Question 1

If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be smaller than expected, then inflation:

Accepted Answer

A)  will be lower than expected. 
B)  will be higher than expected. 
C)  will be unaffected. 
D)  could be higher or lower than expected. 
A)  will be lower than expected. 
B)  will be higher than expected. 
C)  will be unaffected. 
D)  could be higher or lower than expected.

Question 2

Since classical economists and monetarists believe that the economy operates at full employment, real GDP, that is, along the vertical segment of aggregate supply, then:

Accepted Answer

A)  any increase in the money supply can only end up raising the price level. 
B)  any increase in the money supply can only end up lowering the price level. 
C)  any decrease in the money supply can only end up raising the price level. 
D)  changes in the money supply will not affect the price level. 
A)  any increase in the money supply can only end up raising the price level. 
B)  any increase in the money supply can only end up lowering the price level. 
C)  any decrease in the money supply can only end up raising the price level. 
D)  changes in the money supply will not affect the price level.

Question 3

The 'conditional-projections' for the growth of the monetary aggregate, M3, were conditional because:

Accepted Answer

A)  they were conditional on government policies. 
B)  they depended on local industrial conditions. 
C)  they depended on the world or domestic economic conditions. 
D)  they depended on the climate change. 
A)  they were conditional on government policies. 
B)  they depended on local industrial conditions. 
C)  they depended on the world or domestic economic conditions. 
D)  they depended on the climate change.

Question 4

The equation of exchange (MV = PY) is:

Accepted Answer

A)  a theory, because no one knows what the value of V is. 
B)  used by Keynesian economists to justify the monetarist transmission mechanism. 
C)  only held if V is constant. 
D)  an accounting identity and is by definition true. 
A)  a theory, because no one knows what the value of V is. 
B)  used by Keynesian economists to justify the monetarist transmission mechanism. 
C)  only held if V is constant. 
D)  an accounting identity and is by definition true.

Question 5

If the velocity of money = 1, then the money supply will be:

Accepted Answer

A)  equal to the price level. 
B)  equal to nominal GDP. 
C)  equal to real GDP. 
D)  equal to the difference between nominal and real GDP. 
A)  equal to the price level. 
B)  equal to nominal GDP. 
C)  equal to real GDP. 
D)  equal to the difference between nominal and real GDP.

Question 6

The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:

Accepted Answer

A)  fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP. 
B)  fall, boosting investment and shifting the AD curve rightward, leading to a decrease in real GDP. 
C)  rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP. 
D)  rise, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP. 
A)  fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP. 
B)  fall, boosting investment and shifting the AD curve rightward, leading to a decrease in real GDP. 
C)  rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP. 
D)  rise, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP.

Question 7

Since the Australian dollar was floated in 1983, the RBA has:

Accepted Answer

A)  not operated in the FOREX market. 
B)  intervened in the FOREX market continually in order to maintain the Australian dollar at a certain level. 
C)  intervened in the FOREX market only when the Australian dollar is under speculative pressure or when it is extremely volatile. 
D)  handed control of the Australian dollar over to the Treasury. 
A)  not operated in the FOREX market. 
B)  intervened in the FOREX market continually in order to maintain the Australian dollar at a certain level. 
C)  intervened in the FOREX market only when the Australian dollar is under speculative pressure or when it is extremely volatile. 
D)  handed control of the Australian dollar over to the Treasury.

Question 8

Which of the following is a reason for the Keynesian view that monetary policy plays a minor role in affecting the economy?

Accepted Answer

A)  The money demand curve is vertical. 
B)  The investment curve is very steep. 
C)  The money demand curve is horizontal at any interest rate. 
D)  The monetary rule. 
A)  The money demand curve is vertical. 
B)  The investment curve is very steep. 
C)  The money demand curve is horizontal at any interest rate. 
D)  The monetary rule.

Question 9

Monetarists believe that an increase in the money supply will lead to:

Accepted Answer

A)  an increase in real GDP. 
B)  an increase in leisure time. 
C)  an increase in the price level. 
D)  a decrease in nominal GDP. 
A)  an increase in real GDP. 
B)  an increase in leisure time. 
C)  an increase in the price level. 
D)  a decrease in nominal GDP.

Question 10

Australia:

Accepted Answer

A)  did not implement monetarist policy during 1976-85. 
B)  has only used the classical economics approach in designing monetary policy. 
C)  rejected a monetarist policy during 1976-85. 
D)  implemented a monetarist policy during 1976-85. 
A)  did not implement monetarist policy during 1976-85. 
B)  has only used the classical economics approach in designing monetary policy. 
C)  rejected a monetarist policy during 1976-85. 
D)  implemented a monetarist policy during 1976-85.

Question 11

All economists would agree that velocity:

Accepted Answer

A)  may be variable over the long term. 
B)  may be variable over the short term. 
C)  cannot be defined over the short term. 
D)  may be stable over the long term. 
A)  may be variable over the long term. 
B)  may be variable over the short term. 
C)  cannot be defined over the short term. 
D)  may be stable over the long term.

Question 12

The quantity theory of money of the classical economists says that a change in the money supply will produce a:

Accepted Answer

A)  proportional change in the price level. 
B)  greater than proportional change in the price level. 
C)  less than proportional change in the price level. 
D)  wide variation in the velocity of money. 
A)  proportional change in the price level. 
B)  greater than proportional change in the price level. 
C)  less than proportional change in the price level. 
D)  wide variation in the velocity of money.

Question 13

According to the quantity theory of money, if an economy produces 5000 units of output, its money supply equals $40 000 and the velocity of money equals one, then the price level will equal:

Accepted Answer

A)  $0.13. 
B)  $1.25. 
C)  $8. 
D)  $200. 
A)  $0.13. 
B)  $1.25. 
C)  $8. 
D)  $200.

Question 14

Which of the following is the equation of exchange?

Accepted Answer

A)  MQ=PV. 
B)  PV=MQ. 
C)  MP=VQ. 
D)  MV=PQ. 
A)  MQ=PV. 
B)  PV=MQ. 
C)  MP=VQ. 
D)  MV=PQ.

Question 15

If the RBA is 'testing' the foreign exchange market, it is trying to:

Accepted Answer

A)  reduce excessive fluctuations in the $A. 
B)  maintain the $A at its agreed fixed rate. 
C)  see whether movement in the value of the currency is real or speculative. 
D)  smooth the market. 
A)  reduce excessive fluctuations in the $A. 
B)  maintain the $A at its agreed fixed rate. 
C)  see whether movement in the value of the currency is real or speculative. 
D)  smooth the market.

Question 16

According to the quantity theory of money, if M's growth is lower than Q's, then:

Accepted Answer

A)  V falls. 
B)  V rises. 
C)  P stays the same. 
D)  P falls. 
A)  V falls. 
B)  V rises. 
C)  P stays the same. 
D)  P falls.

Question 17

If nominal GDP is $500 billion, the money supply is $100 billion and the velocity of money is 5, then real GDP is:

Accepted Answer

A)  $20 billion. 
B)  $100 billion. 
C)  $500 billion. 
D)  indeterminate as there is no information about nominal GDP. 
A)  $20 billion. 
B)  $100 billion. 
C)  $500 billion. 
D)  indeterminate as there is no information about nominal GDP.

Question 18

The only interest rate the RBA has direct control over is the:

Accepted Answer

A)  cash rate. 
B)  bank-accepted bill rate. 
C)  prime lending rate. 
D)  personal loan rate. 
A)  cash rate. 
B)  bank-accepted bill rate. 
C)  prime lending rate. 
D)  personal loan rate.

Question 19

According to monetarists:

Accepted Answer

A)  if the money supply is expanding too much, lower rates of inflation will be likely. 
B)  if the money supply is expanding too slowly, the unemployment rate may increase. 
C)  if the money supply is expanding too slowly, prices may increase. 
D)  if the money demand is expanding too much, lower rates of inflation will be likely. 
A)  if the money supply is expanding too much, lower rates of inflation will be likely. 
B)  if the money supply is expanding too slowly, the unemployment rate may increase. 
C)  if the money supply is expanding too slowly, prices may increase. 
D)  if the money demand is expanding too much, lower rates of inflation will be likely.

Question 20

The goal of the monetary policy in Australia:

Accepted Answer

A)  is to help low-income earners find a better job. 
B)  is to provide everyone with a high income. 
C)  is to keep the interest rates as high as possible. 
D)  is to keep inflation between 2 and 3 per cent. 
A)  is to help low-income earners find a better job. 
B)  is to provide everyone with a high income. 
C)  is to keep the interest rates as high as possible. 
D)  is to keep inflation between 2 and 3 per cent.

If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be smaller than expected, then inflation:

Since classical economists and monetarists believe that the economy operates at full employment, real GDP, that is, along the vertical segment of aggregate supply, then:

The 'conditional-projections' for the growth of the monetary aggregate, M3, were conditional because:

The equation of exchange (MV = PY) is:

If the velocity of money = 1, then the money supply will be:

The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:

Since the Australian dollar was floated in 1983, the RBA has:

Which of the following is a reason for the Keynesian view that monetary policy plays a minor role in affecting the economy?

Monetarists believe that an increase in the money supply will lead to:

Australia:

All economists would agree that velocity:

The quantity theory of money of the classical economists says that a change in the money supply will produce a:

According to the quantity theory of money, if an economy produces 5000 units of output, its money supply equals $40 000 and the velocity of money equals one, then the price level will equal:

Which of the following is the equation of exchange?

If the RBA is 'testing' the foreign exchange market, it is trying to:

According to the quantity theory of money, if M's growth is lower than Q's, then:

If nominal GDP is $500 billion, the money supply is $100 billion and the velocity of money is 5, then real GDP is:

The only interest rate the RBA has direct control over is the:

According to monetarists:

The goal of the monetary policy in Australia:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

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Exam 17: Macroeconomic Policy I: Monetary Policy

If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be smaller than expected, then inflation:

Since classical economists and monetarists believe that the economy operates at full employment, real GDP, that is, along the vertical segment of aggregate supply, then:

The 'conditional-projections' for the growth of the monetary aggregate, M3, were conditional because:

The equation of exchange (MV = PY) is:

If the velocity of money = 1, then the money supply will be:

The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:

Since the Australian dollar was floated in 1983, the RBA has:

Which of the following is a reason for the Keynesian view that monetary policy plays a minor role in affecting the economy?

Monetarists believe that an increase in the money supply will lead to:

Australia:

All economists would agree that velocity:

The quantity theory of money of the classical economists says that a change in the money supply will produce a:

According to the quantity theory of money, if an economy produces 5000 units of output, its money supply equals $40 000 and the velocity of money equals one, then the price level will equal:

Which of the following is the equation of exchange?

If the RBA is 'testing' the foreign exchange market, it is trying to:

According to the quantity theory of money, if M's growth is lower than Q's, then:

If nominal GDP is $500 billion, the money supply is $100 billion and the velocity of money is 5, then real GDP is:

The only interest rate the RBA has direct control over is the:

According to monetarists:

The goal of the monetary policy in Australia:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters