Question 1

The money demand curve is downward sloping because

Accepted Answer

A)  lower interest rates cause households and firms to switch from money to financial assets. 
B)  lower interest rates cause households and firms to switch from financial assets to money. 
C)  lower interest rates cause households and firms to switch from money to shares. 
D)  lower interest rates cause households and firms to switch from money to bonds. 
A)  lower interest rates cause households and firms to switch from money to financial assets. 
B)  lower interest rates cause households and firms to switch from financial assets to money. 
C)  lower interest rates cause households and firms to switch from money to shares. 
D)  lower interest rates cause households and firms to switch from money to bonds. B

Question 2

If real GDP decreases

Accepted Answer

A)  there will be an upward movement along the money demand curve. 
B)  there will be a downward movement along the money demand curve. 
C)  the money demand curve will shift to the right. 
D)  the money demand curve will shift to the left. 
A)  there will be an upward movement along the money demand curve. 
B)  there will be a downward movement along the money demand curve. 
C)  the money demand curve will shift to the right. 
D)  the money demand curve will shift to the left. D

Question 3

Figure 16.2  
-Refer to Figure 16.2.In this figure,a movement from point A to point B would be caused by

Accepted Answer

A)  a decrease in real GDP. 
B)  an increase in the price level. 
C)  a decrease in the price level. 
D)  an increase in the interest rate. 
A)  a decrease in real GDP. 
B)  an increase in the price level. 
C)  a decrease in the price level. 
D)  an increase in the interest rate. D

Question 4

Explain how a decrease in the tax rate on interest earned on savings would affect savings,investment,the interest rate,and economic growth.

Accepted Answer

One determinant of the amount of househo

Question 5

The Reserve Bank of Australia has its independence from the government guaranteed by the Australian Constitution.

Accepted Answer

A) True 
 B)False

Question 6

Explain why the money demand curve is downward sloping.

Accepted Answer

Households and firms have a choice betwe

Question 7

A government could use control of a central bank to further its political interests by

Accepted Answer

A)  decreasing the cash rate before an election to decrease production and employment. 
B)  decreasing the cash rate before an election to increase production and employment. 
C)  decreasing the cash rate before an election to decrease inflation. 
D)  increasing the cash rate before an election to increase inflation. 
A)  decreasing the cash rate before an election to decrease production and employment. 
B)  decreasing the cash rate before an election to increase production and employment. 
C)  decreasing the cash rate before an election to decrease inflation. 
D)  increasing the cash rate before an election to increase inflation.

Question 8

If technological change increases the profitability of new investment for firms,then the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________.

Accepted Answer

A)  supply; right; fall 
B)  supply; left; rise 
C)  demand; right; rise 
D)  demand; left; fall 
A)  supply; right; fall 
B)  supply; left; rise 
C)  demand; right; rise 
D)  demand; left; fall

Question 9

Use the dynamic aggregate demand and aggregate supply model to explain what monetary policy stance the Reserve Bank of Australia should take if the economy is entering a period of high inflation.

Accepted Answer

If economic indicators are showing that

Question 10

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Accepted Answer

A)  short-term real interest rates; long-term nominal interest rates 
B)  short-term nominal interest rates; long-term nominal interest rates 
C)  short-term real interest rates; long-term real interest rates 
D)  short-term nominal interest rates; long-term real interest rates 
A)  short-term real interest rates; long-term nominal interest rates 
B)  short-term nominal interest rates; long-term nominal interest rates 
C)  short-term real interest rates; long-term real interest rates 
D)  short-term nominal interest rates; long-term real interest rates

Question 11

Which of the following is not true about monetary policy?

Accepted Answer

A)  Contractionary monetary policy is often more effective at reducing the rate of economic growth than expansionary monetary policy is at increasing the rate of economic growth. 
B)  The burden of contractionary monetary policy is not spread evenly among the population. 
C)  Contractionary monetary policy can reduce export earnings. 
D)  The full effect of monetary policy impacts the economy immediately as, unlike fiscal policy, monetary policy is not subject to time lags. 
A)  Contractionary monetary policy is often more effective at reducing the rate of economic growth than expansionary monetary policy is at increasing the rate of economic growth. 
B)  The burden of contractionary monetary policy is not spread evenly among the population. 
C)  Contractionary monetary policy can reduce export earnings. 
D)  The full effect of monetary policy impacts the economy immediately as, unlike fiscal policy, monetary policy is not subject to time lags.

Question 12

Figure 16.4  
-Refer to Figure 16.4.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Accepted Answer

A)  Decrease income taxes 
B)  Increase government spending 
C)  Buy financial securities 
D)  Sell financial securities 
A)  Decrease income taxes 
B)  Increase government spending 
C)  Buy financial securities 
D)  Sell financial securities

Question 13

The demand for loanable funds has a ________ slope because,the lower the interest rate,the ________ number of investment projects are profitable,and the ________ the quantity of loanable funds demanded.

Accepted Answer

A)  negative; greater; greater 
B)  negative; greater; lesser 
C)  negative; lesser; greater 
D)  positive; lesser; lesser 
A)  negative; greater; greater 
B)  negative; greater; lesser 
C)  negative; lesser; greater 
D)  positive; lesser; lesser

Question 14

If interest rates rise

Accepted Answer

A)  an investment in shares becomes relatively more attractive. 
B)  an investment in shares becomes relatively less attractive. 
C)  this does not change the attractiveness of investments in the share market. 
D)  investors will respond by cutting back on investments in interest-earning assets such as government bonds. 
A)  an investment in shares becomes relatively more attractive. 
B)  an investment in shares becomes relatively less attractive. 
C)  this does not change the attractiveness of investments in the share market. 
D)  investors will respond by cutting back on investments in interest-earning assets such as government bonds.

Question 15

Figure 16.6  
-Refer to Figure 16.6.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Accepted Answer

A)  Decrease income taxes 
B)  Increase government spending 
C)  Buy financial securities 
D)  Sell financial securities 
A)  Decrease income taxes 
B)  Increase government spending 
C)  Buy financial securities 
D)  Sell financial securities

Question 16

Which of the following are goals of monetary policy?

Accepted Answer

A)  Maximising the value of the dollar relative to other currencies, economic growth, and high employment. 
B)  Price stability, maximising the value of the dollar relative to other currencies, and high employment. 
C)  Price stability, economic growth, and high employment. 
D)  Price stability, economic growth, and maximising the value of the dollar relative to other currencies. 
A)  Maximising the value of the dollar relative to other currencies, economic growth, and high employment. 
B)  Price stability, maximising the value of the dollar relative to other currencies, and high employment. 
C)  Price stability, economic growth, and high employment. 
D)  Price stability, economic growth, and maximising the value of the dollar relative to other currencies.

Question 17

A rise in interest rates will lead to a negative income effect for households that are net borrowers.

Accepted Answer

A) True 
 B)False

Question 18

The money demand curve has a

Accepted Answer

A)  negative slope. 
B)  positive slope. 
C)  zero slope and is perfectly elastic. 
D)  positive slope for low levels of money demand and a negative slope for high levels of money demand. 
A)  negative slope. 
B)  positive slope. 
C)  zero slope and is perfectly elastic. 
D)  positive slope for low levels of money demand and a negative slope for high levels of money demand.

Question 19

Which of the following is the main goal of monetary policy in Australia?

Accepted Answer

A)  Lowering the rate of unemployment 
B)  Increasing the value of the Australian dollar relative to other currencies 
C)  Economic growth 
D)  Price stability 
A)  Lowering the rate of unemployment 
B)  Increasing the value of the Australian dollar relative to other currencies 
C)  Economic growth 
D)  Price stability

Question 20

An increase in the real interest rate results in which of the following?

Accepted Answer

A)  An increase in the demand for loanable funds. 
B)  A decrease in the demand for loanable funds. 
C)  An increase in the quantity of loanable funds supplied. 
D)  Both B and C will occur as a result of an increase in the real interest rate. 
A)  An increase in the demand for loanable funds. 
B)  A decrease in the demand for loanable funds. 
C)  An increase in the quantity of loanable funds supplied. 
D)  Both B and C will occur as a result of an increase in the real interest rate.

The money demand curve is downward sloping because

If real GDP decreases

Figure 16.2 -Refer to Figure 16.2.In this figure,a movement from point A to point B would be caused by

Explain how a decrease in the tax rate on interest earned on savings would affect savings,investment,the interest rate,and economic growth.

The Reserve Bank of Australia has its independence from the government guaranteed by the Australian Constitution.

Explain why the money demand curve is downward sloping.

A government could use control of a central bank to further its political interests by

If technological change increases the profitability of new investment for firms,then the curve for loanable funds will shift to the and the equilibrium real interest rate will .

Use the dynamic aggregate demand and aggregate supply model to explain what monetary policy stance the Reserve Bank of Australia should take if the economy is entering a period of high inflation.

The money market model is concerned with and the loanable funds market model is concerned with .

Which of the following is not true about monetary policy?

Figure 16.4 -Refer to Figure 16.4.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

The demand for loanable funds has a slope because,the lower the interest rate,the number of investment projects are profitable,and the the quantity of loanable funds demanded.

If interest rates rise

Figure 16.6 -Refer to Figure 16.6.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Which of the following are goals of monetary policy?

A rise in interest rates will lead to a negative income effect for households that are net borrowers.

The money demand curve has a

Which of the following is the main goal of monetary policy in Australia?

An increase in the real interest rate results in which of the following?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 16: Money, banks, and the Federal Reserve System

The money demand curve is downward sloping because

If real GDP decreases

Figure 16.2 -Refer to Figure 16.2.In this figure,a movement from point A to point B would be caused by

Explain how a decrease in the tax rate on interest earned on savings would affect savings,investment,the interest rate,and economic growth.

The Reserve Bank of Australia has its independence from the government guaranteed by the Australian Constitution.

Explain why the money demand curve is downward sloping.

A government could use control of a central bank to further its political interests by

If technological change increases the profitability of new investment for firms,then the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________.

Use the dynamic aggregate demand and aggregate supply model to explain what monetary policy stance the Reserve Bank of Australia should take if the economy is entering a period of high inflation.

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Which of the following is not true about monetary policy?

Figure 16.4 -Refer to Figure 16.4.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

The demand for loanable funds has a ________ slope because,the lower the interest rate,the ________ number of investment projects are profitable,and the ________ the quantity of loanable funds demanded.

If interest rates rise

Figure 16.6 -Refer to Figure 16.6.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Which of the following are goals of monetary policy?

A rise in interest rates will lead to a negative income effect for households that are net borrowers.

The money demand curve has a

Which of the following is the main goal of monetary policy in Australia?

An increase in the real interest rate results in which of the following?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

If technological change increases the profitability of new investment for firms,then the curve for loanable funds will shift to the and the equilibrium real interest rate will .

The money market model is concerned with and the loanable funds market model is concerned with .

The demand for loanable funds has a slope because,the lower the interest rate,the number of investment projects are profitable,and the the quantity of loanable funds demanded.