Question 1

When the Fed decreases the money supply,interest rates

Accepted Answer

A)  rise, causing velocity to fall. 
B)  fall, causing velocity to fall. 
C)  rise, causing velocity to rise. 
D)  fall, causing velocity to rise. 
A)  rise, causing velocity to fall. 
B)  fall, causing velocity to fall. 
C)  rise, causing velocity to rise. 
D)  fall, causing velocity to rise.

Question 2

A major advantage of monetary policy over fiscal policy is that monetary

Accepted Answer

A)  policy affects all sectors of the economy equally. 
B)  policy can be put into effect more quickly. 
C)  policy, once implemented, takes effect more quickly. 
D)  authorities see the need for policy more quickly. 
A)  policy affects all sectors of the economy equally. 
B)  policy can be put into effect more quickly. 
C)  policy, once implemented, takes effect more quickly. 
D)  authorities see the need for policy more quickly.

Question 3

If economists say that a 7 percent growth in the money supply will increase aggregate demand by 7 percent,they are assuming that velocity

Accepted Answer

A)  will decrease. 
B)  is constant. 
C)  will increase. 
D)  is unpredictable. 
A)  will decrease. 
B)  is constant. 
C)  will increase. 
D)  is unpredictable.

Question 4

Velocity is calculated as nominal GDP/money stock.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

Accepted Answer

A)  The Fed's policies cannot be targeted at only one sector of the economy. 
B)  Price changes for one asset or one industry cannot have a substantial impact on the entire economy. 
C)  The FDIC rather than the Fed is responsible for recognizing bad lending practices. 
D)  all of the above 
A)  The Fed's policies cannot be targeted at only one sector of the economy. 
B)  Price changes for one asset or one industry cannot have a substantial impact on the entire economy. 
C)  The FDIC rather than the Fed is responsible for recognizing bad lending practices. 
D)  all of the above

Question 6

In the short run,an increase in the quantity of money normally

Accepted Answer

A)  has no effect; in the long run, V will increase. 
B)  has no effect; in the long run, V will decrease. 
C)  results in an increase in velocity. 
D)  results in a decrease in velocity. 
A)  has no effect; in the long run, V will increase. 
B)  has no effect; in the long run, V will decrease. 
C)  results in an increase in velocity. 
D)  results in a decrease in velocity.

Question 7

Which of the following will increase the velocity of circulation?

Accepted Answer

A)  Interest rates increase. 
B)  The inflation rate decreases. 
C)  Federal banking legislation abolishes credit cards. 
D)  Employers decide to pay employees once a month instead of once a week. 
A)  Interest rates increase. 
B)  The inflation rate decreases. 
C)  Federal banking legislation abolishes credit cards. 
D)  Employers decide to pay employees once a month instead of once a week.

Question 8

An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy

Accepted Answer

A)  is near full employment and the aggregate supply curve is horizontal. 
B)  is near full employment and the aggregate supply curve is vertical. 
C)  has substantial unemployment and the aggregate supply curve is vertical. 
D)  has substantial unemployment and the aggregate supply curve is horizontal. 
A)  is near full employment and the aggregate supply curve is horizontal. 
B)  is near full employment and the aggregate supply curve is vertical. 
C)  has substantial unemployment and the aggregate supply curve is vertical. 
D)  has substantial unemployment and the aggregate supply curve is horizontal.

Question 9

The equation of exchange is an accounting identity that

Accepted Answer

A)  relates the money supply to nominal GDP. 
B)  equates the demand for money with the supply of money. 
C)  relates the money supply to real GDP. 
D)  accounts use to balance assets and liabilities. 
A)  relates the money supply to nominal GDP. 
B)  equates the demand for money with the supply of money. 
C)  relates the money supply to real GDP. 
D)  accounts use to balance assets and liabilities.

Question 10

Economists observed the following growth rates in the fourth quarter of 1995: real GDP = 2.8 percent; M1 = 7.8 percent; GDP Deflator = 2.2 percent.Given this data,the growth of velocity was approximately

Accepted Answer

A) −7.8 percent. 
B) -5.0 percent. 
C) -2.8 percent. 
D) -2.2 percent 
E) -2.0 percent. 
A) −7.8 percent. 
B) -5.0 percent. 
C) -2.8 percent. 
D) -2.2 percent 
E) -2.0 percent.

Question 11

How rapidly does the economy's self-correcting mechanism work? Most economists agree that it

Accepted Answer

A)  works quickly and reliably. 
B)  works slowly and not very reliably. 
C)  works reliably, but not very quickly. 
D)  does not work at all. 
A)  works quickly and reliably. 
B)  works slowly and not very reliably. 
C)  works reliably, but not very quickly. 
D)  does not work at all.

Question 12

What are some examples of the unconventional monetary policy from the Federal Reserve in response to the 2007-2009? Why were opponents concerned about these measures?

Accepted Answer

The unconventional monetary policy used

Question 13

Many banks offer accounts featuring "Automatic Transfer from Savings" allowing customers to overdraw checking accounts and the bank will transfer enough funds to cover the check automatically.Most likely,what is the effect of this feature on velocity?

Accepted Answer

A)  It will decrease. 
B)  It will increase. 
C)  It will remain constant. 
D)  Velocity is unrelated to saving accounts. 
A)  It will decrease. 
B)  It will increase. 
C)  It will remain constant. 
D)  Velocity is unrelated to saving accounts.

Question 14

Which is likely to be larger,the velocity of M1 or M2?

Accepted Answer

A)  M1, because M2 is a larger number. 
B)  M2, because M1 is a larger number. 
C)  The velocities of both are approximately equal. 
D)  The numbers of velocity switch in relative size. 
A)  M1, because M2 is a larger number. 
B)  M2, because M1 is a larger number. 
C)  The velocities of both are approximately equal. 
D)  The numbers of velocity switch in relative size.

When the Fed decreases the money supply,interest rates

A major advantage of monetary policy over fiscal policy is that monetary

If economists say that a 7 percent growth in the money supply will increase aggregate demand by 7 percent,they are assuming that velocity

Velocity is calculated as nominal GDP/money stock.

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

In the short run,an increase in the quantity of money normally

Which of the following will increase the velocity of circulation?

An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy

The equation of exchange is an accounting identity that

Economists observed the following growth rates in the fourth quarter of 1995: real GDP = 2.8 percent; M1 = 7.8 percent; GDP Deflator = 2.2 percent.Given this data,the growth of velocity was approximately

How rapidly does the economy's self-correcting mechanism work? Most economists agree that it

What are some examples of the unconventional monetary policy from the Federal Reserve in response to the 2007-2009? Why were opponents concerned about these measures?

Many banks offer accounts featuring "Automatic Transfer from Savings" allowing customers to overdraw checking accounts and the bank will transfer enough funds to cover the check automatically.Most likely,what is the effect of this feature on velocity?

Which is likely to be larger,the velocity of M1 or M2?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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Exam 15: The Debate over Monetary and Fiscal Policy

When the Fed decreases the money supply,interest rates

A major advantage of monetary policy over fiscal policy is that monetary

If economists say that a 7 percent growth in the money supply will increase aggregate demand by 7 percent,they are assuming that velocity

Velocity is calculated as nominal GDP/money stock.

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

In the short run,an increase in the quantity of money normally

Which of the following will increase the velocity of circulation?

An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy

The equation of exchange is an accounting identity that

Economists observed the following growth rates in the fourth quarter of 1995: real GDP = 2.8 percent; M1 = 7.8 percent; GDP Deflator = 2.2 percent.Given this data,the growth of velocity was approximately

How rapidly does the economy's self-correcting mechanism work? Most economists agree that it

What are some examples of the unconventional monetary policy from the Federal Reserve in response to the 2007-2009? Why were opponents concerned about these measures?

Many banks offer accounts featuring "Automatic Transfer from Savings" allowing customers to overdraw checking accounts and the bank will transfer enough funds to cover the check automatically.Most likely,what is the effect of this feature on velocity?

Which is likely to be larger,the velocity of M1 or M2?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters