Question 1

-In the figure above, what happens if the Fed increases the quantity of money by 8 percent?

Accepted Answer

A)  The LRMD curve shifts rightward to restore equilibrium. 
B)  The value of money falls to 0.92 and there is a movement downward along the LRMD. 
C)  The price level falls to 1.08. 
D)  The interest rate rises to 1.08. 
E)  The value of money rises to 1.08. 
A)  The LRMD curve shifts rightward to restore equilibrium. 
B)  The value of money falls to 0.92 and there is a movement downward along the LRMD. 
C)  The price level falls to 1.08. 
D)  The interest rate rises to 1.08. 
E)  The value of money rises to 1.08.

Question 2

If credit card usage exhibits a sharp increase, there is

Accepted Answer

A)  an upward movement along the demand for money curve. 
B)  a downward movement along the demand for money curve. 
C)  a rightward shift of the demand for money curve. 
D)  a leftward shift of the demand for money curve. 
E)  a leftward shift of the supply of money curve. 
A)  an upward movement along the demand for money curve. 
B)  a downward movement along the demand for money curve. 
C)  a rightward shift of the demand for money curve. 
D)  a leftward shift of the demand for money curve. 
E)  a leftward shift of the supply of money curve.

Question 3

The lower the nominal interest rate, the

Accepted Answer

A)  greater the demand for money. 
B)  greater the quantity of money demanded. 
C)  greater the quantity of money supplied. 
D)  smaller the demand for goods and services. 
E)  smaller the quantity of money demanded. 
A)  greater the demand for money. 
B)  greater the quantity of money demanded. 
C)  greater the quantity of money supplied. 
D)  smaller the demand for goods and services. 
E)  smaller the quantity of money demanded.

Question 4

In the money market, if the price level rises, then the demand for money ________ and the equilibrium nominal interest rate ________.

Accepted Answer

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

Question 5

Hyperinflation is defined as periods of

Accepted Answer

A)  negative price changes. 
B)  low inflation. 
C)  inflation over 50 percent per month. 
D)  inflation under 10 percent per year. 
E)  inflation over 25 percent per year 
A)  negative price changes. 
B)  low inflation. 
C)  inflation over 50 percent per month. 
D)  inflation under 10 percent per year. 
E)  inflation over 25 percent per year

Question 6

Assume the Fed is concerned with a possible recession so it wants to lower the interest rate.How does the Fed lower the interest rate in the short run?

Accepted Answer

In order to lower the interest

Question 7

The demand for money increases and the demand for money curve shifts rightward if

Accepted Answer

A)  the real interest rate increase. 
B)  the nominal interest rate increases. 
C)  the price level increases. 
D)  the inflation rate increases. 
E)  real GDP decreases. 
A)  the real interest rate increase. 
B)  the nominal interest rate increases. 
C)  the price level increases. 
D)  the inflation rate increases. 
E)  real GDP decreases.

Question 8

Suppose that the price level does not change while real GDP decreases. As a result,

Accepted Answer

A)  the demand for money increases and the demand for money curve shifts rightward. 
B)  the supply of money curve shifts leftward. 
C)  the supply of money curve shifts rightward. 
D)  the quantity of money demanded decreases and there is a movement downward along the demand for money curve. 
E)  the demand for money decreases so that households and firms hold smaller amounts of money. 
A)  the demand for money increases and the demand for money curve shifts rightward. 
B)  the supply of money curve shifts leftward. 
C)  the supply of money curve shifts rightward. 
D)  the quantity of money demanded decreases and there is a movement downward along the demand for money curve. 
E)  the demand for money decreases so that households and firms hold smaller amounts of money.

Question 9

-The figure above shows the money market.At which interest rate are people selling bonds and thereby changing the interest rate?

Accepted Answer

A)  6 percent 
B)  5 percent 
C)  4 percent 
D)  6 percent and 4 percent 
E)  6 percent, 5 percent, and 4 percent 
A)  6 percent 
B)  5 percent 
C)  4 percent 
D)  6 percent and 4 percent 
E)  6 percent, 5 percent, and 4 percent

Question 10

Suppose a country has a real interest rate of 4 percent and an inflation rate of 3 percent.If the income tax rate is 20 percent, then the after-tax real interest rate is

Accepted Answer

A)  2.6 percent. 
B)  4.0 percent. 
C)  5.6 percent. 
D)  7.0 percent. 
E)  1.4 percent. 
A)  2.6 percent. 
B)  4.0 percent. 
C)  5.6 percent. 
D)  7.0 percent. 
E)  1.4 percent.

Question 11

What is the equation of exchange?
 Suppose that real GDP and velocity are constant.In this case, what effect will an increase in the quantity of money have?

Accepted Answer

The equation of exchange is that M × V =

Question 12

When the opportunity cost of holding money increases, then

Accepted Answer

A)  people want to hold more money. 
B)  the real interest rate falls. 
C)  the nominal interest rate falls. 
D)  people want to hold less money. 
E)  the quantity of money supplied increases. 
A)  people want to hold more money. 
B)  the real interest rate falls. 
C)  the nominal interest rate falls. 
D)  people want to hold less money. 
E)  the quantity of money supplied increases.

Question 13

Define the quantity theory of money and show how it is related to the equation of exchange.

Accepted Answer

The quantity theory of money is the prop

Question 14

When the nominal interest rate increases, the

Accepted Answer

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

Question 15

Which of the following shifts the demand for money curve?
i. change in the nominal interest rate
ii. change in real GDP
iii. change in the price level

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii

Question 16

In the long run, the price level adjusts

Accepted Answer

A)  so that the real interest rate equals the nominal interest rate. 
B)  so that the inflation rate equals zero. 
C)  to achieve money market equilibrium. 
D)  so that the inflation rate equals the growth rate of real GDP. 
E)  so that the inflation rate is moderate. 
A)  so that the real interest rate equals the nominal interest rate. 
B)  so that the inflation rate equals zero. 
C)  to achieve money market equilibrium. 
D)  so that the inflation rate equals the growth rate of real GDP. 
E)  so that the inflation rate is moderate.

Question 17

The ________ the price level, the ________.

Accepted Answer

A)  higher; greater the demand for money 
B)  higher; smaller the demand for money 
C)  lower; greater the demand for money 
D)  higher; greater the supply of money 
E)  higher; smaller the supply of money 
A)  higher; greater the demand for money 
B)  higher; smaller the demand for money 
C)  lower; greater the demand for money 
D)  higher; greater the supply of money 
E)  higher; smaller the supply of money

Question 18

When households and firms sell financial assets, such as government securities, the

Accepted Answer

A)  nominal interest rate falls. 
B)  market price of the securities increases. 
C)  nominal interest rate rises. 
D)  demand for money curve shifts leftward. 
E)  supply of money curve shifts leftward. 
A)  nominal interest rate falls. 
B)  market price of the securities increases. 
C)  nominal interest rate rises. 
D)  demand for money curve shifts leftward. 
E)  supply of money curve shifts leftward.

Question 19

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

Accepted Answer

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

Question 20

The demand for money increases and the demand curve for money shifts rightward as a result of

Accepted Answer

A)  an increase in real GDP. 
B)  a decrease in the real interest rate. 
C)  an increase in the use of credit cards. 
D)  a decrease in the price level. 
E)  a decrease in the nominal interest rate. 
A)  an increase in real GDP. 
B)  a decrease in the real interest rate. 
C)  an increase in the use of credit cards. 
D)  a decrease in the price level. 
E)  a decrease in the nominal interest rate.

-In the figure above, what happens if the Fed increases the quantity of money by 8 percent?

If credit card usage exhibits a sharp increase, there is

The lower the nominal interest rate, the

In the money market, if the price level rises, then the demand for money and the equilibrium nominal interest rate .

Hyperinflation is defined as periods of

Assume the Fed is concerned with a possible recession so it wants to lower the interest rate.How does the Fed lower the interest rate in the short run?

The demand for money increases and the demand for money curve shifts rightward if

Suppose that the price level does not change while real GDP decreases. As a result,

-The figure above shows the money market.At which interest rate are people selling bonds and thereby changing the interest rate?

Suppose a country has a real interest rate of 4 percent and an inflation rate of 3 percent.If the income tax rate is 20 percent, then the after-tax real interest rate is

What is the equation of exchange? Suppose that real GDP and velocity are constant.In this case, what effect will an increase in the quantity of money have?

When the opportunity cost of holding money increases, then

Define the quantity theory of money and show how it is related to the equation of exchange.

When the nominal interest rate increases, the

Which of the following shifts the demand for money curve? i. change in the nominal interest rate ii. change in real GDP iii. change in the price level

In the long run, the price level adjusts

The the price level, the .

When households and firms sell financial assets, such as government securities, the

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

The demand for money increases and the demand curve for money shifts rightward as a result of

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

-In the figure above, what happens if the Fed increases the quantity of money by 8 percent?

If credit card usage exhibits a sharp increase, there is

The lower the nominal interest rate, the

In the money market, if the price level rises, then the demand for money ________ and the equilibrium nominal interest rate ________.

Hyperinflation is defined as periods of

Assume the Fed is concerned with a possible recession so it wants to lower the interest rate.How does the Fed lower the interest rate in the short run?

The demand for money increases and the demand for money curve shifts rightward if

Suppose that the price level does not change while real GDP decreases. As a result,

-The figure above shows the money market.At which interest rate are people selling bonds and thereby changing the interest rate?

Suppose a country has a real interest rate of 4 percent and an inflation rate of 3 percent.If the income tax rate is 20 percent, then the after-tax real interest rate is

What is the equation of exchange? Suppose that real GDP and velocity are constant.In this case, what effect will an increase in the quantity of money have?

When the opportunity cost of holding money increases, then

Define the quantity theory of money and show how it is related to the equation of exchange.

When the nominal interest rate increases, the

Which of the following shifts the demand for money curve? i. change in the nominal interest rate ii. change in real GDP iii. change in the price level

In the long run, the price level adjusts

The ________ the price level, the ________.

When households and firms sell financial assets, such as government securities, the

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

The demand for money increases and the demand curve for money shifts rightward as a result of

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

In the money market, if the price level rises, then the demand for money and the equilibrium nominal interest rate .

The the price level, the .