Question 1

An increase in real GDP leads to a

Accepted Answer

A)  rightward shift in the demand for money curve. 
B)  movement upward along the demand for money curve but no shift of the curve. 
C)  leftward shift in the demand for money curve. 
D)  movement downward along the demand for money curve but no shift of the curve. 
E)  neither a shift in the demand for money curve nor a movement along the curve. 
A)  rightward shift in the demand for money curve. 
B)  movement upward along the demand for money curve but no shift of the curve. 
C)  leftward shift in the demand for money curve. 
D)  movement downward along the demand for money curve but no shift of the curve. 
E)  neither a shift in the demand for money curve nor a movement along the curve.

Question 2

What effect does an increase in the price level have on the demand for money and the demand for money curve?

Accepted Answer

An increase in the price level

Question 3

You have a $500 saving bond.The nominal interest rate is 10 percent, and the inflation rate is 4 percent.After a year, in real terms you have earned

Accepted Answer

A)  $70. 
B)  $40. 
C)  $50. 
D)  $30. 
E)  $510. 
A)  $70. 
B)  $40. 
C)  $50. 
D)  $30. 
E)  $510.

Question 4

An increase in the price level leads to ________ in the demand for money and an increase in real GDP leads to ________ in the demand for money.

Accepted Answer

A)  an increase; an increase 
B)  an increase; a decrease 
C)  an decrease; a increase 
D)  a decrease; a decrease 
E)  no change; an increase 
A)  an increase; an increase 
B)  an increase; a decrease 
C)  an decrease; a increase 
D)  a decrease; a decrease 
E)  no change; an increase

Question 5

If the quantity of money supplied is greater than the quantity of money demanded, then the

Accepted Answer

A)  nominal interest rate rises. 
B)  nominal interest rate falls 
C)  price of financial assets falls. 
D)  money supply decreases. 
E)  price level falls. 
A)  nominal interest rate rises. 
B)  nominal interest rate falls 
C)  price of financial assets falls. 
D)  money supply decreases. 
E)  price level falls.

Question 6

In the long run, what determines the value of money?

Accepted Answer

A)  the government budget balance. 
B)  international trade. 
C)  money market equilibrium. 
D)  equilibrium in the loanable funds market. 
E)  real GDP. 
A)  the government budget balance. 
B)  international trade. 
C)  money market equilibrium. 
D)  equilibrium in the loanable funds market. 
E)  real GDP.

Question 7

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Nominal interest rate } \
\text { (percent per year) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { (trillions of demanded }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { money supplied } \
\text { (trillions of dollars) }
\end{array} \
\hline 5 & 2.9 & 2.5 \
6 & 2.8 & 2.5 \
7 & 2.7 & 2.5 \
8 & 2.6 & 2.5 \
9 & 2.5 & 2.5 \
10 & 2.4 & 2.5
\end{array}$$
-The above table has the demand and supply schedules for money.If the Fed increases the quantity of money by $0.1 trillion, the new equilibrium nominal interest rate is

Accepted Answer

A)  8 percent. 
B)  9 percent. 
C)  7 percent. 
D)  5 percent. 
E)  6 percent. 
A)  8 percent. 
B)  9 percent. 
C)  7 percent. 
D)  5 percent. 
E)  6 percent.

Question 8

When the nominal interest rate falls, the opportunity cost of holding money

Accepted Answer

A)  decreases and the demand for money curve shifts leftward. 
B)  decreases and there is a movement downward along the demand for money curve. 
C)  increases and there is a movement upward along the demand for money curve. 
D)  decreases and the demand for money curve shifts rightward. 
E)  increases and the demand for money curve shifts rightward. 
A)  decreases and the demand for money curve shifts leftward. 
B)  decreases and there is a movement downward along the demand for money curve. 
C)  increases and there is a movement upward along the demand for money curve. 
D)  decreases and the demand for money curve shifts rightward. 
E)  increases and the demand for money curve shifts rightward.

Question 9

All of the following shift the demand for money curve EXCEPT

Accepted Answer

A)  an improvement in financial technology. 
B)  an increase in real GDP. 
C)  a rise in the nominal interest rate. 
D)  a decrease in real GDP. 
E)  an increase in the price level. 
A)  an improvement in financial technology. 
B)  an increase in real GDP. 
C)  a rise in the nominal interest rate. 
D)  a decrease in real GDP. 
E)  an increase in the price level.

Question 10

If the price level rises, there is

Accepted Answer

A)  an upward movement along the demand for money curve and the curve does not shift. 
B)  a downward movement along the demand for money curve and the curve does not shift. 
C)  a rightward shift of the demand for money curve. 
D)  a leftward shift of the demand for money curve. 
E)  no movement along the demand curve for money and the curve does not shift. 
A)  an upward movement along the demand for money curve and the curve does not shift. 
B)  a downward movement along the demand for money curve and the curve does not shift. 
C)  a rightward shift of the demand for money curve. 
D)  a leftward shift of the demand for money curve. 
E)  no movement along the demand curve for money and the curve does not shift.

Question 11

What is the short-run and long-run effect on the nominal interest rate from an increase in the growth rate of the quantity of money?

Accepted Answer

In the short run, the increase in the gr

Question 12

In 2008 and 2009, the quantity theory of money did a ________ job of predicting year-to-year changes in the inflation rate because ________.

Accepted Answer

A)  poor; velocity of circulation plunged 
B)  poor; the Fed changed the growth rate of the quantity of money too quickly 
C)  good; real GDP remained stable 
D)  good; interest rates behaved predictably 
E)  poor; the price level and the velocity of circulation did not change 
A)  poor; velocity of circulation plunged 
B)  poor; the Fed changed the growth rate of the quantity of money too quickly 
C)  good; real GDP remained stable 
D)  good; interest rates behaved predictably 
E)  poor; the price level and the velocity of circulation did not change

Question 13

With a large and growing deficit, the Fed may face pressure from the government to

Accepted Answer

A)  decrease the inflation tax. 
B)  keep interest rates low, but the Fed risks inflation by doing so. 
C)  decrease the quantity of money to keep the value of money high. 
D)  increase the velocity of circulation. 
E)  increase the quantity of money to prevent inflation. 
A)  decrease the inflation tax. 
B)  keep interest rates low, but the Fed risks inflation by doing so. 
C)  decrease the quantity of money to keep the value of money high. 
D)  increase the velocity of circulation. 
E)  increase the quantity of money to prevent inflation.

Question 14

-The above table has the demand for money schedule.
a. If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium nominal interest rate?
b. If the Fed wants the interest rate to be 4 percent, what must it do?

Accepted Answer

a. If the Fed sets the quantity of money

Question 15

In the money market, if the nominal interest rate is below the equilibrium level,

Accepted Answer

A)  the quantity of money demanded exceeds the quantity of money supplied. 
B)  the quantity of money supplied exceeds the quantity of money demanded. 
C)  asset prices will rise. 
D)  the demand for money curve will shift leftward. 
E)  the supply of money curve will shift leftward. 
A)  the quantity of money demanded exceeds the quantity of money supplied. 
B)  the quantity of money supplied exceeds the quantity of money demanded. 
C)  asset prices will rise. 
D)  the demand for money curve will shift leftward. 
E)  the supply of money curve will shift leftward.

Question 16

In the short run, when the Fed increases the quantity of money, the

Accepted Answer

A)  demand for money increases. 
B)  price level decreases. 
C)  nominal interest rate falls. 
D)  quantity demanded of money decreases. 
E)  demand for money decreases. 
A)  demand for money increases. 
B)  price level decreases. 
C)  nominal interest rate falls. 
D)  quantity demanded of money decreases. 
E)  demand for money decreases.

Question 17

Explain how the government gains revenue during inflation.

Accepted Answer

The government issues securities and buy

Question 18

Velocity is V, the quantity of money is M, the price level is P, and real GDP is Y.Which of the following formulas is correct?

Accepted Answer

A)  V = (P × Y) ÷ M 
B)  V = (P + Y) × M 
C)  Y = V × M 
D)  Y = (P × M) ÷ V 
E)  Y = (P + M) - V 
A)  V = (P × Y) ÷ M 
B)  V = (P + Y) × M 
C)  Y = V × M 
D)  Y = (P × M) ÷ V 
E)  Y = (P + M) - V

Question 19

If real GDP and the velocity of circulation do not change and the quantity of money grows by 3 percent, then in the long the inflation rate is

Accepted Answer

A)  3 percent. 
B)  0 percent. 
C)  -3 percent. 
D)  larger than than 3 percent. 
E)  More information is needed to answer the question. 
A)  3 percent. 
B)  0 percent. 
C)  -3 percent. 
D)  larger than than 3 percent. 
E)  More information is needed to answer the question.

Question 20

If nominal GDP is $6.0 trillion and the quantity of money is $1.5 trillion, then the

Accepted Answer

A)  price level is 110. 
B)  price level is 120. 
C)  velocity of circulation is 4. 
D)  velocity of circulation is 10. 
E)  price level is 4.00. 
A)  price level is 110. 
B)  price level is 120. 
C)  velocity of circulation is 4. 
D)  velocity of circulation is 10. 
E)  price level is 4.00.

An increase in real GDP leads to a

What effect does an increase in the price level have on the demand for money and the demand for money curve?

You have a $500 saving bond.The nominal interest rate is 10 percent, and the inflation rate is 4 percent.After a year, in real terms you have earned

An increase in the price level leads to in the demand for money and an increase in real GDP leads to in the demand for money.

If the quantity of money supplied is greater than the quantity of money demanded, then the

In the long run, what determines the value of money?

When the nominal interest rate falls, the opportunity cost of holding money

All of the following shift the demand for money curve EXCEPT

If the price level rises, there is

What is the short-run and long-run effect on the nominal interest rate from an increase in the growth rate of the quantity of money?

In 2008 and 2009, the quantity theory of money did a job of predicting year-to-year changes in the inflation rate because .

With a large and growing deficit, the Fed may face pressure from the government to

-The above table has the demand for money schedule. a. If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium nominal interest rate? b. If the Fed wants the interest rate to be 4 percent, what must it do?

In the money market, if the nominal interest rate is below the equilibrium level,

In the short run, when the Fed increases the quantity of money, the

Explain how the government gains revenue during inflation.

Velocity is V, the quantity of money is M, the price level is P, and real GDP is Y.Which of the following formulas is correct?

If real GDP and the velocity of circulation do not change and the quantity of money grows by 3 percent, then in the long the inflation rate is

If nominal GDP is $6.0 trillion and the quantity of money is $1.5 trillion, then the

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 12: Money, Interest, and Inflation

An increase in real GDP leads to a

What effect does an increase in the price level have on the demand for money and the demand for money curve?

You have a $500 saving bond.The nominal interest rate is 10 percent, and the inflation rate is 4 percent.After a year, in real terms you have earned

An increase in the price level leads to ________ in the demand for money and an increase in real GDP leads to ________ in the demand for money.

If the quantity of money supplied is greater than the quantity of money demanded, then the

In the long run, what determines the value of money?

When the nominal interest rate falls, the opportunity cost of holding money

All of the following shift the demand for money curve EXCEPT

If the price level rises, there is

What is the short-run and long-run effect on the nominal interest rate from an increase in the growth rate of the quantity of money?

In 2008 and 2009, the quantity theory of money did a ________ job of predicting year-to-year changes in the inflation rate because ________.

With a large and growing deficit, the Fed may face pressure from the government to

-The above table has the demand for money schedule. a. If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium nominal interest rate? b. If the Fed wants the interest rate to be 4 percent, what must it do?

In the money market, if the nominal interest rate is below the equilibrium level,

In the short run, when the Fed increases the quantity of money, the

Explain how the government gains revenue during inflation.

Velocity is V, the quantity of money is M, the price level is P, and real GDP is Y.Which of the following formulas is correct?

If real GDP and the velocity of circulation do not change and the quantity of money grows by 3 percent, then in the long the inflation rate is

If nominal GDP is $6.0 trillion and the quantity of money is $1.5 trillion, then the

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

An increase in the price level leads to in the demand for money and an increase in real GDP leads to in the demand for money.

In 2008 and 2009, the quantity theory of money did a job of predicting year-to-year changes in the inflation rate because .