Question 1

-Refer to the graph above to answer this question.If the interest rate is 8 percent what will people do?

Accepted Answer

A) Sell bonds which will cause bond prices to fall and the interest rate to fall. 
B) Buy bonds which will cause bond prices to rise and the interest rate to fall. 
C) Have insufficient liquidity which will cause them to reduce their spending on consumer goods. 
D) Buy bonds which will cause bond prices to fall and the interest rate to rise. 
A) Sell bonds which will cause bond prices to fall and the interest rate to fall. 
B) Buy bonds which will cause bond prices to rise and the interest rate to fall. 
C) Have insufficient liquidity which will cause them to reduce their spending on consumer goods. 
D) Buy bonds which will cause bond prices to fall and the interest rate to rise.

Question 2

The Keynesian transmission process refers to the way in which changes in interest rates affect the demand for bonds and their prices.

Accepted Answer

A) True 
 B)False

Question 3

Explain how an increase in the money supply affects the interest rate,investment,and income.How do the Keynesians and the monetarists differ in their views on this?

Accepted Answer

An increase in the supply of money cause

Question 4

According to Adam Smith,what is the wealth of a nation?

Accepted Answer

A) The sum of its money,gold,and stocks and bonds. 
B) Its nominal GDP. 
C) Its real GDP. 
D) The quantity of gold it possesses. 
A) The sum of its money,gold,and stocks and bonds. 
B) Its nominal GDP. 
C) Its real GDP. 
D) The quantity of gold it possesses.

Question 5

All of the following statements,except one,are correct.Which is the exception?

Accepted Answer

A) A decline in the demand for money will tend to reduce the equilibrium GDP. 
B) The equilibrium interest rate varies directly with money demand. 
C) The equilibrium interest rate varies inversely with money supply. 
D) The equilibrium interest rate varies directly with the level of prices. 
E) A decline in the supply of money tends to reduce equilibrium GDP. 
A) A decline in the demand for money will tend to reduce the equilibrium GDP. 
B) The equilibrium interest rate varies directly with money demand. 
C) The equilibrium interest rate varies inversely with money supply. 
D) The equilibrium interest rate varies directly with the level of prices. 
E) A decline in the supply of money tends to reduce equilibrium GDP.

Question 6

In the equation MV = PQ,what does Q stand for?

Accepted Answer

A) The quantity of goods and services sold. 
B) The quantity of investment. 
C) The quantity of money in circulation. 
D) The quantity of domestic demand. 
E) The quantity of consumption and investment. 
A) The quantity of goods and services sold. 
B) The quantity of investment. 
C) The quantity of money in circulation. 
D) The quantity of domestic demand. 
E) The quantity of consumption and investment.

Question 7

Explain why Keynesians believe that changes in the money supply have only a small impact on real GDP.

Accepted Answer

Keynes believed individuals hold some ca

Question 8

Which of the following is true,according to monetarists?

Accepted Answer

A) Changes in the money supply have no effect on real variables. 
B) The velocity of money increases as real GDP increases. 
C) The total demand for money equals the asset demand for money. 
D) Individuals hold idle balances for rational reasons. 
E) If the economy is at full employment,increasing the money supply will increase the price level. 
A) Changes in the money supply have no effect on real variables. 
B) The velocity of money increases as real GDP increases. 
C) The total demand for money equals the asset demand for money. 
D) Individuals hold idle balances for rational reasons. 
E) If the economy is at full employment,increasing the money supply will increase the price level.

Question 9

All else held constant,the price of bonds is _________ related to the rate of return.

Accepted Answer

A) not 
B) negatively 
C) positively 
D) positively or negatively 
A) not 
B) negatively 
C) positively 
D) positively or negatively

Question 10

Explain how a decrease in the price level affects the aggregate quantity demanded.

Accepted Answer

A) It causes an increase in the interest rate and a decrease in investment spending. 
B) It causes an increase in the interest rate and an increase in investment spending. 
C) It causes a decrease in the interest rate and a decrease in investment spending. 
D) It causes a decrease in the interest rate and an increase in investment spending. 
E) It causes a decrease in the interest rate and an increase in savings. 
A) It causes an increase in the interest rate and a decrease in investment spending. 
B) It causes an increase in the interest rate and an increase in investment spending. 
C) It causes a decrease in the interest rate and a decrease in investment spending. 
D) It causes a decrease in the interest rate and an increase in investment spending. 
E) It causes a decrease in the interest rate and an increase in savings.

Question 11

According to the Keynesian transmission process,what effect will an increase in the money supply have?

Accepted Answer

A) An increase in the interest rate,an increase in investment spending,and an increase in GDP. 
B) An increase in the interest rate,an increase in investment spending,and a decrease in GDP. 
C) An increase in the interest rate,a decrease in investment spending,and a decrease in GDP. 
D) A decrease in the interest rate,an increase in investment spending,and an increase in GDP. 
E) A decrease in the interest rate,a decrease in investment spending,and a decrease in GDP. 
A) An increase in the interest rate,an increase in investment spending,and an increase in GDP. 
B) An increase in the interest rate,an increase in investment spending,and a decrease in GDP. 
C) An increase in the interest rate,a decrease in investment spending,and a decrease in GDP. 
D) A decrease in the interest rate,an increase in investment spending,and an increase in GDP. 
E) A decrease in the interest rate,a decrease in investment spending,and a decrease in GDP.

Question 12

To be able to determine the value of the velocity of money what would one need to know?

Accepted Answer

A) Nominal and real GDP. 
B) The money supply and the price level. 
C) Nominal GDP and the money supply. 
D) Nominal GDP and the interest rate. 
E) Real GDP and the price level. 
A) Nominal and real GDP. 
B) The money supply and the price level. 
C) Nominal GDP and the money supply. 
D) Nominal GDP and the interest rate. 
E) Real GDP and the price level.

Question 13

Below is some data concerning the money market?
  
-Refer to the information above to answer this question.If the transaction demand for money is 10 percent of equilibrium national income which is 700 and the equilibrium interest rate is 6 percent then which of the following is true?

Accepted Answer

A) The supply of money must be $142. 
B) The transactions demand for money must be $72. 
C) The supply of money must be $149. 
D) The supply of money must be $135. 
A) The supply of money must be $142. 
B) The transactions demand for money must be $72. 
C) The supply of money must be $149. 
D) The supply of money must be $135.

Question 14

Suppose that the economy of Motherwell,depicted in the following table is a closed (no foreign trade),private (no government)economy.Assume that initially the money supply is $170.
   a)What are the values of equilibrium values of interest rate and GDP?
b)If the interest rate is 8 percent,is there a surplus or shortage of money?
c)If the interest rate is 7 percent and GDP is $1000 is there a surplus or shortage of goods and services? How much?
d)If the money supply is decreased to $150,what are the new values of equilibrium values of interest rate and GDP?
e)If the full-employment level of GDP is $900,what must be the level of the money supply to produce this level of GDP?

Accepted Answer

a)interest rate: 5%;GDP: $800.

Question 15

The equation of exchange is: MV = PQ.

Accepted Answer

A) True 
 B)False

Question 16

How does a surplus of money disappear?

Accepted Answer

A surplus of money would lead people to

-Refer to the graph above to answer this question.If the interest rate is 8 percent what will people do?

The Keynesian transmission process refers to the way in which changes in interest rates affect the demand for bonds and their prices.

Explain how an increase in the money supply affects the interest rate,investment,and income.How do the Keynesians and the monetarists differ in their views on this?

According to Adam Smith,what is the wealth of a nation?

All of the following statements,except one,are correct.Which is the exception?

In the equation MV = PQ,what does Q stand for?

Explain why Keynesians believe that changes in the money supply have only a small impact on real GDP.

Which of the following is true,according to monetarists?

All else held constant,the price of bonds is _________ related to the rate of return.

Explain how a decrease in the price level affects the aggregate quantity demanded.

According to the Keynesian transmission process,what effect will an increase in the money supply have?

To be able to determine the value of the velocity of money what would one need to know?

Below is some data concerning the money market? -Refer to the information above to answer this question.If the transaction demand for money is 10 percent of equilibrium national income which is 700 and the equilibrium interest rate is 6 percent then which of the following is true?

The equation of exchange is: MV = PQ.

How does a surplus of money disappear?

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

-Refer to the graph above to answer this question.If the interest rate is 8 percent what will people do?

The Keynesian transmission process refers to the way in which changes in interest rates affect the demand for bonds and their prices.

Explain how an increase in the money supply affects the interest rate,investment,and income.How do the Keynesians and the monetarists differ in their views on this?

According to Adam Smith,what is the wealth of a nation?

All of the following statements,except one,are correct.Which is the exception?

In the equation MV = PQ,what does Q stand for?

Explain why Keynesians believe that changes in the money supply have only a small impact on real GDP.

Which of the following is true,according to monetarists?

All else held constant,the price of bonds is _________ related to the rate of return.

Explain how a decrease in the price level affects the aggregate quantity demanded.

According to the Keynesian transmission process,what effect will an increase in the money supply have?

To be able to determine the value of the velocity of money what would one need to know?

Below is some data concerning the money market? -Refer to the information above to answer this question.If the transaction demand for money is 10 percent of equilibrium national income which is 700 and the equilibrium interest rate is 6 percent then which of the following is true?

The equation of exchange is: MV = PQ.

How does a surplus of money disappear?

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