Question 1

A rightward shift in the money supply curve is likely to produce a rightward shift in the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 2

If M stand for the money supply, V for the velocity of money, P for the average selling price, and Q for the output of goods and services, the equation of exchange is MV = PQ.

Accepted Answer

A) True 
 B)False

Question 3

If you hold money in anticipation of household emergency expense, this represents the::

Accepted Answer

A)  speculative demand for holding money.
B)  transactions demand for holding money.
C)  opportunity cost motive for holding money.
D)  precautionary demand for holding money.
E)  regressive cost of holding money.F) None of the above
G) B) and E)

Question 4

The stock of money people hold to take advantage of expected future changes in the price of bonds, stocks, or other nonmoney financial assets is the:

Accepted Answer

A)  unit-of-account motive for holding money.
B)  precautionary motive for holding money.
C)  speculative motive for holding money.
D)  transactions motive for holding money.E) A) and B)
F) A) and C)

Question 5

Keynes called the money people hold in order to buy bonds, stocks, or other nonmoney financial assets the:

Accepted Answer

A)  transactions demand for holding money.
B)  precautionary demand for holding money.
C)  speculative demand for holding money.
D)  unit of account demand for holding money.E) B) and D)
F) C) and D)

Question 6

The velocity of money is the:

Accepted Answer

A)  rate at which the price index for consumer goods rises.
B)  multiple by which an increase in government expenditures will cause output to expand.
C)  average number of times a dollar is used to buy goods and services included in GDP.
D)  number of times a dollar is taken out of the country during a year.E) B) and C)
F) A) and C)

Question 7

If the Fed expands the money supply by $1 trillion, what will happen in the money market?

Accepted Answer

A)  The equilibrium interest rate will rise, and less money will be exchanged in equilibrium.
B)  The equilibrium interest rate will fall, and more money will exchanged in equilibrium.
C)  The equilibrium interest rate will not change.
D)  None of the above.E) A) and B)
F) B) and D)

Question 8

Which of the following statements is true ?

Accepted Answer

A)  The speculative demand for money at possible interest rates gives the demand for money curve its upward slope.
B)  There is an inverse relationship between the quantity of money demanded and the interest rate.
C)  According to the quantity theory of money, any change in the money supply will have no effect on the price level.
D)  All of these are true.E) C) and D)
F) A) and B)

Question 9

If M = 200, P = 100, and Q = 10, then V is:

Accepted Answer

A)  20.
B)  2.
C)  10.
D)  5.
E)  2,000.F) All of the above
G) A) and D)

Question 10

If the economy is inflationary, the Fed would most likely:

Accepted Answer

A)  encourage banks to provide loans by buying government securities.
B)  encourage banks to provide loans by raising the discount rate.
C)  encourage banks to provide loans by selling government securities.
D)  restrict bank lending by selling government securities.
E)  restrict bank lending by lowering the federal funds rate.F) A) and D)
G) D) and E)

Question 11

Other things being equal, an increase in the rate of interest causes a(n) :

Accepted Answer

A)  upward movement along the demand for money curve.
B)  downward movement along the demand for money curve.
C)  rightward shift of the demand for money curve.
D)  leftward shift of the demand for money curve.E) A) and C)
F) B) and D)

Question 12

The Keynesian mechanism through which monetary policy affects the price level, real GDP, and employment depends on the impact of the:

Accepted Answer

A)  interest rate on savings.
B)  inflation on investment.
C)  interest rate on investment.
D)  interest rate on bond prices.E) A) and B)
F) All of the above

Question 13

John Maynard Keynes listed three types of motives for people holding money ¾ transactions, precautionary, and speculative.

Accepted Answer

A) True 
 B)False

Question 14

Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy.

Accepted Answer

According to Keynesian economists, an in...

Question 15

Which of the following policies would be most likely to reduce the rate of inflation?

Accepted Answer

A)  sale of government bonds by the Federal Reserve
B)  a reduction in the discount rate
C)  an increase in the size of the federal budget deficit
D)  a reduction in the required reserves imposed on the banking systemE) A) and D)
F) B) and C)

Question 16

If the Fed uses its tools to expand the money supply, bond prices will be bid down and interest rates will rise.

Accepted Answer

A) True 
 B)False

Question 17

Keynes called money people hold to make routine day-to-day purchases the:

Accepted Answer

A)  transactions demand for holding money.
B)  precautionary demand for holding money.
C)  speculative demand for holding money.
D)  store of value demand for holding money.E) C) and D)
F) A) and B)

Question 18

Exhibit 16-3 Money market demand and supply curves 2 with the money supply at $100 billion and the interest rate at 15 percent. The Fed uses its policy tools to move the economy to a new equilibrium at E1 with a money supply of 150 billion and an interest rate of 10 percent. As part of the adjustment to the new equilibrium, we would expect the: A) price of bonds to rise. B) price of bonds to remain unchanged. C) price of bonds to fall. D) none of these." class="answers-bank-image d-inline" rel="preload" > In Exhibit 16-3, assume an equilibrium at E2 with the money supply at $100 billion and the interest rate at 15 percent. The Fed uses its policy tools to move the economy to a new equilibrium at E1 with a money supply of 150 billion and an interest rate of 10 percent. As part of the adjustment to the new equilibrium, we would expect the:

Accepted Answer

A)  price of bonds to rise.
B)  price of bonds to remain unchanged.
C)  price of bonds to fall.
D)  none of these.E) A) and C)
F) None of the above

Question 19

According to the equation of exchange, if M = 200, P = 100, and Q = 10, the V is:

Accepted Answer

A)  20.
B)  2.
C)  10.
D)  5.
E)  2,000.F) C) and D)
G) B) and E)

Question 20

According to the Monetarist view, the impact of expansionary monetary policy will be:

Accepted Answer

A)  the same in the long run as in the short run.
B)  the same regardless of whether the effects of the policy are anticipated or unanticipated.
C)  a higher price level (inflation) .
D)  a decrease in short-run prices and an increase in long-run prices.E) C) and D)
F) B) and D)

Exam 16: Monetary Policy

The stock of money people hold to take advantage of expected future changes in the price of bonds, stocks, or other nonmoney financial assets is the:

Correct Answer
verified

If the Fed expands the money supply by $1 trillion, what will happen in the money market?

Correct Answer
verified

The Keynesian mechanism through which monetary policy affects the price level, real GDP, and employment depends on the impact of the:

Correct Answer
verified

Keynes called the money people hold in order to buy bonds, stocks, or other nonmoney financial assets the:

Correct Answer
verified

If M stand for the money supply, V for the velocity of money, P for the average selling price, and Q for the output of goods and services, the equation of exchange is MV = PQ.

Correct Answer
verified

According to the Monetarist view, the impact of expansionary monetary policy will be:

Correct Answer
verified

According to the equation of exchange, if M = 200, P = 100, and Q = 10, the V is:

Correct Answer
verified

Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy.

Correct Answer
verified
According to Keynesian economists, an in...
View Answer

The velocity of money is the:

Correct Answer
verified

Keynes called money people hold to make routine day-to-day purchases the:

Correct Answer
verified

Which of the following policies would be most likely to reduce the rate of inflation?

Correct Answer
verified

Which of the following statements is true ?

Correct Answer
verified

If the Fed uses its tools to expand the money supply, bond prices will be bid down and interest rates will rise.

Correct Answer
verified

John Maynard Keynes listed three types of motives for people holding money ¾ transactions, precautionary, and speculative.

Correct Answer
verified

A rightward shift in the money supply curve is likely to produce a rightward shift in the aggregate demand curve.

Correct Answer
verified

If you hold money in anticipation of household emergency expense, this represents the::

Correct Answer
verified

If M = 200, P = 100, and Q = 10, then V is:

Correct Answer
verified

If the economy is inflationary, the Fed would most likely:

Correct Answer
verified

Correct Answer
verified

Other things being equal, an increase in the rate of interest causes a(n) :

Correct Answer
verified

Exam 16: Monetary Policy

The stock of money people hold to take advantage of expected future changes in the price of bonds, stocks, or other nonmoney financial assets is the:

Correct AnswerverifiedShow Answer

If the Fed expands the money supply by $1 trillion, what will happen in the money market?

Correct AnswerverifiedShow Answer

The Keynesian mechanism through which monetary policy affects the price level, real GDP, and employment depends on the impact of the:

Correct AnswerverifiedShow Answer

Keynes called the money people hold in order to buy bonds, stocks, or other nonmoney financial assets the:

Correct AnswerverifiedShow Answer

If M stand for the money supply, V for the velocity of money, P for the average selling price, and Q for the output of goods and services, the equation of exchange is MV = PQ.

Correct AnswerverifiedShow Answer

According to the Monetarist view, the impact of expansionary monetary policy will be:

Correct AnswerverifiedShow Answer

According to the equation of exchange, if M = 200, P = 100, and Q = 10, the V is:

Correct AnswerverifiedShow Answer

Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy.

Correct AnswerverifiedAccording to Keynesian economists, an in...View AnswerShow Answer

The velocity of money is the:

Correct AnswerverifiedShow Answer

Keynes called money people hold to make routine day-to-day purchases the:

Correct AnswerverifiedShow Answer

Which of the following policies would be most likely to reduce the rate of inflation?

Correct AnswerverifiedShow Answer

Which of the following statements is true ?

Correct AnswerverifiedShow Answer

If the Fed uses its tools to expand the money supply, bond prices will be bid down and interest rates will rise.

Correct AnswerverifiedShow Answer

John Maynard Keynes listed three types of motives for people holding money ¾ transactions, precautionary, and speculative.

Correct AnswerverifiedShow Answer

A rightward shift in the money supply curve is likely to produce a rightward shift in the aggregate demand curve.

Correct AnswerverifiedShow Answer

If you hold money in anticipation of household emergency expense, this represents the::

Correct AnswerverifiedShow Answer

If M = 200, P = 100, and Q = 10, then V is:

Correct AnswerverifiedShow Answer

If the economy is inflationary, the Fed would most likely:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things being equal, an increase in the rate of interest causes a(n) :

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
According to Keynesian economists, an in...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified