Question 1

The expression 'Don't do something,just stand there' applies to economists who favour a/an _____ approach to monetary policy.

Accepted Answer

A) discretionary 
B) interventionist 
C) expansionary 
D) rules-based 
E) Keynesian 
A) discretionary 
B) interventionist 
C) expansionary 
D) rules-based 
E) Keynesian D

Question 2

According to the quantity theory of money,if the money supply is increased by 1.5 times while velocity remains constant,the new price level will:

Accepted Answer

A) fall to half its initial level. 
B) fall, but it will not fall all the way to half its initial level. 
C) increase, but it will not double. 
D) increase by 1.5 times. 
E) more than double. 
A) fall to half its initial level. 
B) fall, but it will not fall all the way to half its initial level. 
C) increase, but it will not double. 
D) increase by 1.5 times. 
E) more than double. D

Question 3

Most monetarists recognise that:

Accepted Answer

A) the velocity of money is constant over time and that the economy does not operate at full employment all the time. 
B) the velocity of money is not constant over time and that the economy always operates at full employment. 
C) the velocity of money is not predictable and that the economy always operates at full employment. 
D) the velocity of money is not constant over time and that the economy does not operate at full employment all the time. 
A) the velocity of money is constant over time and that the economy does not operate at full employment all the time. 
B) the velocity of money is not constant over time and that the economy always operates at full employment. 
C) the velocity of money is not predictable and that the economy always operates at full employment. 
D) the velocity of money is not constant over time and that the economy does not operate at full employment all the time. D

Question 4

Monetarists argue that the central bank should frequently adjust the money supply in response to ever-changing economic conditions.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is the equation of exchange?

Accepted Answer

A) MQ=PV. 
B) PV=MQ. 
C) MP=VQ. 
D) MV=PQ. 
A) MQ=PV. 
B) PV=MQ. 
C) MP=VQ. 
D) MV=PQ.

Question 6

A rules-based approach to monetary policy is likely to be more effective when the velocity of money is:

Accepted Answer

A) volatile. 
B) zero. 
C) stable. 
D) equal to the inflation rate. 
E) less than the inflation rate. 
A) volatile. 
B) zero. 
C) stable. 
D) equal to the inflation rate. 
E) less than the inflation rate.

Question 7

The reduction in aggregate demand would:

Accepted Answer

A) slow the economy down and increase the rate of inflation. 
B) speed the economy up keeping the rate of inflation unchanged. 
C) slow the economy down and reduce the rate of inflation. 
D) speed the economy up and reduce the rate of inflation. 
A) slow the economy down and increase the rate of inflation. 
B) speed the economy up keeping the rate of inflation unchanged. 
C) slow the economy down and reduce the rate of inflation. 
D) speed the economy up and reduce the rate of inflation.

Question 8

The monetary rule is the view of the:

Accepted Answer

A) Keynesians that monetary policy is most important. 
B) monetarists that monetary policy is most important. 
C) classical economists that monetary policy is most important. 
D) monetarists that the RBA should expand the money supply at a constant rate. 
A) Keynesians that monetary policy is most important. 
B) monetarists that monetary policy is most important. 
C) classical economists that monetary policy is most important. 
D) monetarists that the RBA should expand the money supply at a constant rate.

Question 9

According to classical economists:

Accepted Answer

A) prices are rigid. 
B) both V and Q are variable for an economy in short-run equilibrium. 
C) changes in M cause changes in V. 
D) the velocity of money is constant. 
A) prices are rigid. 
B) both V and Q are variable for an economy in short-run equilibrium. 
C) changes in M cause changes in V. 
D) the velocity of money is constant.

Question 10

According to the quantity theory of money,if the money supply doubles,the:

Accepted Answer

A) output level must also triple. 
B) velocity must also double. 
C) output level must also double. 
D) price level must also double. 
A) output level must also triple. 
B) velocity must also double. 
C) output level must also double. 
D) price level must also double.

Question 11

The average number of times per year each dollar is used to transact an exchange is known as the:

Accepted Answer

A) liquidity of money. 
B) velocity of money. 
C) quantity theory of money. 
D) equation of exchange. 
E) rapidity index. 
A) liquidity of money. 
B) velocity of money. 
C) quantity theory of money. 
D) equation of exchange. 
E) rapidity index.

Question 12

The RBA might try to sell securities at an attractive rate of interest.

Accepted Answer

A) True 
 B)False

Question 13

If M stands for the money supply,V for the velocity of money,P for the average selling price,and Q for the output of goods and services,the equation of exchange is MV = PQ

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is most likely to be true?

Accepted Answer

A) To run a contractionary monetary policy, the RBA will buy government securities to decrease the cash rate. 
B) To run a contractionary monetary policy, the RBA will sell government securities to increase the cash rate. 
C) To run an expansionary monetary policy, the RBA will buy securities to increase the cash rate. 
D) To run an expansionary policy, the RBA will sell government securities to decrease the cash rate. 
A) To run a contractionary monetary policy, the RBA will buy government securities to decrease the cash rate. 
B) To run a contractionary monetary policy, the RBA will sell government securities to increase the cash rate. 
C) To run an expansionary monetary policy, the RBA will buy securities to increase the cash rate. 
D) To run an expansionary policy, the RBA will sell government securities to decrease the cash rate.

Question 15

The effect of a increase in interest rates by the RBA is likely to be:

Accepted Answer

A) the AD curve will shift left. 
B) the AD curve will shift right. 
C) the AS curve will shift right. 
D) the AS curve will shift left. 
A) the AD curve will shift left. 
B) the AD curve will shift right. 
C) the AS curve will shift right. 
D) the AS curve will shift left.

Question 16

If the supply of money is stable while the demand for money is volatile,the likely result will be that:

Accepted Answer

A) interest rates will remain constant. 
B) inflation rates will remain constant. 
C) interest rates will become more volatile. 
D) the velocity of money will fall. 
E) Deflation will occur. 
A) interest rates will remain constant. 
B) inflation rates will remain constant. 
C) interest rates will become more volatile. 
D) the velocity of money will fall. 
E) Deflation will occur.

Question 17

The velocity of money is the:

Accepted Answer

A) number of times per year each dollar is used to transact an exchange. 
B) rapidity of price increases during inflation. 
C) number of times the price level increases during a year. 
D) time it takes for cheques to clear banks. 
E) number of times per year each product is purchased. 
A) number of times per year each dollar is used to transact an exchange. 
B) rapidity of price increases during inflation. 
C) number of times the price level increases during a year. 
D) time it takes for cheques to clear banks. 
E) number of times per year each product is purchased.

Question 18

One thing monetarists and Keynesians agree on is:

Accepted Answer

A) that monetary policy is ineffective in controlling inflation. 
B) the monetary transmission mechanism. 
C) that the velocity of money is constant. 
D) that a rules-based approach is the best form of monetary policy. 
E) that monetary policy will impact mainly on demand in the short run. 
A) that monetary policy is ineffective in controlling inflation. 
B) the monetary transmission mechanism. 
C) that the velocity of money is constant. 
D) that a rules-based approach is the best form of monetary policy. 
E) that monetary policy will impact mainly on demand in the short run.

Question 19

The cash rate is the interest rate charged:

Accepted Answer

A) on credit cards. 
B) by the RBA for its government securities. 
C) to households when they take out a mortgage. 
D) on short-term borrowings between money-market participants. 
E) to firms who are considered risky. 
A) on credit cards. 
B) by the RBA for its government securities. 
C) to households when they take out a mortgage. 
D) on short-term borrowings between money-market participants. 
E) to firms who are considered risky.

Question 20

Which of the following statements is true?

Accepted Answer

A) Controlling the growth of the supply of money will only have predictable effects on interest rates if the growth in the demand for money is unpredictable. 
B) Volatile interest rates can be detrimental to economic growth. 
C) Interest rates can become volatile because the demand for money is controlled. 
D) Interest rates can become volatile because the supply for money is fluctuating. 
A) Controlling the growth of the supply of money will only have predictable effects on interest rates if the growth in the demand for money is unpredictable. 
B) Volatile interest rates can be detrimental to economic growth. 
C) Interest rates can become volatile because the demand for money is controlled. 
D) Interest rates can become volatile because the supply for money is fluctuating.

The expression 'Don't do something,just stand there' applies to economists who favour a/an _____ approach to monetary policy.

According to the quantity theory of money,if the money supply is increased by 1.5 times while velocity remains constant,the new price level will:

Most monetarists recognise that:

Monetarists argue that the central bank should frequently adjust the money supply in response to ever-changing economic conditions.

Which of the following is the equation of exchange?

A rules-based approach to monetary policy is likely to be more effective when the velocity of money is:

The reduction in aggregate demand would:

The monetary rule is the view of the:

According to classical economists:

According to the quantity theory of money,if the money supply doubles,the:

The average number of times per year each dollar is used to transact an exchange is known as the:

The RBA might try to sell securities at an attractive rate of interest.

If M stands for the money supply,V for the velocity of money,P for the average selling price,and Q for the output of goods and services,the equation of exchange is MV = PQ

Which of the following statements is most likely to be true?

The effect of a increase in interest rates by the RBA is likely to be:

If the supply of money is stable while the demand for money is volatile,the likely result will be that:

The velocity of money is the:

One thing monetarists and Keynesians agree on is:

The cash rate is the interest rate charged:

Which of the following statements is true?

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters

Exam 16: Macroeconomic policy I: monetary policy

The expression 'Don't do something,just stand there' applies to economists who favour a/an _____ approach to monetary policy.

According to the quantity theory of money,if the money supply is increased by 1.5 times while velocity remains constant,the new price level will:

Most monetarists recognise that:

Monetarists argue that the central bank should frequently adjust the money supply in response to ever-changing economic conditions.

Which of the following is the equation of exchange?

A rules-based approach to monetary policy is likely to be more effective when the velocity of money is:

The reduction in aggregate demand would:

The monetary rule is the view of the:

According to classical economists:

According to the quantity theory of money,if the money supply doubles,the:

The average number of times per year each dollar is used to transact an exchange is known as the:

The RBA might try to sell securities at an attractive rate of interest.

If M stands for the money supply,V for the velocity of money,P for the average selling price,and Q for the output of goods and services,the equation of exchange is MV = PQ

Which of the following statements is most likely to be true?

The effect of a increase in interest rates by the RBA is likely to be:

If the supply of money is stable while the demand for money is volatile,the likely result will be that:

The velocity of money is the:

One thing monetarists and Keynesians agree on is:

The cash rate is the interest rate charged:

Which of the following statements is true?

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters