Question 1

The Dodd-Frank Act gave the Fed and the FDIC expanded oversight of large financial institutions, including those that were not depository institutions.

Accepted Answer

A) True 
 B)False

Question 2

If the Fed adopts a contractionary monetary policy, eventually we can expect _____

Accepted Answer

A)  aggregate demand to increase. 
B)  short-run aggregate supply to decrease. 
C)  interest rates to decrease. 
D)  planned investment expenditures to decrease. 
E)  real gross domestic product to increase. 
A)  aggregate demand to increase. 
B)  short-run aggregate supply to decrease. 
C)  interest rates to decrease. 
D)  planned investment expenditures to decrease. 
E)  real gross domestic product to increase.

Question 3

An increase in the expected inflation rate causes _____

Accepted Answer

A)  the velocity of money to increase. 
B)  the velocity of money to decrease. 
C)  the actual inflation rate to fall. 
D)  the actual price level to decrease. 
E)  the money supply to increase. 
A)  the velocity of money to increase. 
B)  the velocity of money to decrease. 
C)  the actual inflation rate to fall. 
D)  the actual price level to decrease. 
E)  the money supply to increase.

Question 4

Exhibit 15.2
  
-Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "r"?

Accepted Answer

A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will buy U.S. Treasury securities. 
D)  The quantity of money demanded will fall. 
E)  The quantity of money supplied will fall. 
A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will buy U.S. Treasury securities. 
D)  The quantity of money demanded will fall. 
E)  The quantity of money supplied will fall.

Question 5

The ultimate effect of a reduction in the money supply is _____

Accepted Answer

A)  a leftward shift of the aggregate demand curve. 
B)  a rightward shift of the short-run aggregate supply curve. 
C)  a movement upward along the aggregate demand curve. 
D)  a movement downward along the aggregate demand curve. 
E)  a movement upward along the short-run aggregate supply curve. 
A)  a leftward shift of the aggregate demand curve. 
B)  a rightward shift of the short-run aggregate supply curve. 
C)  a movement upward along the aggregate demand curve. 
D)  a movement downward along the aggregate demand curve. 
E)  a movement upward along the short-run aggregate supply curve.

Question 6

Exhibit 15.3
  
-Exhibit 15.3 shows equilibrium in a money market. The vertical supply curve Sm implies that _____

Accepted Answer

A)  the quantity of money supplied is independent of the interest rate. 
B)  the quantity of money supplied is dependent on the interest rate. 
C)  the quantity of money demanded is independent of the interest rate. 
D)  the quantity of money demanded is dependent on the interest rate. 
E)  money supply and money demand are dependent on each other. 
A)  the quantity of money supplied is independent of the interest rate. 
B)  the quantity of money supplied is dependent on the interest rate. 
C)  the quantity of money demanded is independent of the interest rate. 
D)  the quantity of money demanded is dependent on the interest rate. 
E)  money supply and money demand are dependent on each other.

Question 7

Which of the following is an example of a contractionary monetary policy?

Accepted Answer

A)  a reduction in the amount of transfer payments made to poor families 
B)  a purchase of U.S. government securities in the open market 
C)  an increase in the discount rate 
D)  a decrease in the required reserve ratio 
E)  an increase in the tax rate 
A)  a reduction in the amount of transfer payments made to poor families 
B)  a purchase of U.S. government securities in the open market 
C)  an increase in the discount rate 
D)  a decrease in the required reserve ratio 
E)  an increase in the tax rate

Question 8

Exhibit 15.3
  
-Exhibit 15.3 shows equilibrium in a money market. What happens if the money supply curve shifts from S'm to Sm while the rate of interest remains at I'?

Accepted Answer

A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will buy U.S. Treasury securities. 
D)  The quantity of money demanded will fall. 
E)  The quantity of money supplied will fall. 
A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will buy U.S. Treasury securities. 
D)  The quantity of money demanded will fall. 
E)  The quantity of money supplied will fall.

Question 9

If the Fed sells U.S. government securities in the open market, gross domestic product _____

Accepted Answer

A)  increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)  increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)  decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)  decreases because the resulting increase in the interest rate leads to an increase in investment. 
E)  decreases because the resulting decrease in the interest rate leads to an increase in investment. 
A)  increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)  increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)  decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)  decreases because the resulting increase in the interest rate leads to an increase in investment. 
E)  decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 10

The velocity of M1 fell from _____ in 2007 to _____ in 2017, a drop of almost _____.

Accepted Answer

A)  10.0; 5.5; 50 percent 
B)  10.5; 5.0; 50 percent 
C)  10.5; 5.5; 10 percent 
D)  10.5; 5.5; 50 percent 
E)  10.5; 5.5; 25 percent 
A)  10.0; 5.5; 50 percent 
B)  10.5; 5.0; 50 percent 
C)  10.5; 5.5; 10 percent 
D)  10.5; 5.5; 50 percent 
E)  10.5; 5.5; 25 percent

Question 11

In an economy in which velocity of money in circulation is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a _____

Accepted Answer

A)  constant price level. 
B)  slowly increasing price level. 
C)  slowly decreasing price level. 
D)  stable 4 percent growth in real GDP. 
E)  stable 4 percent growth in nominal GDP. 
A)  constant price level. 
B)  slowly increasing price level. 
C)  slowly decreasing price level. 
D)  stable 4 percent growth in real GDP. 
E)  stable 4 percent growth in nominal GDP.

Question 12

Suppose the money demand curve shifts rightward. Which of the following is true about the alternative policy options available with the Fed?

Accepted Answer

A)  The Fed can keep the interest rate from rising only if it increases the money supply. 
B)  The Fed cannot prevent the interest rate from rising. 
C)  The Fed can prevent the interest rate from rising without changing the money supply. 
D)  If the Fed expands the money supply, the interest rate will rise even further. 
E)  The Fed should reduce the money supply if it plans to prevent the interest rate from rising. 
A)  The Fed can keep the interest rate from rising only if it increases the money supply. 
B)  The Fed cannot prevent the interest rate from rising. 
C)  The Fed can prevent the interest rate from rising without changing the money supply. 
D)  If the Fed expands the money supply, the interest rate will rise even further. 
E)  The Fed should reduce the money supply if it plans to prevent the interest rate from rising.

Question 13

If the velocity of money is 5.7 and money supply is $3.25 trillion, then nominal GDP is _____

Accepted Answer

A)  $1.3 trillion. 
B)  $3.25 trillion. 
C)  $18.6 trillion. 
D)  $20.8 trillion. 
E)  $50 trillion. 
A)  $1.3 trillion. 
B)  $3.25 trillion. 
C)  $18.6 trillion. 
D)  $20.8 trillion. 
E)  $50 trillion.

Question 14

The demand for money was high in the year 2015, when the interest rate on savings deposits and time deposits was close to zero.

Accepted Answer

A) True 
 B)False

Question 15

For interest rates to remain stable during economic expansions, the money supply should _____

Accepted Answer

A)  decrease at a faster rate than the demand for money. 
B)  grow at the same rate as money demand. 
C)  grow at a faster rate than money demand. 
D)  grow at a slower rate than money demand. 
E)  decrease at a slower rate than the demand for money. 
A)  decrease at a faster rate than the demand for money. 
B)  grow at the same rate as money demand. 
C)  grow at a faster rate than money demand. 
D)  grow at a slower rate than money demand. 
E)  decrease at a slower rate than the demand for money.

Question 16

Exhibit 15.2
  
-Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r"?

Accepted Answer

A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will sell U.S. Treasury securities. 
D)  The money market equilibrium will move from point B to point C. 
E)  The money market equilibrium will move from point C to point A. 
A)  There will be an excess demand for money. 
B)  There will be an excess supply of money. 
C)  The Fed will sell U.S. Treasury securities. 
D)  The money market equilibrium will move from point B to point C. 
E)  The money market equilibrium will move from point C to point A.

Question 17

If the money supply is $600, the price level is $2, and real GDP is $300, the velocity of money is _____

Accepted Answer

A)  1. 
B)  150. 
C)  300. 
D)  600. 
E)  1,200. 
A)  1. 
B)  150. 
C)  300. 
D)  600. 
E)  1,200.

Question 18

Which of the following is correct?

Accepted Answer

A)  What happens in the United States never affects markets overseas. 
B)  What happens in the United States often affects markets overseas. 
C)  What happens in markets overseas never affects the United States. 
D)  What happens in markets overseas often affects the United States. 
E)  What happens in the United States often affects markets overseas and vice versa. 
A)  What happens in the United States never affects markets overseas. 
B)  What happens in the United States often affects markets overseas. 
C)  What happens in markets overseas never affects the United States. 
D)  What happens in markets overseas often affects the United States. 
E)  What happens in the United States often affects markets overseas and vice versa.

Question 19

Which of the following forms of money will earn at least some interest income?

Accepted Answer

A)  gold coins 
B)  currency notes 
C)  traveler's checks 
D)  checkable deposits 
E)  gift checks 
A)  gold coins 
B)  currency notes 
C)  traveler's checks 
D)  checkable deposits 
E)  gift checks

Question 20

Exhibit 15.1
  
-Exhibit 15.1 shows the interest rate on the vertical axis and the quantity of money on the horizontal axis. A decrease in nominal GDP with no change in the price level will cause a movement from _____

Accepted Answer

A)  point B to point A. 
B)  point A to point B. 
C)  DM to DM'. 
D)  DMto DM*. 
E)  point E to point F. 
A)  point B to point A. 
B)  point A to point B. 
C)  DM to DM'. 
D)  DMto DM*. 
E)  point E to point F.

The Dodd-Frank Act gave the Fed and the FDIC expanded oversight of large financial institutions, including those that were not depository institutions.

If the Fed adopts a contractionary monetary policy, eventually we can expect _____

An increase in the expected inflation rate causes _____

Exhibit 15.2 -Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "r"?

The ultimate effect of a reduction in the money supply is _____

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. The vertical supply curve Sm implies that _____

Which of the following is an example of a contractionary monetary policy?

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. What happens if the money supply curve shifts from S'_m to Sm while the rate of interest remains at I'?

If the Fed sells U.S. government securities in the open market, gross domestic product _____

The velocity of M1 fell from ___ in 2007 to _ in 2017, a drop of almost ___.

In an economy in which velocity of money in circulation is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a _____

Suppose the money demand curve shifts rightward. Which of the following is true about the alternative policy options available with the Fed?

If the velocity of money is 5.7 and money supply is $3.25 trillion, then nominal GDP is _____

The demand for money was high in the year 2015, when the interest rate on savings deposits and time deposits was close to zero.

For interest rates to remain stable during economic expansions, the money supply should _____

Exhibit 15.2 -Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r"?

If the money supply is $600, the price level is $2, and real GDP is $300, the velocity of money is _____

Which of the following is correct?

Which of the following forms of money will earn at least some interest income?

Exhibit 15.1 -Exhibit 15.1 shows the interest rate on the vertical axis and the quantity of money on the horizontal axis. A decrease in nominal GDP with no change in the price level will cause a movement from _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 15: Monetary Theory and Policy.

The Dodd-Frank Act gave the Fed and the FDIC expanded oversight of large financial institutions, including those that were not depository institutions.

If the Fed adopts a contractionary monetary policy, eventually we can expect _____

An increase in the expected inflation rate causes _____

Exhibit 15.2 -Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "r"?

The ultimate effect of a reduction in the money supply is _____

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. The vertical supply curve Sm implies that _____

Which of the following is an example of a contractionary monetary policy?

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. What happens if the money supply curve shifts from S'm to Sm while the rate of interest remains at I'?

If the Fed sells U.S. government securities in the open market, gross domestic product _____

The velocity of M1 fell from _____ in 2007 to _____ in 2017, a drop of almost _____.

In an economy in which velocity of money in circulation is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a _____

Suppose the money demand curve shifts rightward. Which of the following is true about the alternative policy options available with the Fed?

If the velocity of money is 5.7 and money supply is $3.25 trillion, then nominal GDP is _____

The demand for money was high in the year 2015, when the interest rate on savings deposits and time deposits was close to zero.

For interest rates to remain stable during economic expansions, the money supply should _____

Exhibit 15.2 -Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r"?

If the money supply is $600, the price level is $2, and real GDP is $300, the velocity of money is _____

Which of the following is correct?

Which of the following forms of money will earn at least some interest income?

Exhibit 15.1 -Exhibit 15.1 shows the interest rate on the vertical axis and the quantity of money on the horizontal axis. A decrease in nominal GDP with no change in the price level will cause a movement from _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. What happens if the money supply curve shifts from S'_m to Sm while the rate of interest remains at I'?

The velocity of M1 fell from ___ in 2007 to _ in 2017, a drop of almost ___.