Question 1

How would expansionary monetary policy affect the AD curve?

Accepted Answer

A) It would shift to the right. 
B) It would shift to the left. 
C) It would become more static. 
D) It would fall. 
A) It would shift to the right. 
B) It would shift to the left. 
C) It would become more static. 
D) It would fall.

Question 2

Which of the following best describes the income velocity of money?

Accepted Answer

A) V = PMs 
B) V = Y 
C) V = PY/Ms 
D) V = Ms/PY 
A) V = PMs 
B) V = Y 
C) V = PY/Ms 
D) V = Ms/PY

Question 3

The interest-rate-based monetary policy transmission mechanism emphasizes the

Accepted Answer

A) indirect effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. 
B) direct effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. 
C) direct effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. 
D) indirect effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. 
A) indirect effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. 
B) direct effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. 
C) direct effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. 
D) indirect effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level.

Question 4

The downward slope of the demand for money curve reflects the fact that

Accepted Answer

A) people hold more of their wealth in the form of money as the price level rises. 
B) people hold more of their wealth in the form of money as the price level falls. 
C) people hold more of their wealth in the form of money as the interest rate rises. 
D) people hold more of their wealth in the form of money as the interest rate falls. 
A) people hold more of their wealth in the form of money as the price level rises. 
B) people hold more of their wealth in the form of money as the price level falls. 
C) people hold more of their wealth in the form of money as the interest rate rises. 
D) people hold more of their wealth in the form of money as the interest rate falls.

Question 5

Holding money to meet unplanned expenditures is

Accepted Answer

A) the transactions demand for money. 
B) the capital demand for money. 
C) the precautionary demand for money. 
D) the asset demand for money. 
A) the transactions demand for money. 
B) the capital demand for money. 
C) the precautionary demand for money. 
D) the asset demand for money.

Question 6

The Federal Reserve conducted the policy of quantitative easing primarily when

Accepted Answer

A) the interest rate was close to zero. 
B) the interest rate was relatively high. 
C) the interest rate was too erratic to be controlled. 
D) the interest rate was very sensitive to the change in the money supply. 
A) the interest rate was close to zero. 
B) the interest rate was relatively high. 
C) the interest rate was too erratic to be controlled. 
D) the interest rate was very sensitive to the change in the money supply.

Question 7

According to Keynes, contractionary monetary policy

Accepted Answer

A) impacts the economy by an amount smaller than the change in investment. 
B) impacts the economy by an amount larger than the change in investment. 
C) will have no impact on the equilibrium nominal GDP. 
D) will have no impact on the equilibrium real GDP. 
A) impacts the economy by an amount smaller than the change in investment. 
B) impacts the economy by an amount larger than the change in investment. 
C) will have no impact on the equilibrium nominal GDP. 
D) will have no impact on the equilibrium real GDP.

Question 8

When the Federal Reserve conducts open market purchases to increase bank reserves without trying to alter the interest rate that is already close to zero, the policy action is called

Accepted Answer

A) qualitative easing. 
B) quantitative easing. 
C) qualitative tightening. 
D) quantitative tightening. 
A) qualitative easing. 
B) quantitative easing. 
C) qualitative tightening. 
D) quantitative tightening.

Question 9

Holding money as a medium of exchange to purchase goods and services and make payments is known as the

Accepted Answer

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

Question 10

Other things being equal, if the Fed raises the interest rate paid on excess reserves

Accepted Answer

A) the supply of reserves in the federal funds market will increase. 
B) the supply of reserves in the federal funds market will decrease. 
C) both the demand for reserves and the supply of reserves in the federal funds market will increase. 
D) both the demand for reserves and the supply of reserves in the federal funds market will decrease. 
A) the supply of reserves in the federal funds market will increase. 
B) the supply of reserves in the federal funds market will decrease. 
C) both the demand for reserves and the supply of reserves in the federal funds market will increase. 
D) both the demand for reserves and the supply of reserves in the federal funds market will decrease.

Question 11

The "V" in the equation of exchange MsV = PY refers to

Accepted Answer

A) a variable. 
B) income velocity of money. 
C) the velocity of inflation. 
D) a vector that links P to Y. 
A) a variable. 
B) income velocity of money. 
C) the velocity of inflation. 
D) a vector that links P to Y.

Question 12

Suppose the economy is operating below its full employment level. The Fed

Accepted Answer

A) is powerless to affect either aggregate demand or aggregate supply. Fiscal policy is needed. 
B) can move the economy toward the full employment level by expanding the money supply to increase aggregate supply. 
C) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand and to hold prices constant. 
D) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand through both its direct and its indirect effects. 
A) is powerless to affect either aggregate demand or aggregate supply. Fiscal policy is needed. 
B) can move the economy toward the full employment level by expanding the money supply to increase aggregate supply. 
C) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand and to hold prices constant. 
D) can move the economy toward the full employment level by expanding the money supply to increase aggregate demand through both its direct and its indirect effects.

Question 13

If a nation's nominal GDP is $40 billion, its money supply is $8 billion, and its price level is 1.25, then the velocity of money is

Accepted Answer

A) 0.2. 
B) 2.0. 
C) 5.0. 
D) 6.25. 
A) 0.2. 
B) 2.0. 
C) 5.0. 
D) 6.25.

Question 14

What are three reasons people want to hold money balances?

Accepted Answer

There are three reasons people hold mone

Question 15

An expansionary monetary policy results in lower interest rates, which in turn

Accepted Answer

A) increases foreign demand for U.S. financial instruments, raising the international price of the dollar and reducing net exports. 
B) increases the foreign demand for U.S. financial instruments, lowering the international price of the dollar and decreasing net exports. 
C) reduces the international price of the dollar and increases net exports. 
D) reduces the foreign demand for U.S. financial instruments and reduce net exports. 
A) increases foreign demand for U.S. financial instruments, raising the international price of the dollar and reducing net exports. 
B) increases the foreign demand for U.S. financial instruments, lowering the international price of the dollar and decreasing net exports. 
C) reduces the international price of the dollar and increases net exports. 
D) reduces the foreign demand for U.S. financial instruments and reduce net exports.

Question 16

When interest rates in the bond market go up

Accepted Answer

A) there is no impact on the price of existing bonds. 
B) the price of existing bonds goes up. 
C) the price of stocks goes up. 
D) the price of existing bonds goes down. 
A) there is no impact on the price of existing bonds. 
B) the price of existing bonds goes up. 
C) the price of stocks goes up. 
D) the price of existing bonds goes down.

Question 17

The Federal Open Market Committee engages in contractionary monetary policy by

Accepted Answer

A) lowering interest rates. 
B) creating excess reserves. 
C) selling bonds. 
D) buying bonds. 
A) lowering interest rates. 
B) creating excess reserves. 
C) selling bonds. 
D) buying bonds.

Question 18

The transaction demand for money varies

Accepted Answer

A) directly with the interest rate. 
B) directly with nominal GDP. 
C) inversely with nominal GDP and real GDP. 
D) inversely with nominal GDP only. 
A) directly with the interest rate. 
B) directly with nominal GDP. 
C) inversely with nominal GDP and real GDP. 
D) inversely with nominal GDP only.

Question 19

The rate at which banks can borrow excess reserves from other banks is equal to

Accepted Answer

A) the discount rate. 
B) the federal funds rate. 
C) the interest rate paid on reserves held with the Fed. 
D) the treasury bill rate. 
A) the discount rate. 
B) the federal funds rate. 
C) the interest rate paid on reserves held with the Fed. 
D) the treasury bill rate.

Question 20

During a period of expansionary 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.

How would expansionary monetary policy affect the AD curve?

Which of the following best describes the income velocity of money?

The interest-rate-based monetary policy transmission mechanism emphasizes the

The downward slope of the demand for money curve reflects the fact that

Holding money to meet unplanned expenditures is

The Federal Reserve conducted the policy of quantitative easing primarily when

According to Keynes, contractionary monetary policy

When the Federal Reserve conducts open market purchases to increase bank reserves without trying to alter the interest rate that is already close to zero, the policy action is called

Holding money as a medium of exchange to purchase goods and services and make payments is known as the

Other things being equal, if the Fed raises the interest rate paid on excess reserves

The "V" in the equation of exchange MsV = PY refers to

Suppose the economy is operating below its full employment level. The Fed

If a nation's nominal GDP is $40 billion, its money supply is $8 billion, and its price level is 1.25, then the velocity of money is

What are three reasons people want to hold money balances?

An expansionary monetary policy results in lower interest rates, which in turn

When interest rates in the bond market go up

The Federal Open Market Committee engages in contractionary monetary policy by

The transaction demand for money varies

The rate at which banks can borrow excess reserves from other banks is equal to

During a period of expansionary monetary policy

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

How would expansionary monetary policy affect the AD curve?

Which of the following best describes the income velocity of money?

The interest-rate-based monetary policy transmission mechanism emphasizes the

The downward slope of the demand for money curve reflects the fact that

Holding money to meet unplanned expenditures is

The Federal Reserve conducted the policy of quantitative easing primarily when

According to Keynes, contractionary monetary policy

When the Federal Reserve conducts open market purchases to increase bank reserves without trying to alter the interest rate that is already close to zero, the policy action is called

Holding money as a medium of exchange to purchase goods and services and make payments is known as the

Other things being equal, if the Fed raises the interest rate paid on excess reserves

The "V" in the equation of exchange MsV = PY refers to

Suppose the economy is operating below its full employment level. The Fed

If a nation's nominal GDP is $40 billion, its money supply is $8 billion, and its price level is 1.25, then the velocity of money is

What are three reasons people want to hold money balances?

An expansionary monetary policy results in lower interest rates, which in turn

When interest rates in the bond market go up

The Federal Open Market Committee engages in contractionary monetary policy by

The transaction demand for money varies

The rate at which banks can borrow excess reserves from other banks is equal to

During a period of expansionary monetary policy

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