The demand for moneyA) d and e are correctB) all of the following are correctC) decreases as the average selling price of a unit of outputincreasesD) increases as GDP increasesE) is increased by credit card usage2. The higher the interest rate, the more of their wealth peoplewill hold as money.A) TrueB) False3. The money demand curve slopesA) downward because the cost of holding money decreases as theinterest rate decreasesB) downward because the cost of holding money increases as theinterest rate decreasesC) upward because people demand more money as GDP increasesD) upward because people demand more money as GDP decreasesE) downward because people demand more money as the price levelincreases4. Which of the following, other things constant, will shift themoney demand curve to the left?A) an increase in the interest rateB) a decrease in the interest rateC) a decrease in real GDPD) an increase in real GDPE) an increase in the price level5. An increase in the money supply willA) increase the demand for money at each interest rateB) decrease the demand for money at each interest rateC) lead people to try to exchange money for interest-bearingassetsD) lead people to try to exchange interest-bearing assets formoneyE) increase the interest rate6. When an increase in the money supply reduces the interest rate,investment and nominal GDP increase.A) TrueB) False7. In the short run, a decrease in the money supply will cause adecrease in Gross Domestic Product and a decrease in the pricelevel.A) TrueB) False8. The demand curve for investment is graphed with __________ onthe vertical axis and __________ on the horizontal axis.A) the interest rate; investmentB) investment; the interest rateC) the price level; investmentD) investment; the price levelE) real GDP; investment9. As the interest rate increases,A) the demand for investment curve shifts to the rightB) the demand for investment curve shifts to the leftC) there is a movement downward along the demand for investmentcurveD) there is a movement upward along the demand for investmentcurveE) GDP increases10. If the economy experiences a contractionary gap and the Fedstimulates the economy, then:A) The money supply is increasing because the Fed prints moremoneyB) The money supply is decreasing because the Fed hoardsmoneyC) The money supply is increasing because the Fed makes open-marketpurchasesD) The money supply is decreasing because the Fed makes open-marketsalesE) There is no change in the money supply because the Fed cannotinfluence the money supply11. If the Fed decreases the money supply, GDPA) increases because the resulting increase in the interest rateleads to a decrease in investmentB) increases because the resulting decrease in the interest rateleads to an increase in investmentC) decreases because the resulting increase in the interest rateleads to a decrease in investmentD) decreases because the resulting increase in the interest rateleads to an increase in investmentE) decreases because the resulting decrease in the interest rateleads to an increase in investment12. An increase in the money supply can increase the price level,real GDP, or both, but it is impossible to tell exactly what willhappen without knowing the slope of the aggregate supplycurve.A) TrueB) False13. If the economy experiences an expansionary gap and the Fedsells US government securities in the open-market, then:A) Money supply increases, investment increases, aggregate demandincreasesB) Money supply increases, the interest rate increases, and theaggregate demand increasesC) Money supply decreases, the interest rate decreases, and theaggregate demand fallsD) Money supply decreases, the investment decreases, and theaggregate demand decreasesE) Interest rate falls, investment falls, aggregate demandincreases14. If the money supply equals $1,000 and nominal GDP equals$3,000, then VA) equals 1/3B) equals 3C) equals 3 millionD) cannot be determined since we do not know anything aboutpricesE) cannot be determined since we do not know anything about realGDP15. If the money supply is increasing at a constant 8 percent,velocity is constant, real GDP is increasing at 5 percent, and theinflation rate is 3 percent, which of the following is true?A) The growth rate of GDP is too low to be maintained.B) The inflation rate is too low to be maintained.C) Velocity is too low to be maintained.D) The money supply growth rate is too low to be maintained.E) This situation can continue indefinitely.16. If real output and velocity are stable and predictable, thenthe equation of exchange can be used to derive a simplerelationship betweenA) the money supply and the price levelB) the money supply and the interest rateC) the money supply and the foreign exchange rateD) velocity and real GDPE) velocity and nominal GDP17. For the quantity theory of money to yield usefulpredictions,A) fiscal policy must be ineffective in altering aggregatedemandB) fiscal policy must be effective in altering aggregatedemandC) the economy must be operating at the potential level of realGross Domestic ProductD) velocity must be stable or predictableE) velocity must be unstable18. A rising rate of inflationA) makes people more willing to hold money as an assetB) reduces the usefulness of money as a store of value and thusincreases the velocity of moneyC) increases the usefulness of money as a medium of exchange andthus reduces the velocity of moneyD) is usually preceded by a reduction in the money supplyE) does not, apparently, have any effect on the velocity ofmoney19. There is considerable disagreement about whether the FedshouldA) engage in open market operationsB) have the power to set reserve requirementsC) reduce the money supply when the economy is growingD) allow banks to invest in the stock marketE) attempt to control interest rates or should instead attempt tocontrol the money supply20. For interest rates to remain stable during economic expansions,the growth rate of the money supply shouldA) exceed the growth in the demand for moneyB) just match the growth in the demand for moneyC) be less than the growth in the demand for moneyD) be zeroE) just match the growth in nominal GDP

Question

		its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another.
		its action expands total reserves and the money supply.
		its action contracts total reserves and the money supply.
		total reserves increase by the amount of the purchase but the money supply stays the same.

		reserves increase, leading to a decrease in the money supply by an amount more than the sale of the government securities.
		reserves decrease, leading to a decrease in the money supply by an amount more than the sale of the government securities.
		reserves increase, leading to a increase in the money supply by an amount more than the sale of the government securities.
		reserves decrease, leading to a increase in the money supply by an amount more than the sale of the government securities.

		the reserve ratio.
		one minus the reserve ratio
		the inverse of the required reserve ratio.
		the number of dollars on reserve.

		the growth in the money supply when income increases.
		the growth in real national income when the money supply increases.
		the maximum potential change in the money supply due to a change in income.
		the maximum potential change in the money supply due to a change in reserves.

		increases the money multiplier.
		will cause banks to make more loans.
		has an expansionary effect on the money supply.
		has a contractionary effect on the money supply.

Unlock all answers

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related questions

Weekly leaderboard

		banks against lawsuits.
		the deposits held in member banks.
		the deposits held in the Fed.
		the federal funds market.

		in difficult times people want currency instead of demand deposits.
		the FDIC is inefficient.
		banks do not keep enough reserves to cover all their depository liabilities.
		bankers are often poor businesspeople.

		make riskier loans than they otherwise would.
		reject some loans that probably would be profitable.
		maintain excess reserves that are too great.
		be too conservative in their lending practices.

		discourages banks from engaging in excessive risk taking.
		was established after the Panic of 1907.
		only insures deposits in money-center banks.
		increases the stability of the banking system by reducing the likelihood of bank runs.

		Money is government issued and it is redeemable for gold or silver.
		Money is part of every barter transaction and it is divisible.
		Money is accepted as a medium of exchange and it is the common unit of account used to express prices.
		Money is a common unit of account and it is also can be traded for other currencies at a guaranteed exchange rate.

		asset demand.
		precautionary demand.
		aggregate demand.
		transactions demand.

		the transaction demand for money.
		the spending demand for money.
		the asset demand for money.
		the precautionary demand for money.

		decreases.
		increases.
		decreases initially and then increases to the original position.
		does not change.

		increases, and the money demand curve shifts to the right.
		remains constant, and the money demand curve remains the same.
		decreases, and the money demand curve shifts to the left.
		increases, and the money demand curve shifts to the left.

		it fulfills no precautionary role.
		it fulfills no transactions role.
		it earns no interest income.
		its real value always increases.