Question 1

People in other countries want to hold U.S.dollars as a

Accepted Answer

A) medium of exchange. 
B) store of value. 
C) unit of account. 
D) standard of deferred payment. 
A) medium of exchange. 
B) store of value. 
C) unit of account. 
D) standard of deferred payment.

Question 2

A disadvantage of the barter system is that

Accepted Answer

A) no trade occurs. 
B) people must produce all their own food, clothing, and shelter. 
C) the opportunity to specialize is greatly reduced. 
D) gold is the only unit of account. 
A) no trade occurs. 
B) people must produce all their own food, clothing, and shelter. 
C) the opportunity to specialize is greatly reduced. 
D) gold is the only unit of account.

Question 3

When the quantity of money supplied equals the quantity of money demanded,then

Accepted Answer

A) the goods market is in equilibrium. 
B) the asset market is in equilibrium. 
C) the money market is in equilibrium. 
D) the money market is not in equilibrium. 
A) the goods market is in equilibrium. 
B) the asset market is in equilibrium. 
C) the money market is in equilibrium. 
D) the money market is not in equilibrium.

Question 4

If real income rises 5%,prices rise 3%,and nominal money demand rises 7%,what is the income elasticity of real money demand?

Accepted Answer

A) 3/4 
B) 4/5 
C) 5/6 
D) 6/7 
A) 3/4 
B) 4/5 
C) 5/6 
D) 6/7

Question 5

Which of the following is not included in M2?

Accepted Answer

A) Money market mutual funds held by individuals 
B) Money market deposit accounts 
C) Money market mutual funds held by institutions 
D) Small-denomination time deposits 
A) Money market mutual funds held by individuals 
B) Money market deposit accounts 
C) Money market mutual funds held by institutions 
D) Small-denomination time deposits

Question 6

In the early 2000s,lenders began issuing mortgage loans to people who would normally not be qualified to take out loans because they did not meet lending standards.Those borrowers are known as

Accepted Answer

A) alternative borrowers. 
B) weak borrowers. 
C) subprime borrowers. 
D) credit risks. 
A) alternative borrowers. 
B) weak borrowers. 
C) subprime borrowers. 
D) credit risks.

Question 7

Suppose real money demand is L = 0.8 Y - 100,000 (r + πe).
If the nominal money supply is 12,000,real output is 15,000,the real interest rate is .02,and the expected inflation rate is .01,then the price level is

Accepted Answer

A) 3/4. 
B) 1) 
C) 4/3. 
D) 3) 
A) 3/4. 
B) 1) 
C) 4/3. 
D) 3)

Question 8

M1 does not include

Accepted Answer

A) MMMFs. 
B) travelers' checks. 
C) currency. 
D) transaction accounts. 
A) MMMFs. 
B) travelers' checks. 
C) currency. 
D) transaction accounts.

Question 9

Money demand is given by Md/P = 1000 + .2Y - 1000i.
Given that P = 200,Y = 2000,and i = .10,velocity is equal to

Accepted Answer

A) 0)65. 
B) 0)75. 
C) 1)33. 
D) 1)54. 
A) 0)65. 
B) 0)75. 
C) 1)33. 
D) 1)54.

Question 10

What happens to M1 and M2 due to each of the following changes?
(a)You take $500 out of your checking account and put it into a passbook savings account.
(b)You take $1000 out of your checking account and buy traveler's checks.
(c)You take $1500 out of your money-market mutual fund and deposit into your checking account.
(d)You cash in $2000 in savings bonds and invest the money in a certificate of deposit.

Accepted Answer

(a)M1 falls $500,M2 is unchang

Question 11

Mr.Pierpont has wealth of $200,000.He wants to keep at least $80,000 in bonds at all times,and will shift $10,000 into bonds from his checking account for each percentage point that the interest rate on bonds exceeds the interest rate on his checking account.Currently,he keeps $100,000 in bonds,which pay him 7%.What is the current interest rate on checking accounts?

Accepted Answer

A) 5% 
B) 7% 
C) 9% 
D) 10% 
A) 5% 
B) 7% 
C) 9% 
D) 10%

Question 12

Suppose the real interest rate is 4% and the expected inflation rate is 3%.If the money supply increases by 10% and output,the real interest rate,and the expected inflation rate are unchanged,then the price level increases by

Accepted Answer

A) 3%. 
B) 4%. 
C) 7%. 
D) 10%. 
A) 3%. 
B) 4%. 
C) 7%. 
D) 10%.

Question 13

Money demand is given by Md/P = 1000 + .2Y - 1000i.
Given that P = 200,Y = 2000,and i = .10,real money demand is equal to

Accepted Answer

A) 1300. 
B) 1500. 
C) 260,000. 
D) 300,000. 
A) 1300. 
B) 1500. 
C) 260,000. 
D) 300,000.

Question 14

Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500.You take $500 out of your passbook savings account and put it in your checking account.What is the overall effect on M1 and M2?

Accepted Answer

A) M1 rises by $500, M2 falls by $500. 
B) M1 is unchanged, M2 is unchanged. 
C) M1 rises by $500, M2 is unchanged. 
D) M1 is unchanged, M2 falls by $500. 
A) M1 rises by $500, M2 falls by $500. 
B) M1 is unchanged, M2 is unchanged. 
C) M1 rises by $500, M2 is unchanged. 
D) M1 is unchanged, M2 falls by $500.

Question 15

Compared with money,bonds have

Accepted Answer

A) less risk and less liquidity. 
B) less risk and more liquidity. 
C) more risk and less liquidity. 
D) more risk and more liquidity. 
A) less risk and less liquidity. 
B) less risk and more liquidity. 
C) more risk and less liquidity. 
D) more risk and more liquidity.

Question 16

If the nominal money supply grows 10%,the inflation rate is 6%,and the income elasticity of money demand is 1.0,then real income growth equals

Accepted Answer

A) 1%. 
B) 2%. 
C) 3%. 
D) 4%. 
A) 1%. 
B) 2%. 
C) 3%. 
D) 4%.

Question 17

If the asset market is to remain in equilibrium,then if the money supply increases,output is unchanged,the price level is unchanged,and the expected inflation rate is unchanged,then

Accepted Answer

A) the real interest rate must rise. 
B) the real interest rate must decline. 
C) the nominal interest rate must rise. 
D) the inflation rate must rise. 
A) the real interest rate must rise. 
B) the real interest rate must decline. 
C) the nominal interest rate must rise. 
D) the inflation rate must rise.

Question 18

An increase in the real interest rate would cause an increase in the real demand for money

Accepted Answer

A) no matter what the change in expected inflation. 
B) if expected inflation fell by less than the rise in the real interest rate. 
C) if expected inflation fell by the same amount as the rise in the real interest rate. 
D) if expected inflation fell by more than the rise in the real interest rate. 
A) no matter what the change in expected inflation. 
B) if expected inflation fell by less than the rise in the real interest rate. 
C) if expected inflation fell by the same amount as the rise in the real interest rate. 
D) if expected inflation fell by more than the rise in the real interest rate.

Question 19

The least liquid asset on this list is

Accepted Answer

A) money. 
B) bonds. 
C) houses. 
D) stocks. 
A) money. 
B) bonds. 
C) houses. 
D) stocks.

Question 20

Large differences in inflation rates among countries are almost always the result of large differences in

Accepted Answer

A) productivity. 
B) real income growth. 
C) the growth rates of real money demand. 
D) the growth rates of nominal money supplies. 
A) productivity. 
B) real income growth. 
C) the growth rates of real money demand. 
D) the growth rates of nominal money supplies.

People in other countries want to hold U.S.dollars as a

A disadvantage of the barter system is that

When the quantity of money supplied equals the quantity of money demanded,then

If real income rises 5%,prices rise 3%,and nominal money demand rises 7%,what is the income elasticity of real money demand?

Which of the following is not included in M2?

In the early 2000s,lenders began issuing mortgage loans to people who would normally not be qualified to take out loans because they did not meet lending standards.Those borrowers are known as

Suppose real money demand is L = 0.8 Y - 100,000 (r + π^e). If the nominal money supply is 12,000,real output is 15,000,the real interest rate is .02,and the expected inflation rate is .01,then the price level is

M1 does not include

Money demand is given by M^d/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,velocity is equal to

Suppose the real interest rate is 4% and the expected inflation rate is 3%.If the money supply increases by 10% and output,the real interest rate,and the expected inflation rate are unchanged,then the price level increases by

Money demand is given by M^d/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,real money demand is equal to

Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500.You take $500 out of your passbook savings account and put it in your checking account.What is the overall effect on M1 and M2?

Compared with money,bonds have

If the nominal money supply grows 10%,the inflation rate is 6%,and the income elasticity of money demand is 1.0,then real income growth equals

If the asset market is to remain in equilibrium,then if the money supply increases,output is unchanged,the price level is unchanged,and the expected inflation rate is unchanged,then

An increase in the real interest rate would cause an increase in the real demand for money

The least liquid asset on this list is

Large differences in inflation rates among countries are almost always the result of large differences in

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 7: The Asset Market, money, and Prices

People in other countries want to hold U.S.dollars as a

A disadvantage of the barter system is that

When the quantity of money supplied equals the quantity of money demanded,then

If real income rises 5%,prices rise 3%,and nominal money demand rises 7%,what is the income elasticity of real money demand?

Which of the following is not included in M2?

In the early 2000s,lenders began issuing mortgage loans to people who would normally not be qualified to take out loans because they did not meet lending standards.Those borrowers are known as

Suppose real money demand is L = 0.8 Y - 100,000 (r + πe). If the nominal money supply is 12,000,real output is 15,000,the real interest rate is .02,and the expected inflation rate is .01,then the price level is

M1 does not include

Money demand is given by Md/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,velocity is equal to

Suppose the real interest rate is 4% and the expected inflation rate is 3%.If the money supply increases by 10% and output,the real interest rate,and the expected inflation rate are unchanged,then the price level increases by

Money demand is given by Md/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,real money demand is equal to

Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500.You take $500 out of your passbook savings account and put it in your checking account.What is the overall effect on M1 and M2?

Compared with money,bonds have

If the nominal money supply grows 10%,the inflation rate is 6%,and the income elasticity of money demand is 1.0,then real income growth equals

If the asset market is to remain in equilibrium,then if the money supply increases,output is unchanged,the price level is unchanged,and the expected inflation rate is unchanged,then

An increase in the real interest rate would cause an increase in the real demand for money

The least liquid asset on this list is

Large differences in inflation rates among countries are almost always the result of large differences in

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Suppose real money demand is L = 0.8 Y - 100,000 (r + π^e). If the nominal money supply is 12,000,real output is 15,000,the real interest rate is .02,and the expected inflation rate is .01,then the price level is

Money demand is given by M^d/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,velocity is equal to

Money demand is given by M^d/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,real money demand is equal to