Question 1

Every day ________ adjusts to make the quantity of money demanded equal the quantity of money supplied.

Accepted Answer

A)  the inflation rate 
B)  the nominal interest rate 
C)  the quantity of money 
D)  potential GDP 
E)  real GDP 
A)  the inflation rate 
B)  the nominal interest rate 
C)  the quantity of money 
D)  potential GDP 
E)  real GDP

Question 2

As the economy enters a strong expansion in which real GDP increases, which of the following occurs?

Accepted Answer

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

Question 3

If the nominal interest rate is less than the equilibrium nominal interest rate determined in the money market, then households and firms

Accepted Answer

A)  are holding more money than they prefer. 
B)  are holding less money than they prefer. 
C)  expect the nominal interest rate to decrease. 
D)  expect the price level to increase. 
E)  expect real GDP to increase. 
A)  are holding more money than they prefer. 
B)  are holding less money than they prefer. 
C)  expect the nominal interest rate to decrease. 
D)  expect the price level to increase. 
E)  expect real GDP to increase.

Question 4

In the short run, how is the nominal interest rate determined?
 If the nominal interest rate is less than the equilibrium nominal interest rate, what occurs?

Accepted Answer

The nominal interest rate is determined

Question 5

A change in financial technology that reduces the need to hold large cash balances ________ the demand for money and ________ the equilibrium nominal interest rate.

Accepted Answer

A)  increases; raises 
B)  increases; lowers 
C)  decreases; raises 
D)  decreases; lowers 
E)  decreases; does not change 
A)  increases; raises 
B)  increases; lowers 
C)  decreases; raises 
D)  decreases; lowers 
E)  decreases; does not change

Question 6

If real GDP grows at 3 percent a year, the quantity of money grows at 5 percent a year, and the velocity of circulation is constant, then the price level must be

Accepted Answer

A)  increasing at 8 percent a year. 
B)  decreasing at 8 percent a year. 
C)  increasing at 2 percent a year. 
D)  decreasing at 2 percent a year. 
E)  increasing at 15 percent a year. 
A)  increasing at 8 percent a year. 
B)  decreasing at 8 percent a year. 
C)  increasing at 2 percent a year. 
D)  decreasing at 2 percent a year. 
E)  increasing at 15 percent a year.

Question 7

An increase in real GDP affects the demand for money because

Accepted Answer

A)  when real GDP increases, more money is needed to make expenditures. 
B)  at the higher price level, it takes more dollars to make expenditures. 
C)  tax payments rise because more income is earned. 
D)  there is an inverse relationship between the quantity money demanded and nominal GDP. 
E)  the larger real GDP, the higher the real interest rate. 
A)  when real GDP increases, more money is needed to make expenditures. 
B)  at the higher price level, it takes more dollars to make expenditures. 
C)  tax payments rise because more income is earned. 
D)  there is an inverse relationship between the quantity money demanded and nominal GDP. 
E)  the larger real GDP, the higher the real interest rate.

Question 8

On any given day, ________ changes to achieve equilibrium in the money market.

Accepted Answer

A)  real GDP 
B)  the price level 
C)  the inflation rate 
D)  the nominal interest rate 
E)  the real interest rate 
A)  real GDP 
B)  the price level 
C)  the inflation rate 
D)  the nominal interest rate 
E)  the real interest rate

Question 9

The demand for money curve slopes downward because a rise in the nominal interest rate ________ the opportunity cost of holding money and therefore ________ the quantity of money demanded.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  increases; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  increases; does not change

Question 10

The long-run effect of an increase in the growth rate of the quantity of money is a

Accepted Answer

A)  lower real interest rate. 
B)  higher real interest rate. 
C)  lower nominal interest rate. 
D)  higher nominal interest rate. 
E)  lower inflation rate. 
A)  lower real interest rate. 
B)  higher real interest rate. 
C)  lower nominal interest rate. 
D)  higher nominal interest rate. 
E)  lower inflation rate.

Question 11

The quantity of money demanded is

Accepted Answer

A)  the total currency in circulation. 
B)  the same as the money supply. 
C)  equal to real GDP. 
D)  the money that people choose to hold. 
E)  changes only when real GDP changes. 
A)  the total currency in circulation. 
B)  the same as the money supply. 
C)  equal to real GDP. 
D)  the money that people choose to hold. 
E)  changes only when real GDP changes.

Question 12

When the nominal interest rate is ________ the equilibrium interest rate, the quantity of money demanded is less than the quantity of money supplied; when the nominal interest rate is ________ the equilibrium interest rate, the quantity of money demanded exceeds the quantity of money supplied.

Accepted Answer

A)  less than; greater than 
B)  equal to; less than 
C)  greater than; equal to 
D)  greater than; less than 
E)  equal to; greater than 
A)  less than; greater than 
B)  equal to; less than 
C)  greater than; equal to 
D)  greater than; less than 
E)  equal to; greater than

Question 13

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Nominal interest rate } \
\text { (percent per year) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { (trillions of demanded }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { money supplied } \
\text { (trillions of dollars) }
\end{array} \
\hline 5 & 2.9 & 2.5 \
6 & 2.8 & 2.5 \
7 & 2.7 & 2.5 \
8 & 2.6 & 2.5 \
9 & 2.5 & 2.5 \
10 & 2.4 & 2.5
\end{array}$$
-The above table has the demand and supply schedules for money.Real GDP increases and, as a result, the demand for money increases by $0.2 trillion at each level of the nominal interest rate.The new equilibrium interest rate is

Accepted Answer

A)  3 percent. 
B)  4 percent. 
C)  5 percent. 
D)  6 percent. 
E)  2 percent. 
A)  3 percent. 
B)  4 percent. 
C)  5 percent. 
D)  6 percent. 
E)  2 percent.

Question 14

In the early 1920s, Germany experienced hyperinflation because Germany's

Accepted Answer

A)  economy was growing very rapidly. 
B)  population was growing very rapidly. 
C)  quantity of money was growing very rapidly. 
D)  real GDP was growing faster than nominal GDP. 
E)  demand for money skyrocketed. 
A)  economy was growing very rapidly. 
B)  population was growing very rapidly. 
C)  quantity of money was growing very rapidly. 
D)  real GDP was growing faster than nominal GDP. 
E)  demand for money skyrocketed.

Question 15

In the long run, an increase in the quantity of money ________ the value of money and ________ the price level.

Accepted Answer

A)  raises; raises 
B)  raises; does not change 
C)  lowers; lowers 
D)  lowers; does not change 
E)  lowers; raises 
A)  raises; raises 
B)  raises; does not change 
C)  lowers; lowers 
D)  lowers; does not change 
E)  lowers; raises

Question 16

During an inflation, a household with savings of $100,000

Accepted Answer

A)  gains because inflation increases the value of their savings. 
B)  loses because the inflation increases the after-tax real interest rate. 
C)  gains because the inflation gives savers more money and so more purchasing power. 
D)  loses because inflation increases the real tax on the interest paid. 
E)  neither gains nor loses because inflation does not affect savers. 
A)  gains because inflation increases the value of their savings. 
B)  loses because the inflation increases the after-tax real interest rate. 
C)  gains because the inflation gives savers more money and so more purchasing power. 
D)  loses because inflation increases the real tax on the interest paid. 
E)  neither gains nor loses because inflation does not affect savers.

Question 17

The opportunity cost of holding money is the

Accepted Answer

A)  nominal interest rate. 
B)  real interest rate. 
C)  inflation rate. 
D)  nominal interest rate plus the inflation rate. 
E)  growth rate of real GDP. 
A)  nominal interest rate. 
B)  real interest rate. 
C)  inflation rate. 
D)  nominal interest rate plus the inflation rate. 
E)  growth rate of real GDP.

Question 18

In the long run, the nominal interest rate is

Accepted Answer

A)  negatively related to the price level. 
B)  positively related to the price level. 
C)  negatively related to the inflation rate. 
D)  positively related to the inflation rate. 
E)  not related to the price level or the inflation rate. 
A)  negatively related to the price level. 
B)  positively related to the price level. 
C)  negatively related to the inflation rate. 
D)  positively related to the inflation rate. 
E)  not related to the price level or the inflation rate.

Question 19

Since 1970, as a percent of GDP, M1 held has steadily decreased.Which of the following can account for this fact?

Accepted Answer

A)  Real GDP has increased since 1970. 
B)  The price level has risen since 1970. 
C)  Credit cards have become more widely available since 1970. 
D)  The nominal interest rate has steadily risen since 1970. 
E)  The nominal interest rate has steadily fallen since 1970. 
A)  Real GDP has increased since 1970. 
B)  The price level has risen since 1970. 
C)  Credit cards have become more widely available since 1970. 
D)  The nominal interest rate has steadily risen since 1970. 
E)  The nominal interest rate has steadily fallen since 1970.

Question 20

When you accumulate more money,

Accepted Answer

A)  the marginal benefit of holding money decreases. 
B)  the opportunity cost of holding money decreases. 
C)  your marginal tax rate falls. 
D)  you earn a lower rate of interest on your checkable deposit. 
E)  the interest rate you are paid on your currency increases. 
A)  the marginal benefit of holding money decreases. 
B)  the opportunity cost of holding money decreases. 
C)  your marginal tax rate falls. 
D)  you earn a lower rate of interest on your checkable deposit. 
E)  the interest rate you are paid on your currency increases.

Every day ________ adjusts to make the quantity of money demanded equal the quantity of money supplied.

As the economy enters a strong expansion in which real GDP increases, which of the following occurs?

If the nominal interest rate is less than the equilibrium nominal interest rate determined in the money market, then households and firms

In the short run, how is the nominal interest rate determined? If the nominal interest rate is less than the equilibrium nominal interest rate, what occurs?

A change in financial technology that reduces the need to hold large cash balances the demand for money and the equilibrium nominal interest rate.

If real GDP grows at 3 percent a year, the quantity of money grows at 5 percent a year, and the velocity of circulation is constant, then the price level must be

An increase in real GDP affects the demand for money because

On any given day, ________ changes to achieve equilibrium in the money market.

The demand for money curve slopes downward because a rise in the nominal interest rate the opportunity cost of holding money and therefore the quantity of money demanded.

The long-run effect of an increase in the growth rate of the quantity of money is a

The quantity of money demanded is

When the nominal interest rate is the equilibrium interest rate, the quantity of money demanded is less than the quantity of money supplied; when the nominal interest rate is the equilibrium interest rate, the quantity of money demanded exceeds the quantity of money supplied.

In the early 1920s, Germany experienced hyperinflation because Germany's

In the long run, an increase in the quantity of money the value of money and the price level.

During an inflation, a household with savings of $100,000

The opportunity cost of holding money is the

In the long run, the nominal interest rate is

Since 1970, as a percent of GDP, M1 held has steadily decreased.Which of the following can account for this fact?

When you accumulate more money,

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

Every day ________ adjusts to make the quantity of money demanded equal the quantity of money supplied.

As the economy enters a strong expansion in which real GDP increases, which of the following occurs?

If the nominal interest rate is less than the equilibrium nominal interest rate determined in the money market, then households and firms

In the short run, how is the nominal interest rate determined? If the nominal interest rate is less than the equilibrium nominal interest rate, what occurs?

A change in financial technology that reduces the need to hold large cash balances ________ the demand for money and ________ the equilibrium nominal interest rate.

If real GDP grows at 3 percent a year, the quantity of money grows at 5 percent a year, and the velocity of circulation is constant, then the price level must be

An increase in real GDP affects the demand for money because

On any given day, ________ changes to achieve equilibrium in the money market.

The demand for money curve slopes downward because a rise in the nominal interest rate ________ the opportunity cost of holding money and therefore ________ the quantity of money demanded.

The long-run effect of an increase in the growth rate of the quantity of money is a

The quantity of money demanded is

When the nominal interest rate is ________ the equilibrium interest rate, the quantity of money demanded is less than the quantity of money supplied; when the nominal interest rate is ________ the equilibrium interest rate, the quantity of money demanded exceeds the quantity of money supplied.

In the early 1920s, Germany experienced hyperinflation because Germany's

In the long run, an increase in the quantity of money ________ the value of money and ________ the price level.

During an inflation, a household with savings of $100,000

The opportunity cost of holding money is the

In the long run, the nominal interest rate is

Since 1970, as a percent of GDP, M1 held has steadily decreased.Which of the following can account for this fact?

When you accumulate more money,

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

A change in financial technology that reduces the need to hold large cash balances the demand for money and the equilibrium nominal interest rate.

The demand for money curve slopes downward because a rise in the nominal interest rate the opportunity cost of holding money and therefore the quantity of money demanded.

When the nominal interest rate is the equilibrium interest rate, the quantity of money demanded is less than the quantity of money supplied; when the nominal interest rate is the equilibrium interest rate, the quantity of money demanded exceeds the quantity of money supplied.

In the long run, an increase in the quantity of money the value of money and the price level.