Question 1

Why is the equation MV = PQ an identity and not just an equation?

Accepted Answer

A) Because M x V equals real GDP and P x Q equals nominal GDP. 
B) Because M x V equals nominal GDP and P x Q equals real GDP. 
C) Because both M x V and P x Q equal real GDP. 
D) Because both M x V and P x Q equal nominal GDP. 
E) Because the monetarists assume it to be so. 
A) Because M x V equals real GDP and P x Q equals nominal GDP. 
B) Because M x V equals nominal GDP and P x Q equals real GDP. 
C) Because both M x V and P x Q equal real GDP. 
D) Because both M x V and P x Q equal nominal GDP. 
E) Because the monetarists assume it to be so.

Question 2

A bond pays a coupon rate of 7% and its present market price is $1,000 with exactly one year to maturity.What is the face value of the bond if the market interest rate is 7%?

Accepted Answer

The answer of A bond pays a coupon rate of...

Question 3

The interest rate can be thought of as which of the following?

Accepted Answer

A) As a reflection of the demand for money. 
B) As a reflection of the supply of money. 
C) As the price of money. 
D) As a result of the level of investment. 
E) As a result of the level of saving. 
A) As a reflection of the demand for money. 
B) As a reflection of the supply of money. 
C) As the price of money. 
D) As a result of the level of investment. 
E) As a result of the level of saving.

Question 4

The following figure shows information on the economy of Taurus:
a)If the money supply is equal to 80,what are the values of equilibrium interest rate and investment spending?
b)If the money supply is equal to 140,what are the values of equilibrium interest rate and investment spending?
c)If the money supply is equal to 120,and the money demand increases by 60,what are the values of equilibrium interest rate and investment spending?

Accepted Answer

a)interest rate: 7%;investment

Question 5

What does the equation of exchange say?

Accepted Answer

A) That if the economy is at full employment,then an increase in M will cause a proportionate decrease in P. 
B) MP = VQ. 
C) That the velocity and the supply of money vary directly with one another. 
D) MV = PQ. 
E) That other things being equal,the price level varies inversely with the supply of money. 
A) That if the economy is at full employment,then an increase in M will cause a proportionate decrease in P. 
B) MP = VQ. 
C) That the velocity and the supply of money vary directly with one another. 
D) MV = PQ. 
E) That other things being equal,the price level varies inversely with the supply of money.

Question 6

Below is some data concerning the money market?
  
-Refer to the information above to answer this question.If equilibrium national income is $680 and the transaction demand for money is 10 percent of national income and the equilibrium interest rate is 7 percent then what is the supply of money?

Accepted Answer

A) $149. 
B) $142. 
C) $135. 
D) $128. 
E) $121. 
A) $149. 
B) $142. 
C) $135. 
D) $128. 
E) $121.

Question 7

What does the term transactions demand for money refer to?

Accepted Answer

A) The demand for money by the Bank of Canada in order to settle international transactions. 
B) The demand for money by the public in order to effect transactions. 
C) The desire by the public to receive income in the form of money. 
D) The demand for money by the public in order to make financial investments. 
A) The demand for money by the Bank of Canada in order to settle international transactions. 
B) The demand for money by the public in order to effect transactions. 
C) The desire by the public to receive income in the form of money. 
D) The demand for money by the public in order to make financial investments.

Question 8

An increase in the money supply,according to Keynes,will cause investment and real GDP to increase.

Accepted Answer

A) True 
 B)False

Question 9

What does the velocity of money measure?

Accepted Answer

A) The number of times that money is spent on the same article during a year. 
B) The reciprocal of the reserve ratio. 
C) The average annual rate of increase in the money supply. 
D) The rate at which the money supply turns over in generating income. 
E) The ratio of the total demand for money to the transactions demand. 
A) The number of times that money is spent on the same article during a year. 
B) The reciprocal of the reserve ratio. 
C) The average annual rate of increase in the money supply. 
D) The rate at which the money supply turns over in generating income. 
E) The ratio of the total demand for money to the transactions demand.

Question 10

What is meant by the velocity of money?

Accepted Answer

A) The number of times per year that each unit of currency is used before it is recalled by The Canadian Mint. 
B) The number of times per year that the average unit of currency is spent buying final goods and services. 
C) The money supply divided by the level of GDP. 
D) The rate at which M1 changes into M2 or M3. 
A) The number of times per year that each unit of currency is used before it is recalled by The Canadian Mint. 
B) The number of times per year that the average unit of currency is spent buying final goods and services. 
C) The money supply divided by the level of GDP. 
D) The rate at which M1 changes into M2 or M3.

Question 11

Ginny's aunt has sent her a $10,000 bond to help finance her studies.The bond pays an annual interest of 8 percent and has two years left until redemption.Ginny wishes to cash in the bond now when the current interest rate is 5 percent.Ignoring brokerage and other costs,approximately how much will Ginny get for the bond?

Accepted Answer

The answer of Ginny's aunt has sent her a $10,000...

Question 12

What is the demand for money?

Accepted Answer

A) The same as the demand for income. 
B) It is made up of the transactions demand plus asset demand. 
C) It is made up of the transactions demand minus asset demand. 
D) Whatever the Bank of Canada determines it to be. 
A) The same as the demand for income. 
B) It is made up of the transactions demand plus asset demand. 
C) It is made up of the transactions demand minus asset demand. 
D) Whatever the Bank of Canada determines it to be.

Question 13

On a diagram with the interest rate on the vertical axis and the quantity of money demanded on the horizontal axis,how can the total demand for money be obtained?

Accepted Answer

A) By adding the transactions and the asset demand for money horizontally. 
B) By subtracting the transactions demand from the asset demand for money vertically. 
C) By subtracting the asset demand from the transactions demand for money horizontally. 
D) By adding the transactions and the asset demand for money vertically. 
E) The asset and transaction demands are unrelated and therefore cannot be added or subtracted. 
A) By adding the transactions and the asset demand for money horizontally. 
B) By subtracting the transactions demand from the asset demand for money vertically. 
C) By subtracting the asset demand from the transactions demand for money horizontally. 
D) By adding the transactions and the asset demand for money vertically. 
E) The asset and transaction demands are unrelated and therefore cannot be added or subtracted.

Question 14

According to monetarists,which of the following will cause the demand for money to rise?

Accepted Answer

A) An increase in interest rates. 
B) An increase in the price level. 
C) An increase in real GDP but a decrease in the price level. 
D) An increase in nominal GDP. 
E) An increase in the velocity of money. 
A) An increase in interest rates. 
B) An increase in the price level. 
C) An increase in real GDP but a decrease in the price level. 
D) An increase in nominal GDP. 
E) An increase in the velocity of money.

Question 15

What would cause the total demand for money to shift to the left?

Accepted Answer

A) An increase in nominal GDP. 
B) An increase in the rate of interest. 
C) A decrease in the rate of interest. 
D) An increase in the price level. 
E) A decrease in nominal GDP. 
A) An increase in nominal GDP. 
B) An increase in the rate of interest. 
C) A decrease in the rate of interest. 
D) An increase in the price level. 
E) A decrease in nominal GDP.

Question 16

Lara's grandmother left her a $5,000 bond with exactly one year left until redemption.It pays a nominal interest rate of 6 percent.The current interest rate on similar bonds is 3 percent.Lara has decided to sell the bond to raise money for a second-hand car.Ignoring brokerage fees and other transactions costs,approximately how much will Lara get for her bond?

Accepted Answer

The answer of Lara's grandmother left her a $5,000 bond...

Question 17

Which of the following is true about the Bank of Canada?

Accepted Answer

A) It is state-owned. 
B) It the sole issuer of the economy's currency. 
C) It is the bankers' bank. 
D) All of these. 
A) It is state-owned. 
B) It the sole issuer of the economy's currency. 
C) It is the bankers' bank. 
D) All of these.

Question 18

When can we be certain that the quantity of money demanded will decrease?

Accepted Answer

A) When nominal GDP decreases and the interest rate increases. 
B) When nominal GDP increases and the interest rate increases. 
C) When nominal GDP decreases and the interest rate decreases. 
D) When nominal GDP increases and the interest rate decreases. 
A) When nominal GDP decreases and the interest rate increases. 
B) When nominal GDP increases and the interest rate increases. 
C) When nominal GDP decreases and the interest rate decreases. 
D) When nominal GDP increases and the interest rate decreases.

Question 19

Table 9.1 contains data relating to the money market.
  
-Refer to Table 8.1 to answer this question.If the supply of money is $150,what is the value of the equilibrium interest rate?

Accepted Answer

A) 4 percent. 
B) 5 percent. 
C) 6 percent. 
D) 7 percent. 
A) 4 percent. 
B) 5 percent. 
C) 6 percent. 
D) 7 percent.

Question 20

When does the demand for money curve to shift to the left?

Accepted Answer

A) If nominal GDP increases. 
B) If the interest rate increases. 
C) If the price level decreases. 
D) If real GDP increases. 
A) If nominal GDP increases. 
B) If the interest rate increases. 
C) If the price level decreases. 
D) If real GDP increases.

Why is the equation MV = PQ an identity and not just an equation?

A bond pays a coupon rate of 7% and its present market price is $1,000 with exactly one year to maturity.What is the face value of the bond if the market interest rate is 7%?

The interest rate can be thought of as which of the following?

What does the equation of exchange say?

Below is some data concerning the money market? -Refer to the information above to answer this question.If equilibrium national income is $680 and the transaction demand for money is 10 percent of national income and the equilibrium interest rate is 7 percent then what is the supply of money?

What does the term transactions demand for money refer to?

An increase in the money supply,according to Keynes,will cause investment and real GDP to increase.

What does the velocity of money measure?

What is meant by the velocity of money?

What is the demand for money?

On a diagram with the interest rate on the vertical axis and the quantity of money demanded on the horizontal axis,how can the total demand for money be obtained?

According to monetarists,which of the following will cause the demand for money to rise?

What would cause the total demand for money to shift to the left?

Which of the following is true about the Bank of Canada?

When can we be certain that the quantity of money demanded will decrease?

Table 9.1 contains data relating to the money market. -Refer to Table 8.1 to answer this question.If the supply of money is $150,what is the value of the equilibrium interest rate?

When does the demand for money curve to shift to the left?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters

Exam 9: The Money Market and Monetary Policy

Why is the equation MV = PQ an identity and not just an equation?

A bond pays a coupon rate of 7% and its present market price is $1,000 with exactly one year to maturity.What is the face value of the bond if the market interest rate is 7%?

The interest rate can be thought of as which of the following?

What does the equation of exchange say?

Below is some data concerning the money market? -Refer to the information above to answer this question.If equilibrium national income is $680 and the transaction demand for money is 10 percent of national income and the equilibrium interest rate is 7 percent then what is the supply of money?

What does the term transactions demand for money refer to?

An increase in the money supply,according to Keynes,will cause investment and real GDP to increase.

What does the velocity of money measure?

What is meant by the velocity of money?

What is the demand for money?

On a diagram with the interest rate on the vertical axis and the quantity of money demanded on the horizontal axis,how can the total demand for money be obtained?

According to monetarists,which of the following will cause the demand for money to rise?

What would cause the total demand for money to shift to the left?

Which of the following is true about the Bank of Canada?

When can we be certain that the quantity of money demanded will decrease?

Table 9.1 contains data relating to the money market. -Refer to Table 8.1 to answer this question.If the supply of money is $150,what is the value of the equilibrium interest rate?

When does the demand for money curve to shift to the left?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters