Question 1

Money is a ________ and a transaction is a ________.

Accepted Answer

A) stock; stock 
B) flow; flow 
C) flow; stock 
D) stock; flow 
A) stock; stock 
B) flow; flow 
C) flow; stock 
D) stock; flow

Question 2

An increase in the money supply, other things being constant

Accepted Answer

A) causes interest rates to rise. 
B) generates an increase in the demand for money. 
C) causes the price level to increase. 
D) causes the purchasing power of money to increase. 
A) causes interest rates to rise. 
B) generates an increase in the demand for money. 
C) causes the price level to increase. 
D) causes the purchasing power of money to increase.

Question 3

The quantity theory of money and prices asserts that

Accepted Answer

A)  increases in the money supply lead to inflation. 
B)  increases in the money supply lead to an increase in the velocity of money. 
C)  increases in the money supply lead to a decrease in the velocity of money. 
D)  increases in the money supply will increase real GDP. 
A)  increases in the money supply lead to inflation. 
B)  increases in the money supply lead to an increase in the velocity of money. 
C)  increases in the money supply lead to a decrease in the velocity of money. 
D)  increases in the money supply will increase real GDP.

Question 4

The relationship between the interest rate and the asset demand for money is

Accepted Answer

A) positive. 
B) inverse. 
C) positive sometimes and inverse other times. 
D) nonexistent. 
A) positive. 
B) inverse. 
C) positive sometimes and inverse other times. 
D) nonexistent.

Question 5

The demand for money for which the purpose is making unexpected purchases or meeting emergencies is considered to be part of

Accepted Answer

A) precautionary demand. 
B) transactions demand. 
C) asset demand. 
D) savings demand. 
A) precautionary demand. 
B) transactions demand. 
C) asset demand. 
D) savings demand.

Question 6

The hypothesis that changes in the money supply lead to proportional changes in the price level is called

Accepted Answer

A) the equation of exchange. 
B) the Keynesian multiplier. 
C) the theory of empirical relativity. 
D) the quantity theory of money and prices. 
A) the equation of exchange. 
B) the Keynesian multiplier. 
C) the theory of empirical relativity. 
D) the quantity theory of money and prices.

Question 7

According to the quantity theory of money, an excess quantity of money supplied will lead to

Accepted Answer

A) a reduction in spending and higher interest rates. 
B) a reduced level of real Gross Domestic Product (GDP). 
C) a higher level of employment. 
D) a higher price level. 
A) a reduction in spending and higher interest rates. 
B) a reduced level of real Gross Domestic Product (GDP). 
C) a higher level of employment. 
D) a higher price level.

Question 8

When people want to hold money to make regular planned expenditures, this is

Accepted Answer

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

Question 9

Which of the following would NOT be a result of a contractionary monetary policy?

Accepted Answer

A) Interest rates would rise. 
B) Foreign goods would become more expensive to U.S. residents. 
C) Net exports would decline. 
D) Imports would rise. 
A) Interest rates would rise. 
B) Foreign goods would become more expensive to U.S. residents. 
C) Net exports would decline. 
D) Imports would rise.

Question 10

The net-export effect of contractionary monetary policy is

Accepted Answer

A) the depreciation of the value of the dollar and a resulting increase of U.S. net exports. 
B) the depreciation of the value of the dollar and a resulting decrease of U.S. net exports. 
C) the appreciation of the value of the dollar and a resulting increase of U.S. net exports. 
D) the appreciation of the value of the dollar and a resulting decrease of U.S. net exports. 
A) the depreciation of the value of the dollar and a resulting increase of U.S. net exports. 
B) the depreciation of the value of the dollar and a resulting decrease of U.S. net exports. 
C) the appreciation of the value of the dollar and a resulting increase of U.S. net exports. 
D) the appreciation of the value of the dollar and a resulting decrease of U.S. net exports.

Question 11

-Refer to the above figure. Suppose point A is the original equilibrium. If there is an increase in the money supply, the new short-run equilibrium is given by point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 12

As real Gross Domestic Product (GDP)decreases, people hold

Accepted Answer

A) more money because they will want to increase the amount of savings. 
B) less money because they will want to collect interest. 
C) about the same amount of money since that has been enough in the past. 
D) less money since they will make fewer purchases. 
A) more money because they will want to increase the amount of savings. 
B) less money because they will want to collect interest. 
C) about the same amount of money since that has been enough in the past. 
D) less money since they will make fewer purchases.

Question 13

During a period of contractionary monetary policy

Accepted Answer

A) the price level is increased, which leads to an increase in the money supply. 
B) the price level is decreased, which leads to a decrease in the money supply. 
C) the rate of growth of the money supply is increased, leading to an increase in the price level. 
D) the rate of growth of the money supply is reduced, leading to a decrease in the price level. 
A) the price level is increased, which leads to an increase in the money supply. 
B) the price level is decreased, which leads to a decrease in the money supply. 
C) the rate of growth of the money supply is increased, leading to an increase in the price level. 
D) the rate of growth of the money supply is reduced, leading to a decrease in the price level.

Question 14

Which of the following represents the opportunity cost of holding money?

Accepted Answer

A) liquidity 
B) the interest rate 
C) the rate of inflation 
D) none of the above 
A) liquidity 
B) the interest rate 
C) the rate of inflation 
D) none of the above

Question 15

The purchase of government bonds by the Fed leads to a(n)

Accepted Answer

A) increase in the supply of bonds and a decrease in bond prices. 
B) decrease in the supply of bonds and an increase in bond prices. 
C) increase in the demand of bonds and a decrease in the price of bonds. 
D) decrease in the demand of bonds and an increase in the price of bonds. 
A) increase in the supply of bonds and a decrease in bond prices. 
B) decrease in the supply of bonds and an increase in bond prices. 
C) increase in the demand of bonds and a decrease in the price of bonds. 
D) decrease in the demand of bonds and an increase in the price of bonds.

Question 16

According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply will

Accepted Answer

A) lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending. 
B) lead to a decrease in investment spending and an increase in real GDP which is greater than the decrease in investment spending. 
C) lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending. 
D) lead to an increase in investment spending and an increase in real GDP which is greater than the increase in investment spending. 
A) lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending. 
B) lead to a decrease in investment spending and an increase in real GDP which is greater than the decrease in investment spending. 
C) lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending. 
D) lead to an increase in investment spending and an increase in real GDP which is greater than the increase in investment spending.

Question 17

An increase in the money supply typically leads to

Accepted Answer

A) a reduction in the rate of interest. 
B) a decrease in the price level. 
C) a reduction in the velocity of money. 
D) an inward shift in money demand. 
A) a reduction in the rate of interest. 
B) a decrease in the price level. 
C) a reduction in the velocity of money. 
D) an inward shift in money demand.

Question 18

The transactions demand for money is the demand to hold money to

Accepted Answer

A) make regular, expected purchases. 
B) meet unplanned expenditures. 
C) store one's wealth. 
D) purchase bonds when interest rates increase. 
A) make regular, expected purchases. 
B) meet unplanned expenditures. 
C) store one's wealth. 
D) purchase bonds when interest rates increase.

Question 19

If the source of economic instability is generally variations in spending, then the Fed should

Accepted Answer

A) set money supply targets. 
B) print more money. 
C) buy gold. 
D) raise taxes. 
A) set money supply targets. 
B) print more money. 
C) buy gold. 
D) raise taxes.

Question 20

The demand for money is based on

Accepted Answer

A) the transactions demand, asset demand, and precautionary demand. 
B) the demand for cash, demand for securities, and the demand for real estate. 
C) the demand for consumption, demand for investment, and demand by government. 
D) a demand for liquidity and wealth. 
A) the transactions demand, asset demand, and precautionary demand. 
B) the demand for cash, demand for securities, and the demand for real estate. 
C) the demand for consumption, demand for investment, and demand by government. 
D) a demand for liquidity and wealth.

Money is a and a transaction is a .

An increase in the money supply, other things being constant

The quantity theory of money and prices asserts that

The relationship between the interest rate and the asset demand for money is

The demand for money for which the purpose is making unexpected purchases or meeting emergencies is considered to be part of

The hypothesis that changes in the money supply lead to proportional changes in the price level is called

According to the quantity theory of money, an excess quantity of money supplied will lead to

When people want to hold money to make regular planned expenditures, this is

Which of the following would NOT be a result of a contractionary monetary policy?

The net-export effect of contractionary monetary policy is

-Refer to the above figure. Suppose point A is the original equilibrium. If there is an increase in the money supply, the new short-run equilibrium is given by point

As real Gross Domestic Product (GDP)decreases, people hold

During a period of contractionary monetary policy

Which of the following represents the opportunity cost of holding money?

The purchase of government bonds by the Fed leads to a(n)

According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply will

An increase in the money supply typically leads to

The transactions demand for money is the demand to hold money to

If the source of economic instability is generally variations in spending, then the Fed should

The demand for money is based on

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

Money is a ________ and a transaction is a ________.

An increase in the money supply, other things being constant

The quantity theory of money and prices asserts that

The relationship between the interest rate and the asset demand for money is

The demand for money for which the purpose is making unexpected purchases or meeting emergencies is considered to be part of

The hypothesis that changes in the money supply lead to proportional changes in the price level is called

According to the quantity theory of money, an excess quantity of money supplied will lead to

When people want to hold money to make regular planned expenditures, this is

Which of the following would NOT be a result of a contractionary monetary policy?

The net-export effect of contractionary monetary policy is

-Refer to the above figure. Suppose point A is the original equilibrium. If there is an increase in the money supply, the new short-run equilibrium is given by point

As real Gross Domestic Product (GDP)decreases, people hold

During a period of contractionary monetary policy

Which of the following represents the opportunity cost of holding money?

The purchase of government bonds by the Fed leads to a(n)

According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply will

An increase in the money supply typically leads to

The transactions demand for money is the demand to hold money to

If the source of economic instability is generally variations in spending, then the Fed should

The demand for money is based on

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

Money is a and a transaction is a .