Question 1

By spreading her investments out over many different assets,an investor achieves

Accepted Answer

A) a higher expected return. 
B) increased risk. 
C) diversification. 
D) greater liquidity. 
A) a higher expected return. 
B) increased risk. 
C) diversification. 
D) greater liquidity.

Question 2

M2 includes

Accepted Answer

A) large-denomination time deposits. 
B) institutional MMMFs. 
C) commercial paper. 
D) M1. 
A) large-denomination time deposits. 
B) institutional MMMFs. 
C) commercial paper. 
D) M1.

Question 3

The idea that investors today compare the returns on bonds with differing times to maturity to see which is expected to give them the highest return is the underlying principle behind the ________ of the term structure of interest rates.

Accepted Answer

A) expectations theory 
B) investors' viewpoint analysis 
C) segmented-markets theory 
D) yield comparison theory 
A) expectations theory 
B) investors' viewpoint analysis 
C) segmented-markets theory 
D) yield comparison theory

Question 4

If the income elasticity of money demand is 3/4 and income increases 8%,by about how much does the price level change?

Accepted Answer

A) Falls by 6% 
B) Unchanged 
C) Rises by 6% 
D) Rises by 8% 
A) Falls by 6% 
B) Unchanged 
C) Rises by 6% 
D) Rises by 8%

Question 5

If the nominal money supply grows 6%,real income rises 2%,and the inflation rate is 5%,then the income elasticity of money demand is

Accepted Answer

A) 0)5. 
B) 0)75. 
C) 1)0. 
D) 1)5. 
A) 0)5. 
B) 0)75. 
C) 1)0. 
D) 1)5.

Question 6

Money demand is given by
Md/P = 1000 + .2Y - 1000i.
Given that P = 200,Y = 2000,and i = .10,velocity is equal to

Accepted Answer

A) 0)65. 
B) 0)75. 
C) 1)33. 
D) 1)54. 
A) 0)65. 
B) 0)75. 
C) 1)33. 
D) 1)54.

Question 7

If nominal money supply grows 3% and real money demand grows 8%,the inflation rate is

Accepted Answer

A) -5%. 
B) 8/3%. 
C) 5%. 
D) 11%. 
A) -5%. 
B) 8/3%. 
C) 5%. 
D) 11%.

Question 8

Give five examples of factors that could reduce the demand for money.

Accepted Answer

Lower price level,lower real income,high

Question 9

Under a situation of asset market equilibrium,

Accepted Answer

A) the quantity of money supplied equals the quantity of money demanded. 
B) the quantity of money supplied equals the quantity of nonmonetary assets demanded. 
C) the quantity of nonmonetary assets supplied equals the quantity of monetary assets demanded. 
D) the quantity of money supplied equals the quantity of nonmonetary assets supplied. 
A) the quantity of money supplied equals the quantity of money demanded. 
B) the quantity of money supplied equals the quantity of nonmonetary assets demanded. 
C) the quantity of nonmonetary assets supplied equals the quantity of monetary assets demanded. 
D) the quantity of money supplied equals the quantity of nonmonetary assets supplied.

Question 10

If the quantity of money demanded exceeds the quantity of money supplied,then

Accepted Answer

A) the quantity of nonmonetary assets demanded exceeds the quantity supplied. 
B) the quantity of nonmonetary assets supplied exceeds the quantity demanded. 
C) the quantity of nonmonetary assets demanded will still equal the quantity supplied,all else being equal. 
D) you can make no conclusions about the relative supply and demand of nonmonetary assets. 
A) the quantity of nonmonetary assets demanded exceeds the quantity supplied. 
B) the quantity of nonmonetary assets supplied exceeds the quantity demanded. 
C) the quantity of nonmonetary assets demanded will still equal the quantity supplied,all else being equal. 
D) you can make no conclusions about the relative supply and demand of nonmonetary assets.

Question 11

Bonds sold by the U.S.government that offer a certain real interest rate are known as

Accepted Answer

A) zero-coupon bonds. 
B) Treasury Inflation-Protected Securities. 
C) denominalized securities. 
D) savings bonds. 
A) zero-coupon bonds. 
B) Treasury Inflation-Protected Securities. 
C) denominalized securities. 
D) savings bonds.

Question 12

Which of the following is most likely to lead to a decrease of 10% in the nominal demand for money?

Accepted Answer

A) An increase in real income of 5% 
B) A decrease in real income of 5% 
C) A decline of 10% in the price level 
D) An increase of 10% in the price level 
A) An increase in real income of 5% 
B) A decrease in real income of 5% 
C) A decline of 10% in the price level 
D) An increase of 10% in the price level

Question 13

In some countries,prices in stores are listed in terms of U.S.dollars,rather than in units of the local currency.That's most likely because

Accepted Answer

A) the country's political system is unstable. 
B) interest rates are higher using U.S.dollars than using the local currency. 
C) there is no other store of value. 
D) the country has experienced high rates of inflation. 
A) the country's political system is unstable. 
B) interest rates are higher using U.S.dollars than using the local currency. 
C) there is no other store of value. 
D) the country has experienced high rates of inflation.

Question 14

If real income rises 5%,prices rise 3%,and nominal money demand rises 7%,what is the income elasticity of real money demand?

Accepted Answer

A) 3/4 
B) 4/5 
C) 5/6 
D) 6/7 
A) 3/4 
B) 4/5 
C) 5/6 
D) 6/7

Question 15

What are the major components of M1? What are the major components of M2? Describe each component.

Accepted Answer

The principal components of M1 are curre

Question 16

Define asset market equilibrium and state the asset market equilibrium condition.

Accepted Answer

Asset market equilibrium exists when the

Question 17

The set of assets that a holder of wealth chooses to own is called

Accepted Answer

A) an asset assortment. 
B) a wealth strategy. 
C) a portfolio. 
D) an investment envelope. 
A) an asset assortment. 
B) a wealth strategy. 
C) a portfolio. 
D) an investment envelope.

Question 18

If real income rises 4%,prices rise 1%,and nominal money demand rises 4%,what is the income elasticity of real money demand?

Accepted Answer

A) 3/4 
B) 4/5 
C) 5/6 
D) 1 
A) 3/4 
B) 4/5 
C) 5/6 
D) 1

Question 19

Large differences in inflation rates among countries are almost always the result of large differences in

Accepted Answer

A) productivity. 
B) real income growth. 
C) the growth rates of real money demand. 
D) the growth rates of nominal money supplies. 
A) productivity. 
B) real income growth. 
C) the growth rates of real money demand. 
D) the growth rates of nominal money supplies.

Question 20

Suppose velocity is constant at 4,real output is 10,and the price level is 2.From this initial situation,the government increases the nominal money supply to 6.If velocity and output remain unchanged,by how much will the price level increase?

Accepted Answer

A) 2)4% 
B) 20% 
C) 24% 
D) 50% 
A) 2)4% 
B) 20% 
C) 24% 
D) 50%

By spreading her investments out over many different assets,an investor achieves

M2 includes

The idea that investors today compare the returns on bonds with differing times to maturity to see which is expected to give them the highest return is the underlying principle behind the ________ of the term structure of interest rates.

If the income elasticity of money demand is 3/4 and income increases 8%,by about how much does the price level change?

If the nominal money supply grows 6%,real income rises 2%,and the inflation rate is 5%,then the income elasticity of money demand is

Money demand is given by Md/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,velocity is equal to

If nominal money supply grows 3% and real money demand grows 8%,the inflation rate is

Give five examples of factors that could reduce the demand for money.

Under a situation of asset market equilibrium,

If the quantity of money demanded exceeds the quantity of money supplied,then

Bonds sold by the U.S.government that offer a certain real interest rate are known as

Which of the following is most likely to lead to a decrease of 10% in the nominal demand for money?

In some countries,prices in stores are listed in terms of U.S.dollars,rather than in units of the local currency.That's most likely because

If real income rises 5%,prices rise 3%,and nominal money demand rises 7%,what is the income elasticity of real money demand?

What are the major components of M1? What are the major components of M2? Describe each component.

Define asset market equilibrium and state the asset market equilibrium condition.

The set of assets that a holder of wealth chooses to own is called

If real income rises 4%,prices rise 1%,and nominal money demand rises 4%,what is the income elasticity of real money demand?

Large differences in inflation rates among countries are almost always the result of large differences in

Suppose velocity is constant at 4,real output is 10,and the price level is 2.From this initial situation,the government increases the nominal money supply to 6.If velocity and output remain unchanged,by how much will the price level increase?

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

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Exam 7: The Asset Market, Money, and Prices

By spreading her investments out over many different assets,an investor achieves

M2 includes

The idea that investors today compare the returns on bonds with differing times to maturity to see which is expected to give them the highest return is the underlying principle behind the ________ of the term structure of interest rates.

If the income elasticity of money demand is 3/4 and income increases 8%,by about how much does the price level change?

If the nominal money supply grows 6%,real income rises 2%,and the inflation rate is 5%,then the income elasticity of money demand is

Money demand is given by Md/P = 1000 + .2Y - 1000i. Given that P = 200,Y = 2000,and i = .10,velocity is equal to

If nominal money supply grows 3% and real money demand grows 8%,the inflation rate is

Give five examples of factors that could reduce the demand for money.

Under a situation of asset market equilibrium,

If the quantity of money demanded exceeds the quantity of money supplied,then

Bonds sold by the U.S.government that offer a certain real interest rate are known as

Which of the following is most likely to lead to a decrease of 10% in the nominal demand for money?

In some countries,prices in stores are listed in terms of U.S.dollars,rather than in units of the local currency.That's most likely because

If real income rises 5%,prices rise 3%,and nominal money demand rises 7%,what is the income elasticity of real money demand?

What are the major components of M1? What are the major components of M2? Describe each component.

Define asset market equilibrium and state the asset market equilibrium condition.

The set of assets that a holder of wealth chooses to own is called

If real income rises 4%,prices rise 1%,and nominal money demand rises 4%,what is the income elasticity of real money demand?

Large differences in inflation rates among countries are almost always the result of large differences in

Suppose velocity is constant at 4,real output is 10,and the price level is 2.From this initial situation,the government increases the nominal money supply to 6.If velocity and output remain unchanged,by how much will the price level increase?

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters