Question 1

According to Keynes, the impact of a decrease in the money supply is a

Accepted Answer

A) lower interest rate and larger growth in real GDP. 
B) lower interest rate and smaller growth in real GDP. 
C) higher interest rate and larger growth in real GDP. 
D) higher interest rate and smaller growth in real GDP. 
A) lower interest rate and larger growth in real GDP. 
B) lower interest rate and smaller growth in real GDP. 
C) higher interest rate and larger growth in real GDP. 
D) higher interest rate and smaller growth in real GDP.

Question 2

When interest rates rise, the transactions demand for money usually

Accepted Answer

A) decreases. 
B) increases. 
C) decreases initially and then increases to the original position. 
D) does not change. 
A) decreases. 
B) increases. 
C) decreases initially and then increases to the original position. 
D) does not change.

Question 3

The short-run effect of an increase in the money supply is to

Accepted Answer

A) increase real GDP only. 
B) increase the price level only. 
C) increase both real GDP and the price level. 
D) increase nominal GDP but decrease the price level. 
A) increase real GDP only. 
B) increase the price level only. 
C) increase both real GDP and the price level. 
D) increase nominal GDP but decrease the price level.

Question 4

A open market purchase of government securities by the Fed will cause which of the following?

Accepted Answer

A) a reduction in the federal funds rate 
B) an increase in the amount of excess reserves that banks will wish to hold 
C) an increase in the equilibrium quantity of reserves 
D) all of the above 
A) a reduction in the federal funds rate 
B) an increase in the amount of excess reserves that banks will wish to hold 
C) an increase in the equilibrium quantity of reserves 
D) all of the above

Question 5

An increase in the money supply will affect aggregate demand

Accepted Answer

A) only if the increase in the money supply causes interest rates to rise. 
B) only if the increase in the money supply causes people to buy less goods and services. 
C) only if the increase in the money supply causes people to increase their saving. 
D) if the increase in the money supply causes interest rates to fall and/or causes people to buy more goods and services. 
A) only if the increase in the money supply causes interest rates to rise. 
B) only if the increase in the money supply causes people to buy less goods and services. 
C) only if the increase in the money supply causes people to increase their saving. 
D) if the increase in the money supply causes interest rates to fall and/or causes people to buy more goods and services.

Question 6

When the rate of interest in the economy falls, there will be

Accepted Answer

A) an increase in the market price of existing bonds. 
B) a decrease in the transaction demand for money. 
C) less investment by businesses. 
D) an increase in nominal Gross Domestic Product (GDP). 
A) an increase in the market price of existing bonds. 
B) a decrease in the transaction demand for money. 
C) less investment by businesses. 
D) an increase in nominal Gross Domestic Product (GDP).

Question 7

A depreciation of the U.S. dollar

Accepted Answer

A) makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, increasing net exports. 
B) makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, increasing net exports. 
C) makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, decreasing net exports. 
D) makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, decreasing net exports. 
A) makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, increasing net exports. 
B) makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, increasing net exports. 
C) makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, decreasing net exports. 
D) makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, decreasing net exports.

Question 8

The demand for money curve depicts

Accepted Answer

A) an inverse relationship between the quantity of money demanded and the quantity of bonds demanded. 
B) a direct relationship between the quantity of money demanded and the quantity of bonds demanded. 
C) an inverse relationship between the quantity of money demanded and the interest rate. 
D) a direct relationship between the quantity of money demanded and the interest rate. 
A) an inverse relationship between the quantity of money demanded and the quantity of bonds demanded. 
B) a direct relationship between the quantity of money demanded and the quantity of bonds demanded. 
C) an inverse relationship between the quantity of money demanded and the interest rate. 
D) a direct relationship between the quantity of money demanded and the interest rate.

Question 9

Which of the following is a variable in the equation of exchange?

Accepted Answer

A) the price level. 
B) the money supply. 
C) the velocity of money. 
D) real GDP. 
E) all of the above. 
A) the price level. 
B) the money supply. 
C) the velocity of money. 
D) real GDP. 
E) all of the above.

Question 10

When the interest rate increases, people will adjust their precautionary demand for money

Accepted Answer

A) upward. 
B) downward. 
C) not at all. 
D) downward or upward depending upon the actual supply of money. 
A) upward. 
B) downward. 
C) not at all. 
D) downward or upward depending upon the actual supply of money.

Question 11

The quantity theory of money and prices assumes

Accepted Answer

A) velocity is constant. 
B) real output is constant. 
C) the price level is constant. 
D) the price level is increasing at a constant rate. 
A) velocity is constant. 
B) real output is constant. 
C) the price level is constant. 
D) the price level is increasing at a constant rate.

Question 12

An assumption used in the quantity theory of money is that

Accepted Answer

A) the price level is constant. 
B) velocity is constant. 
C) nominal Gross Domestic Product (GDP)is constant. 
D) the money supply is constant. 
A) the price level is constant. 
B) velocity is constant. 
C) nominal Gross Domestic Product (GDP)is constant. 
D) the money supply is constant.

Question 13

A contractionary monetary policy causes

Accepted Answer

A) higher interest rates, which increases the international price of the dollar and decreases net exports. 
B) higher interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports. 
C) lower interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports. 
D) higher interest rates, which increases the foreign demand for U.S. financial instruments, which causes interest rates to decrease. There is no effect on net exports. 
A) higher interest rates, which increases the international price of the dollar and decreases net exports. 
B) higher interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports. 
C) lower interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports. 
D) higher interest rates, which increases the foreign demand for U.S. financial instruments, which causes interest rates to decrease. There is no effect on net exports.

Question 14

If the Fed thought the economy was experiencing a recessionary gap, and it wanted to correct this gap, it would

Accepted Answer

A) sell bonds. 
B) lower the differential between the discount rate and the federal funds rate. 
C) raise the reserve requirement. 
D) increase aggregate supply. 
A) sell bonds. 
B) lower the differential between the discount rate and the federal funds rate. 
C) raise the reserve requirement. 
D) increase aggregate supply.

Question 15

The "direct effect" of an increase in the money supply is to

Accepted Answer

A) increase aggregate demand as people spend their excess money balances. 
B) increase aggregate demand as interest rates fall and investment spending increases. 
C) increase aggregate supply as producers anticipate higher future profits. 
D) decrease the rate of inflation. 
A) increase aggregate demand as people spend their excess money balances. 
B) increase aggregate demand as interest rates fall and investment spending increases. 
C) increase aggregate supply as producers anticipate higher future profits. 
D) decrease the rate of inflation.

Question 16

-In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD₃, then the long-run equilibrium will be at point

Accepted Answer

A) a. 
B) b. 
C) c. 
D) i. 
A) a. 
B) b. 
C) c. 
D) i.

Question 17

The hypothesis that changes in the money supply lead to an equiproportional change in the price level is called

Accepted Answer

A) the quantity theory of money. 
B) the classical theory of money. 
C) the Keynesian theory of money. 
D) the fractional theory of money. 
A) the quantity theory of money. 
B) the classical theory of money. 
C) the Keynesian theory of money. 
D) the fractional theory of money.

Question 18

-Refer to the above figure. Which panel is consistent with the Fed buying bonds?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 19

Which Federal Reserve Bank now regularly tracks target levels for the federal funds rate predicted by a basic Taylor-rule equation?

Accepted Answer

A) Boston 
B) Chicago 
C) New York 
D) St. Louis 
A) Boston 
B) Chicago 
C) New York 
D) St. Louis

Question 20

Other things being equal, the quantity theory of money suggests that any increase in the money supply

Accepted Answer

A) causes a reduction in the demand for money. 
B) results in a decrease in the aggregate price level. 
C) causes the aggregate level of nominal Gross Domestic Product (GDP)to fall. 
D) results in a proportionate increase in the price level. 
A) causes a reduction in the demand for money. 
B) results in a decrease in the aggregate price level. 
C) causes the aggregate level of nominal Gross Domestic Product (GDP)to fall. 
D) results in a proportionate increase in the price level.

According to Keynes, the impact of a decrease in the money supply is a

When interest rates rise, the transactions demand for money usually

The short-run effect of an increase in the money supply is to

A open market purchase of government securities by the Fed will cause which of the following?

An increase in the money supply will affect aggregate demand

When the rate of interest in the economy falls, there will be

A depreciation of the U.S. dollar

The demand for money curve depicts

Which of the following is a variable in the equation of exchange?

When the interest rate increases, people will adjust their precautionary demand for money

The quantity theory of money and prices assumes

An assumption used in the quantity theory of money is that

A contractionary monetary policy causes

If the Fed thought the economy was experiencing a recessionary gap, and it wanted to correct this gap, it would

The "direct effect" of an increase in the money supply is to

-In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD₃, then the long-run equilibrium will be at point

The hypothesis that changes in the money supply lead to an equiproportional change in the price level is called

-Refer to the above figure. Which panel is consistent with the Fed buying bonds?

Which Federal Reserve Bank now regularly tracks target levels for the federal funds rate predicted by a basic Taylor-rule equation?

Other things being equal, the quantity theory of money suggests that any increase in the money supply

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

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Exam 15: Domestic and International Dimensions of Monetary Policy

According to Keynes, the impact of a decrease in the money supply is a

When interest rates rise, the transactions demand for money usually

The short-run effect of an increase in the money supply is to

A open market purchase of government securities by the Fed will cause which of the following?

An increase in the money supply will affect aggregate demand

When the rate of interest in the economy falls, there will be

A depreciation of the U.S. dollar

The demand for money curve depicts

Which of the following is a variable in the equation of exchange?

When the interest rate increases, people will adjust their precautionary demand for money

The quantity theory of money and prices assumes

An assumption used in the quantity theory of money is that

A contractionary monetary policy causes

If the Fed thought the economy was experiencing a recessionary gap, and it wanted to correct this gap, it would

The "direct effect" of an increase in the money supply is to

-In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD₃, then the long-run equilibrium will be at point

The hypothesis that changes in the money supply lead to an equiproportional change in the price level is called

-Refer to the above figure. Which panel is consistent with the Fed buying bonds?

Which Federal Reserve Bank now regularly tracks target levels for the federal funds rate predicted by a basic Taylor-rule equation?

Other things being equal, the quantity theory of money suggests that any increase in the money supply

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