Question 1

The quantity theory of money and prices

Accepted Answer

A) is derived from the equation of exchange assuming that prices remain constant. 
B) shows how a change in the price level leads to a change in the money supply. 
C) shows how the demand for money is inversely related to the price level. 
D) is the hypothesis that changes in the money supply leads to proportional changes in the price level. 
A) is derived from the equation of exchange assuming that prices remain constant. 
B) shows how a change in the price level leads to a change in the money supply. 
C) shows how the demand for money is inversely related to the price level. 
D) is the hypothesis that changes in the money supply leads to proportional changes in the price level.

Question 2

According to Keynes, the effect on planned real investment spending resulting from the interest-rate impact of a decrease in the money supply

Accepted Answer

A) impacts the economy through the multiplier. 
B) impacts the economy by reducing the value of the U.S. dollar. 
C) impacts the economy by increasing the deficit. 
D) does not impact the economy. 
A) impacts the economy through the multiplier. 
B) impacts the economy by reducing the value of the U.S. dollar. 
C) impacts the economy by increasing the deficit. 
D) does not impact the economy.

Question 3

According to the text, the main reason for people to hold money is

Accepted Answer

A) to enjoy looking at the pictures of past leaders. 
B) to tell other people how rich they are. 
C) because they are irrational. 
D) to use it for different reasons. 
A) to enjoy looking at the pictures of past leaders. 
B) to tell other people how rich they are. 
C) because they are irrational. 
D) to use it for different reasons.

Question 4

If the Fed sells bonds through its open market operations, then there is

Accepted Answer

A) an increase in the demand for bonds and a rise in the price of existing bonds. 
B) an increase in the supply of bonds and a fall in the price of existing bonds. 
C) a decrease in interest rates because of the increase in the supply of bonds. 
D) a decrease in interest rates because of the decrease in the demand for bonds. 
A) an increase in the demand for bonds and a rise in the price of existing bonds. 
B) an increase in the supply of bonds and a fall in the price of existing bonds. 
C) a decrease in interest rates because of the increase in the supply of bonds. 
D) a decrease in interest rates because of the decrease in the demand for bonds.

Question 5

As nominal Gross Domestic Product (GDP)rises, people will wish to

Accepted Answer

A) hold less money for transactions. 
B) hold more money for transactions. 
C) spend less. 
D) invest only in stocks. 
A) hold less money for transactions. 
B) hold more money for transactions. 
C) spend less. 
D) invest only in stocks.

Question 6

The main reason people hold money is that

Accepted Answer

A) money provides a standard of value. 
B) money is used to buy goods and services. 
C) money is intrinsically valuable. 
D) money is power. 
A) money provides a standard of value. 
B) money is used to buy goods and services. 
C) money is intrinsically valuable. 
D) money is power.

Question 7

-Using a graph above, show the short-run and long-run effects of an expansionary monetary policy.

Accepted Answer

In the above figure, E₁ is the original

Question 8

A person puts a $100 bill in the glove compartment of his car in case of an emergency. This is an example of

Accepted Answer

A) the precautionary demand for money. 
B) the transaction demand for money. 
C) the emergency investment demand for money. 
D) the asset demand for money. 
A) the precautionary demand for money. 
B) the transaction demand for money. 
C) the emergency investment demand for money. 
D) the asset demand for money.

Question 9

Which of the following is a TRUE statement?

Accepted Answer

A) To demand money is to demand wealth. 
B) To demand money is to demand a higher income. 
C) To use money, one must hold money. 
D) To get more money, one must earn interest on money. 
A) To demand money is to demand wealth. 
B) To demand money is to demand a higher income. 
C) To use money, one must hold money. 
D) To get more money, one must earn interest on money.

Question 10

If V is constant and Y is fixed, any change in M

Accepted Answer

A) leads to a smaller change in P. 
B) leads to a larger change in P. 
C) leads to a proportionate change in P. 
D) does not lead to change in P. 
A) leads to a smaller change in P. 
B) leads to a larger change in P. 
C) leads to a proportionate change in P. 
D) does not lead to change in P.

Question 11

Which of the following is NOT a type of demand for holding money?

Accepted Answer

A) transactions demand 
B) precautionary demand 
C) asset demand 
D) qualitative demand 
A) transactions demand 
B) precautionary demand 
C) asset demand 
D) qualitative demand

Question 12

Suppose the typical household holds $1,000 when the interest rate is 5 percent. When the interest rate rises to 6 percent, the typical household would most likely hold

Accepted Answer

A) more money because the opportunity cost of holding money is lower. 
B) less money because the opportunity cost of holding money is lower. 
C) more money because the opportunity cost of holding money is higher. 
D) less money because the opportunity cost of holding money is higher. 
A) more money because the opportunity cost of holding money is lower. 
B) less money because the opportunity cost of holding money is lower. 
C) more money because the opportunity cost of holding money is higher. 
D) less money because the opportunity cost of holding money is higher.

Question 13

The interest-rate-based monetary policy transmission mechanism suggests that the changes in the money supply affect aggregate spending

Accepted Answer

A) indirectly through interest rates and planned investment spending. 
B) directly through interest rates and planned consumption spending. 
C) indirectly through tax rates and planned consumption spending. 
D) directly through interest rates and planned government spending. 
A) indirectly through interest rates and planned investment spending. 
B) directly through interest rates and planned consumption spending. 
C) indirectly through tax rates and planned consumption spending. 
D) directly through interest rates and planned government spending.

Question 14

John gets paid monthly and pays for everything with cash. When he cashes his check he keeps $200 for food, $100 for utilities, $900 for rent, $50 for transportation, $100 for entertainment and $300 for unexpected expenditures. Which of the following statements is TRUE?

Accepted Answer

A) The transactions demand for money is $1,350, the precautionary demand is $300 and the asset demand is $0. 
B) The transactions demand for money is $450, the precautionary demand is $300 and the asset demand is $900. 
C) The transactions demand for money is $350, the precautionary demand is $1,150 and the asset demand is $150. 
D) The transactions demand for money is $350, the precautionary demand is $950 and the asset demand is $0. 
A) The transactions demand for money is $1,350, the precautionary demand is $300 and the asset demand is $0. 
B) The transactions demand for money is $450, the precautionary demand is $300 and the asset demand is $900. 
C) The transactions demand for money is $350, the precautionary demand is $1,150 and the asset demand is $150. 
D) The transactions demand for money is $350, the precautionary demand is $950 and the asset demand is $0.

Question 15

When the rate of interest in the economy increases

Accepted Answer

A) the market price of existing bonds will fall. 
B) the transaction demand for money will increase. 
C) real Gross Domestic Product (GDP)will increase. 
D) the asset demand for money will increase. 
A) the market price of existing bonds will fall. 
B) the transaction demand for money will increase. 
C) real Gross Domestic Product (GDP)will increase. 
D) the asset demand for money will increase.

Question 16

The interest rate that the Fed charges banks to borrow funds from the Fed is the

Accepted Answer

A) discount rate. 
B) federal funds rate. 
C) money market rate. 
D) nominal interest rate. 
A) discount rate. 
B) federal funds rate. 
C) money market rate. 
D) nominal interest rate.

Question 17

Money's use in non-barter transactions relates to its role as a

Accepted Answer

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

Question 18

Open market operations by the Fed cause

Accepted Answer

A) changes in the difference between the discount rate. and the federal funds rate. 
B) aggregate supply to change. 
C) the prices of bonds to change. 
D) changes in the required reserve ratio. 
A) changes in the difference between the discount rate. and the federal funds rate. 
B) aggregate supply to change. 
C) the prices of bonds to change. 
D) changes in the required reserve ratio.

Question 19

A person keeps $500 in his home in order to be prepared for some unforeseen future event. This reflects his

Accepted Answer

A) speculative demand for money. 
B) asset demand for money. 
C) precautionary demand for money. 
D) liquidity demand for money. 
A) speculative demand for money. 
B) asset demand for money. 
C) precautionary demand for money. 
D) liquidity demand for money.

Question 20

Suppose the Fed conducts an open market sale of bonds. This monetary policy action will tend to cause

Accepted Answer

A) the price of bonds to increase and the interest rate to increase. 
B) the price of bonds to increase and the interest rate to decrease. 
C) the price of bonds to decrease and the interest rate to increase. 
D) the price of bonds to decrease and the interest rate to decrease. 
A) the price of bonds to increase and the interest rate to increase. 
B) the price of bonds to increase and the interest rate to decrease. 
C) the price of bonds to decrease and the interest rate to increase. 
D) the price of bonds to decrease and the interest rate to decrease.

The quantity theory of money and prices

According to Keynes, the effect on planned real investment spending resulting from the interest-rate impact of a decrease in the money supply

According to the text, the main reason for people to hold money is

If the Fed sells bonds through its open market operations, then there is

As nominal Gross Domestic Product (GDP)rises, people will wish to

The main reason people hold money is that

-Using a graph above, show the short-run and long-run effects of an expansionary monetary policy.

A person puts a $100 bill in the glove compartment of his car in case of an emergency. This is an example of

Which of the following is a TRUE statement?

If V is constant and Y is fixed, any change in M

Which of the following is NOT a type of demand for holding money?

Suppose the typical household holds $1,000 when the interest rate is 5 percent. When the interest rate rises to 6 percent, the typical household would most likely hold

The interest-rate-based monetary policy transmission mechanism suggests that the changes in the money supply affect aggregate spending

John gets paid monthly and pays for everything with cash. When he cashes his check he keeps $200 for food, $100 for utilities, $900 for rent, $50 for transportation, $100 for entertainment and $300 for unexpected expenditures. Which of the following statements is TRUE?

When the rate of interest in the economy increases

The interest rate that the Fed charges banks to borrow funds from the Fed is the

Money's use in non-barter transactions relates to its role as a

Open market operations by the Fed cause

A person keeps $500 in his home in order to be prepared for some unforeseen future event. This reflects his

Suppose the Fed conducts an open market sale of bonds. This monetary policy action will tend to cause

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 15: Domestic and International Dimensions of Monetary Policy

The quantity theory of money and prices

According to Keynes, the effect on planned real investment spending resulting from the interest-rate impact of a decrease in the money supply

According to the text, the main reason for people to hold money is

If the Fed sells bonds through its open market operations, then there is

As nominal Gross Domestic Product (GDP)rises, people will wish to

The main reason people hold money is that

-Using a graph above, show the short-run and long-run effects of an expansionary monetary policy.

A person puts a $100 bill in the glove compartment of his car in case of an emergency. This is an example of

Which of the following is a TRUE statement?

If V is constant and Y is fixed, any change in M

Which of the following is NOT a type of demand for holding money?

Suppose the typical household holds $1,000 when the interest rate is 5 percent. When the interest rate rises to 6 percent, the typical household would most likely hold

The interest-rate-based monetary policy transmission mechanism suggests that the changes in the money supply affect aggregate spending

John gets paid monthly and pays for everything with cash. When he cashes his check he keeps $200 for food, $100 for utilities, $900 for rent, $50 for transportation, $100 for entertainment and $300 for unexpected expenditures. Which of the following statements is TRUE?

When the rate of interest in the economy increases

The interest rate that the Fed charges banks to borrow funds from the Fed is the

Money's use in non-barter transactions relates to its role as a

Open market operations by the Fed cause

A person keeps $500 in his home in order to be prepared for some unforeseen future event. This reflects his

Suppose the Fed conducts an open market sale of bonds. This monetary policy action will tend to cause

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters