest rate with a relatively steep slope.

Question 7

Crowding out is important only in the classical model.

Accepted Answer

A) True 
 B)False

Question 8

In the classical model the interest rate is determined in the money market;in the short-run macro model the interest rate is determined in the market for loanable funds.

Accepted Answer

A) True 
 B)False

Question 9

The federal funds rate is closely tied to many interest rates on many types of loans.Which one is the exception?

Accepted Answer

A)  Auto loan rates 
B)  Adjustable rate mortgages 
C)  Adjustable rate home equity loans 
D)  30-year Treasury bonds 
E)  Business loans 
A)  Auto loan rates 
B)  Adjustable rate mortgages 
C)  Adjustable rate home equity loans 
D)  30-year Treasury bonds 
E)  Business loans

Question 10

-Consider Figure 14-7 above.Which of the following would cause a movement from point A to point B on the diagram?

Accepted Answer

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

Question 11

If there is an excess supply of money,there is an excess

Accepted Answer

A)  demand for bonds and the price of bonds will decrease 
B)  supply of bonds and the price of bonds will decrease 
C)  supply of bonds but the price of bonds will not change 
D)  supply of bonds and the price of bonds will increase 
E)  demand for bonds and the price of bonds will increase 
A)  demand for bonds and the price of bonds will decrease 
B)  supply of bonds and the price of bonds will decrease 
C)  supply of bonds but the price of bonds will not change 
D)  supply of bonds and the price of bonds will increase 
E)  demand for bonds and the price of bonds will increase

Question 12

-Refer to Figure 14-2.If the interest rate is 4 percent,

Accepted Answer

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

Question 13

The demand for money

Accepted Answer

A)  is the same as the demand for bonds 
B)  is the same as the supply of bonds 
C)  increases whenever the price level falls 
D)  reflects the constraints that people face 
E)  shows the people always demand as much money as possible 
A)  is the same as the demand for bonds 
B)  is the same as the supply of bonds 
C)  increases whenever the price level falls 
D)  reflects the constraints that people face 
E)  shows the people always demand as much money as possible

Question 14

When implementing monetary policy,the variable the Federal Reserve watches most closely is the

Accepted Answer

A)  required reserve ratio 
B)  federal funds rate 
C)  long term bond rate 
D)  national debt 
E)  short term corporate bond rate 
A)  required reserve ratio 
B)  federal funds rate 
C)  long term bond rate 
D)  national debt 
E)  short term corporate bond rate

Question 15

Which of the following is the opportunity cost of money?

Accepted Answer

A)  The use of money as a means of payment 
B)  The trouble of having to get money out of the bank 
C)  The interest forgone by holding money 
D)  The ability to purchase things at a moment's notice 
E)  Commissions paid to brokers 
A)  The use of money as a means of payment 
B)  The trouble of having to get money out of the bank 
C)  The interest forgone by holding money 
D)  The ability to purchase things at a moment's notice 
E)  Commissions paid to brokers

Question 16

Although loans in the federal funds market are very short term,such as daily,the federal funds rate is stated as an annual rate of return.

Accepted Answer

A) True 
 B)False

Question 17

What trade-off must be considered when deciding how much of your wealth is to be held as money relative to bonds?

Accepted Answer

A)  Bonds pay more interest and are easier to use for payment. 
B)  Bonds pay less interest but are less convenient. 
C)  Bonds pay more interest but are less convenient relative to money. 
D)  Money pays less interest and is less convenient to use. 
E)  Money pays more interest and is less convenient to use. 
A)  Bonds pay more interest and are easier to use for payment. 
B)  Bonds pay less interest but are less convenient. 
C)  Bonds pay more interest but are less convenient relative to money. 
D)  Money pays less interest and is less convenient to use. 
E)  Money pays more interest and is less convenient to use.

Question 18

If the quantity of money demanded is less than the quantity 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 the equilibrium is attained where the money demand and supply curves intersect. 
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. 
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 the equilibrium is attained where the money demand and supply curves intersect. 
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. 
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

If the Fed reduces the money supply,there will be a decline in

Accepted Answer

A)  government purchases 
B)  unemployment 
C)  purchases of consumer durables 
D)  demand for bonds 
E)  deflationary pressures 
A)  government purchases 
B)  unemployment 
C)  purchases of consumer durables 
D)  demand for bonds 
E)  deflationary pressures

Question 20

-Refer to Figure 14-3.What are the equilibrium interest rate and quantity of money?

Accepted Answer

A)  10 percent and $500 billion 
B)  8 percent and $500 billion 
C)  6 percent and $500 billion 
D)  8 percent and $750 billion 
E)  6 percent and $750 billion 
A)  10 percent and $500 billion 
B)  8 percent and $500 billion 
C)  6 percent and $500 billion 
D)  8 percent and $750 billion 
E)  6 percent and $750 billion

If the Fed conducts open market purchases,we should expect to see the money supply

Increases in government purchases,investment spending,and autonomous consumption all tend to

If the interest rate decreases,there will be

The rise in equilibrium GDP shifts the money demand curve to the left.

Changes in the interest rate

Which of the following is correct with regard to the supply of money?

Crowding out is important only in the classical model.

In the classical model the interest rate is determined in the money market;in the short-run macro model the interest rate is determined in the market for loanable funds.

The federal funds rate is closely tied to many interest rates on many types of loans.Which one is the exception?

-Consider Figure 14-7 above.Which of the following would cause a movement from point A to point B on the diagram?

If there is an excess supply of money,there is an excess

-Refer to Figure 14-2.If the interest rate is 4 percent,

The demand for money

When implementing monetary policy,the variable the Federal Reserve watches most closely is the

Which of the following is the opportunity cost of money?

Although loans in the federal funds market are very short term,such as daily,the federal funds rate is stated as an annual rate of return.

What trade-off must be considered when deciding how much of your wealth is to be held as money relative to bonds?

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

If the Fed reduces the money supply,there will be a decline in

-Refer to Figure 14-3.What are the equilibrium interest rate and quantity of money?

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 conducts open market purchases,we should expect to see the money supply

Increases in government purchases,investment spending,and autonomous consumption all tend to

If the interest rate decreases,there will be

The rise in equilibrium GDP shifts the money demand curve to the left.

Changes in the interest rate

Which of the following is correct with regard to the supply of money?

Crowding out is important only in the classical model.

In the classical model the interest rate is determined in the money market;in the short-run macro model the interest rate is determined in the market for loanable funds.

The federal funds rate is closely tied to many interest rates on many types of loans.Which one is the exception?

-Consider Figure 14-7 above.Which of the following would cause a movement from point A to point B on the diagram?

If there is an excess supply of money,there is an excess

-Refer to Figure 14-2.If the interest rate is 4 percent,

The demand for money

When implementing monetary policy,the variable the Federal Reserve watches most closely is the

Which of the following is the opportunity cost of money?

Although loans in the federal funds market are very short term,such as daily,the federal funds rate is stated as an annual rate of return.

What trade-off must be considered when deciding how much of your wealth is to be held as money relative to bonds?

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

If the Fed reduces the money supply,there will be a decline in

-Refer to Figure 14-3.What are the equilibrium interest rate and quantity of money?

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