Question 1

A change in the level of the supply of money

Accepted Answer

A) increases the long-run values of the interest rate and real output. 
B) decreases the long-run values of the interest rate and real output. 
C) has no effect on the long-run values of the interest rate,but may affect real output. 
D) has no effect on the long-run values of real output,but may affect the interest rate. 
E) has no effect on the long-run values of the interest rate and real output. 
A) increases the long-run values of the interest rate and real output. 
B) decreases the long-run values of the interest rate and real output. 
C) has no effect on the long-run values of the interest rate,but may affect real output. 
D) has no effect on the long-run values of real output,but may affect the interest rate. 
E) has no effect on the long-run values of the interest rate and real output.

Question 2

The money supply schedule is

Accepted Answer

A) horizontal because  
Is set by the central bank while P is taken as given. 
B) horizontal because  
Is set by the central bank. 
C) vertical because  
Is set by the households and firms while P is taken as given. 
D) vertical because  
And P are set by the central bank. 
E) vertical because  
Is set by the central bank while P is taken as given. 
A) horizontal because  
Is set by the central bank while P is taken as given. 
B) horizontal because  
Is set by the central bank. 
C) vertical because  
Is set by the households and firms while P is taken as given. 
D) vertical because  
And P are set by the central bank. 
E) vertical because  
Is set by the central bank while P is taken as given.

Question 3

What will be the effects of an increase in real output on the interest rate?

Accepted Answer

An increase in real output will increase

Question 4

Using a figure describing both the U.S.money market and the foreign exchange market,analyze the effects of an increase in the U.S.money supply on the dollar/euro exchange rate.

Accepted Answer

An increase in the U.S.money supply will

Question 5

Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate.

Accepted Answer

The main points are: An increase in the

Question 6

The aggregate real money demand schedule L(R,Y)

Accepted Answer

A) slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
B) slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. 
C) has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. 
D) slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
E) slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets. 
A) slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
B) slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. 
C) has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. 
D) slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. 
E) slopes downward because a rise in the interest rate makes consumers less focused on the liquidity of their assets.

Question 7

Inflation targeting was initiated by which central bank in 1989?

Accepted Answer

A) U.S. 
B) Japan 
C) Canada 
D) New Zealand 
E) U.K. 
A) U.S. 
B) Japan 
C) Canada 
D) New Zealand 
E) U.K.

Question 8

Explain the following figure.

Accepted Answer

The figure explains how the money market

Question 9

In the United States at the end of 2012,the total money supply,M1,amounted to approximately

Accepted Answer

A) 16 percent of that year's GNP. 
B) 20 percent of that year's GNP. 
C) 30 percent of that year's GNP. 
D) 40 percent of that year's GNP. 
E) 50 percent of that year's GNP. 
A) 16 percent of that year's GNP. 
B) 20 percent of that year's GNP. 
C) 30 percent of that year's GNP. 
D) 40 percent of that year's GNP. 
E) 50 percent of that year's GNP.

Question 10

What are the factors that determine the amount of money an individual desires to hold?

Accepted Answer

Three main factors: first,the

Question 11

What are the main factors that determine aggregate money demand?

Accepted Answer

The three main factors are interest rate

Question 12

An increase in a country's money supply causes

Accepted Answer

A) its currency to appreciate in the foreign exchange market while a reduction in the money supply causes its currency to depreciate. 
B) its currency to depreciate in the foreign exchange market while a reduction in the money supply causes its currency to appreciate. 
C) no effect on the values of it currency in international markets. 
D) its currency to depreciate in the foreign exchange market while a reduction in the money supply causes its currency to further depreciate. 
E) its currency to depreciate in the domestic market and appreciate in the foreign market. 
A) its currency to appreciate in the foreign exchange market while a reduction in the money supply causes its currency to depreciate. 
B) its currency to depreciate in the foreign exchange market while a reduction in the money supply causes its currency to appreciate. 
C) no effect on the values of it currency in international markets. 
D) its currency to depreciate in the foreign exchange market while a reduction in the money supply causes its currency to further depreciate. 
E) its currency to depreciate in the domestic market and appreciate in the foreign market.

Question 13

A sustained change in the monetary growth rate will

Accepted Answer

A) immediately affect equilibrium real money balances by raising the money interest rate. 
B) eventually affect equilibrium nominal money balances by raising the money interest rate. 
C) eventually affect equilibrium real money balances by reducing the money interest rate. 
D) eventually affect equilibrium real money balances by raising the real interest rate. 
E) eventually affect equilibrium real money balances by raising the money interest rate. 
A) immediately affect equilibrium real money balances by raising the money interest rate. 
B) eventually affect equilibrium nominal money balances by raising the money interest rate. 
C) eventually affect equilibrium real money balances by reducing the money interest rate. 
D) eventually affect equilibrium real money balances by raising the real interest rate. 
E) eventually affect equilibrium real money balances by raising the money interest rate.

Question 14

Money serves as all of the following EXCEPT

Accepted Answer

A) a medium of exchange. 
B) a unit of account. 
C) a store of value. 
D) a symbol that is made of or can be redeemed for a fixed amount of precious metal. 
E) a highly liquid asset. 
A) a medium of exchange. 
B) a unit of account. 
C) a store of value. 
D) a symbol that is made of or can be redeemed for a fixed amount of precious metal. 
E) a highly liquid asset.

Question 15

An economy's long-run equilibrium is

Accepted Answer

A) the equilibrium that would occur if prices were perfectly flexible. 
B) the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. 
C) the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. 
D) the equilibrium that would occur if prices were perfectly fixed to preserve full employment. 
E) the equilibrium that would occur if prices were perfectly fixed at the full employment point. 
A) the equilibrium that would occur if prices were perfectly flexible. 
B) the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. 
C) the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. 
D) the equilibrium that would occur if prices were perfectly fixed to preserve full employment. 
E) the equilibrium that would occur if prices were perfectly fixed at the full employment point.

Question 16

Which one of the following statements is the MOST accurate?

Accepted Answer

A) A decrease in the money supply lowers the interest rate while an increase in the money supply raises the interest rate,given the price level and output. 
B) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate,given the price level. 
C) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate,given the output level. 
D) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate,given the price level and output. 
E) An increase in the money supply does not usually affect the interest rate. 
A) A decrease in the money supply lowers the interest rate while an increase in the money supply raises the interest rate,given the price level and output. 
B) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate,given the price level. 
C) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate,given the output level. 
D) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate,given the price level and output. 
E) An increase in the money supply does not usually affect the interest rate.

Question 17

For a given level of

Accepted Answer

A) nominal GNP,changes in interest rates cause movements along the L(R,Y)schedule. 
B) real GNP,changes in interest rates cause a decrease of the L(R,Y)schedule. 
C) real GNP,changes in interest rates cause an increase of the L(R,Y)schedule. 
D) nominal GNP,changes in interest rates cause an increase in the L(R,Y)schedule. 
E) real GNP,changes in interest rates cause movements along the L(R,Y)schedule. 
A) nominal GNP,changes in interest rates cause movements along the L(R,Y)schedule. 
B) real GNP,changes in interest rates cause a decrease of the L(R,Y)schedule. 
C) real GNP,changes in interest rates cause an increase of the L(R,Y)schedule. 
D) nominal GNP,changes in interest rates cause an increase in the L(R,Y)schedule. 
E) real GNP,changes in interest rates cause movements along the L(R,Y)schedule.

Question 18

An increase in

Accepted Answer

A) nominal output raises the interest rate while a fall in real output lowers the interest rate,given the price level and the money supply. 
B) real output decreases the interest rate while a fall in real output increases the interest rate,given the price level. 
C) real output raises the interest rate while a fall in real output lowers the interest rate,given the money supply. 
D) nominal output raises the interest rate while a fall in real output lowers the interest rate,given the price level. 
E) real output raises the interest rate while a fall in real output lowers the interest rate,given the price level and the money supply. 
A) nominal output raises the interest rate while a fall in real output lowers the interest rate,given the price level and the money supply. 
B) real output decreases the interest rate while a fall in real output increases the interest rate,given the price level. 
C) real output raises the interest rate while a fall in real output lowers the interest rate,given the money supply. 
D) nominal output raises the interest rate while a fall in real output lowers the interest rate,given the price level. 
E) real output raises the interest rate while a fall in real output lowers the interest rate,given the price level and the money supply.

Question 19

In a classic paper,Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

Accepted Answer

A) 50 percent per month. 
B) 10 percent per month. 
C) 20 percent per month. 
D) 5 percent per month. 
E) 25 percent per month. 
A) 50 percent per month. 
B) 10 percent per month. 
C) 20 percent per month. 
D) 5 percent per month. 
E) 25 percent per month.

Question 20

Using figures for both the short run and the long run,show the effects of a permanent increase in the U.S.money supply.Try to line up your figures to the short and long run equilibria side by side.Assume that the U.S.real national income is constant.

Accepted Answer

@#IMG-DLM& 
An increase in the nominal money suppl

Exam 15: Money,Interest Rates, and Exchange Rates

A change in the level of the supply of money

The money supply schedule is

What will be the effects of an increase in real output on the interest rate?

Using a figure describing both the U.S.money market and the foreign exchange market,analyze the effects of an increase in the U.S.money supply on the dollar/euro exchange rate.

Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate.

The aggregate real money demand schedule L(R,Y)

Inflation targeting was initiated by which central bank in 1989?

Explain the following figure.

In the United States at the end of 2012,the total money supply,M1,amounted to approximately

What are the factors that determine the amount of money an individual desires to hold?

What are the main factors that determine aggregate money demand?

An increase in a country's money supply causes

A sustained change in the monetary growth rate will

Money serves as all of the following EXCEPT

An economy's long-run equilibrium is

Which one of the following statements is the MOST accurate?

For a given level of

An increase in

In a classic paper,Columbia University economist Phillip Cagan drew the line between inflation and hyperinflation at an inflation rate of

Using figures for both the short run and the long run,show the effects of a permanent increase in the U.S.money supply.Try to line up your figures to the short and long run equilibria side by side.Assume that the U.S.real national income is constant.

Introduction

World Trade: An Overview

Labor Productivity and Comparative Advantage: The Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: An Asset Approach

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: An Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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