Question 1

The equation of exchange (MV = PY)is:

Accepted Answer

A) a theory, because no one knows what the value of V is. 
B) used by Keynesian economists to justify the monetarist transmission mechanism. 
C) only held if V is constant. 
D) an accounting identity and is by definition true. 
A) a theory, because no one knows what the value of V is. 
B) used by Keynesian economists to justify the monetarist transmission mechanism. 
C) only held if V is constant. 
D) an accounting identity and is by definition true.

Question 2

The RBA believes that by keeping inflation low and steady it can assist with:

Accepted Answer

A) the achievement of low prices over the medium to long term. 
B) the achievement of slow and steady economic growth over the medium to long term. 
C) the achievement of full unemployment and slow and steady economic growth over the medium to long term. 
D) the achievement of full employment and high economic growth over the medium to long term. 
A) the achievement of low prices over the medium to long term. 
B) the achievement of slow and steady economic growth over the medium to long term. 
C) the achievement of full unemployment and slow and steady economic growth over the medium to long term. 
D) the achievement of full employment and high economic growth over the medium to long term.

Question 3

If the RBA wants to reduce inflation in the economy,it is likely to:

Accepted Answer

A) buy government securities to put banks' ESAs into surplus, thereby decreasing interest rates. 
B) buy government securities to put banks' ESAs into deficit, thereby decreasing interest rates. 
C) sell government securities to put banks' ESAs into surplus, thereby increasing interest rates. 
D) sell government securities to put banks' ESAs into deficit, thereby increasing interest rates. 
E) sell government securities to put banks' ESAs into deficit, thereby decreasing interest rates. 
A) buy government securities to put banks' ESAs into surplus, thereby decreasing interest rates. 
B) buy government securities to put banks' ESAs into deficit, thereby decreasing interest rates. 
C) sell government securities to put banks' ESAs into surplus, thereby increasing interest rates. 
D) sell government securities to put banks' ESAs into deficit, thereby increasing interest rates. 
E) sell government securities to put banks' ESAs into deficit, thereby decreasing interest rates.

Question 4

If the RBA is 'testing' the foreign exchange market,it is trying to:

Accepted Answer

A) reduce excessive fluctuations in the $A. 
B) maintain the $A at its agreed fixed rate. 
C) see whether movement in the value of the currency is real or speculative. 
D) smooth the market. 
A) reduce excessive fluctuations in the $A. 
B) maintain the $A at its agreed fixed rate. 
C) see whether movement in the value of the currency is real or speculative. 
D) smooth the market.

Question 5

If the velocity of money = 1,then the money supply will be:

Accepted Answer

A) equal to the price level. 
B) equal to nominal GDP. 
C) equal to real GDP. 
D) equal to the difference between nominal and real GDP. 
E) indeterminate. 
A) equal to the price level. 
B) equal to nominal GDP. 
C) equal to real GDP. 
D) equal to the difference between nominal and real GDP. 
E) indeterminate.

Question 6

Countercyclical macroeconomic policy is favoured by:

Accepted Answer

A) Keynesian economists. 
B) monetarists. 
C) classical economists. 
D) microeconomists. 
E) Milton Friedman. 
A) Keynesian economists. 
B) monetarists. 
C) classical economists. 
D) microeconomists. 
E) Milton Friedman.

Question 7

According to Keynesians,for monetary policy to have a stimulative effect on GDP,a/an:

Accepted Answer

A) increase in the money supply is needed which lowers the interest rate in order to stimulate higher levels of investment. 
B) increase in the money supply is needed which lowers the interest rate in order to lower levels of investment. 
C) decrease in the money supply is needed which lowers the interest rate in order to stimulate higher levels of investment 
D) decrease in the money supply is needed which causes the interest rate to rise in order to stimulate higher levels of investment. 
E) increase in the money supply is needed which causes the interest rate to rise in order to stimulate higher levels of investment. 
A) increase in the money supply is needed which lowers the interest rate in order to stimulate higher levels of investment. 
B) increase in the money supply is needed which lowers the interest rate in order to lower levels of investment. 
C) decrease in the money supply is needed which lowers the interest rate in order to stimulate higher levels of investment 
D) decrease in the money supply is needed which causes the interest rate to rise in order to stimulate higher levels of investment. 
E) increase in the money supply is needed which causes the interest rate to rise in order to stimulate higher levels of investment.

Question 8

If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be smaller than expected,then inflation:

Accepted Answer

A) will be lower than expected. 
B) will be higher than expected. 
C) will be unaffected. 
D) could be higher or lower than expected. 
A) will be lower than expected. 
B) will be higher than expected. 
C) will be unaffected. 
D) could be higher or lower than expected.

Question 9

Monetarists argue that using active discretionary monetary policy is dangerous because it is subject to:

Accepted Answer

A) information lags. 
B) long-term policy determination lags. 
C) short-term policy effectiveness lags. 
D) information, policy determination and policy effectiveness lags. 
A) information lags. 
B) long-term policy determination lags. 
C) short-term policy effectiveness lags. 
D) information, policy determination and policy effectiveness lags.

Question 10

One of the potential difficulties in following a rules-based approach to monetary policy is:

Accepted Answer

A) that interest rates will be stable. 
B) that the relationship between the money supply and inflation can be weak in the short run. 
C) that the velocity of money is fully predictable. 
D) that the policy outcome is desirable. 
A) that interest rates will be stable. 
B) that the relationship between the money supply and inflation can be weak in the short run. 
C) that the velocity of money is fully predictable. 
D) that the policy outcome is desirable.

Question 11

Monetarists argue that velocity is reasonably predictable.

Accepted Answer

A) True 
 B)False

Question 12

The only interest rate the RBA has direct control over is the:

Accepted Answer

A) cash rate. 
B) bank-accepted bill rate. 
C) prime lending rate. 
D) personal loan rate. 
E) home mortgage rate. 
A) cash rate. 
B) bank-accepted bill rate. 
C) prime lending rate. 
D) personal loan rate. 
E) home mortgage rate.

Question 13

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

Accepted Answer

A) By targeting the growth in the money supply, the government will be more successful in keeping inflation low if the demand for money becomes volatile. 
B) Targeting the growth in the money supply will be more successful in keeping inflation low if the velocity of money is stable. 
C) The demand for money influences the velocity of money. 
D) A rules-based approach to monetary policy will be less effective when the demand for money is volatile. 
E) A rules-based approach to monetary policy will be less effective when the velocity of money is volatile. 
A) By targeting the growth in the money supply, the government will be more successful in keeping inflation low if the demand for money becomes volatile. 
B) Targeting the growth in the money supply will be more successful in keeping inflation low if the velocity of money is stable. 
C) The demand for money influences the velocity of money. 
D) A rules-based approach to monetary policy will be less effective when the demand for money is volatile. 
E) A rules-based approach to monetary policy will be less effective when the velocity of money is volatile.

Question 14

The rules-based approach to monetary policy was followed in Australia:

Accepted Answer

A) between 1976-85. 
B) from 1991 to the present. 
C) between 1960-74. 
D) during the Second World War. 
E) at no time. It has never been used in Australia. 
A) between 1976-85. 
B) from 1991 to the present. 
C) between 1960-74. 
D) during the Second World War. 
E) at no time. It has never been used in Australia.

Question 15

According to the equation of exchange,the money supply multiplied by the average number of times per year a dollar is spent on final goods and services is equal to:

Accepted Answer

A) marginal spending. 
B) unemployment. 
C) total spending. 
D) price level. 
A) marginal spending. 
B) unemployment. 
C) total spending. 
D) price level.

Question 16

A volatile velocity of money is,according to Keynesians,equivalent to saying:

Accepted Answer

A) the supply of money is volatile. 
B) the demand for money is stable. 
C) the supply of money is stable. 
D) the demand for money is volatile. 
E) interest rates are volatile. 
A) the supply of money is volatile. 
B) the demand for money is stable. 
C) the supply of money is stable. 
D) the demand for money is volatile. 
E) interest rates are volatile.

Question 17

Financial innovation in Australia during the 1980s led to:

Accepted Answer

A) the demand for money increasing. 
B) the velocity of money becoming more stable. 
C) the velocity of money becoming more volatile. 
D) the demand for money becoming more stable. 
A) the demand for money increasing. 
B) the velocity of money becoming more stable. 
C) the velocity of money becoming more volatile. 
D) the demand for money becoming more stable.

Question 18

According to monetarists:

Accepted Answer

A) if the money supply is expanding too much, higher rates of inflation will be likely. 
B) if the money supply is expanding too slowly, the unemployment rate will decline. 
C) if the money supply is expanding too slowly, prices will grow. 
D) if the money supply is shrinking, higher rates of inflation will be likely. 
A) if the money supply is expanding too much, higher rates of inflation will be likely. 
B) if the money supply is expanding too slowly, the unemployment rate will decline. 
C) if the money supply is expanding too slowly, prices will grow. 
D) if the money supply is shrinking, higher rates of inflation will be likely.

Question 19

If the central bank announces that it is going to increase the money supply by 6 per cent this year,they are following:

Accepted Answer

A) a demand-based approach. 
B) a discretionary monetary policy. 
C) a discretionary fiscal policy. 
D) a monetarist approach. 
A) a demand-based approach. 
B) a discretionary monetary policy. 
C) a discretionary fiscal policy. 
D) a monetarist approach.

Question 20

The quantity theory of money of the classical economists says that a change in the money supply will produce a:

Accepted Answer

A) proportional change in the price level. 
B) greater than proportional change in the price level. 
C) less than proportional change in the price level. 
D) wide variation in the velocity of money. 
A) proportional change in the price level. 
B) greater than proportional change in the price level. 
C) less than proportional change in the price level. 
D) wide variation in the velocity of money.

The equation of exchange (MV = PY)is:

The RBA believes that by keeping inflation low and steady it can assist with:

If the RBA wants to reduce inflation in the economy,it is likely to:

If the RBA is 'testing' the foreign exchange market,it is trying to:

If the velocity of money = 1,then the money supply will be:

Countercyclical macroeconomic policy is favoured by:

According to Keynesians,for monetary policy to have a stimulative effect on GDP,a/an:

If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be smaller than expected,then inflation:

Monetarists argue that using active discretionary monetary policy is dangerous because it is subject to:

One of the potential difficulties in following a rules-based approach to monetary policy is:

Monetarists argue that velocity is reasonably predictable.

The only interest rate the RBA has direct control over is the:

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

The rules-based approach to monetary policy was followed in Australia:

According to the equation of exchange,the money supply multiplied by the average number of times per year a dollar is spent on final goods and services is equal to:

A volatile velocity of money is,according to Keynesians,equivalent to saying:

Financial innovation in Australia during the 1980s led to:

According to monetarists:

If the central bank announces that it is going to increase the money supply by 6 per cent this year,they are following:

The quantity theory of money of the classical economists says that a change in the money supply will produce a:

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

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Exam 16: Macroeconomic policy I: monetary policy

The equation of exchange (MV = PY)is:

The RBA believes that by keeping inflation low and steady it can assist with:

If the RBA wants to reduce inflation in the economy,it is likely to:

If the RBA is 'testing' the foreign exchange market,it is trying to:

If the velocity of money = 1,then the money supply will be:

Countercyclical macroeconomic policy is favoured by:

According to Keynesians,for monetary policy to have a stimulative effect on GDP,a/an:

If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be smaller than expected,then inflation:

Monetarists argue that using active discretionary monetary policy is dangerous because it is subject to:

One of the potential difficulties in following a rules-based approach to monetary policy is:

Monetarists argue that velocity is reasonably predictable.

The only interest rate the RBA has direct control over is the:

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

The rules-based approach to monetary policy was followed in Australia:

According to the equation of exchange,the money supply multiplied by the average number of times per year a dollar is spent on final goods and services is equal to:

A volatile velocity of money is,according to Keynesians,equivalent to saying:

Financial innovation in Australia during the 1980s led to:

According to monetarists:

If the central bank announces that it is going to increase the money supply by 6 per cent this year,they are following:

The quantity theory of money of the classical economists says that a change in the money supply will produce a:

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