Question 1

The idea that a decrease in the price level raises the real value of households' money holdings,which increases consumer spending and the quantity of goods and services demanded is known as

Accepted Answer

A)  the interest-rate effect.
B)  the exchange-rate effect.
C)  the theory of liquidity preference.
D)  the wealth effect.E) None of the above
F) A) and D)

Question 2

According to liquidity preference theory,if there were a surplus of money,then

Accepted Answer

A)  the interest rate would be above equilibrium and the quantity of money demanded would be too large for equilibrium.
B)  the interest rate would be above equilibrium and the quantity of money demanded would be too small for equilibrium.
C)  the interest rate would be below equilibrium and the quantity of money demanded would be too small for equilibrium.
D)  the interest rate would be below equilibrium and the quantity of money demanded would be too large for equilibrium.E) A) and D)
F) C) and D)

Question 3

Which of the following sequences best explains the negative slope of the aggregate-demand curve?

Accepted Answer

A)  price level ↑ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
B)  price level ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↓
C)  price level ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↑
D)  price level ↓ ⇒ equilibrium interest rate ↓ ⇒ demand for money ↑ ⇒ quantity of goods and services demanded ↑E) None of the above
F) B) and C)

Question 4

In recent years,the Fed has chosen to target interest rates rather than the money supply because

Accepted Answer

A)  Congress passed a law requiring them to do so.
B)  the President requested them to do so.
C)  the money supply is hard to measure with sufficient precision.
D)  changes in the interest rate change aggregate demand,but changes in the money supply do not.E) A) and C)
F) B) and D)

Question 5

In which of the following cases does the aggregate-demand curve shift to the right?

Accepted Answer

A)  The price level rises,causing the interest rate to fall.
B)  The price level falls,causing the interest rate to fall.
C)  The money supply increases,causing the interest rate to fall.
D)  The money supply decreases,causing the interest rate to fall.E) B) and C)
F) All of the above

Question 6

The opportunity cost of holding money

Accepted Answer

A)  decreases when the interest rate decreases,so people desire to hold more of it.
B)  decreases when the interest rate decreases,so people desire to hold less of it.
C)  increases when the interest rate decreases,so people desire to hold more of it.
D)  increases when the interest rate decreases,so people desire to hold less of it.E) A) and B)
F) All of the above

Question 7

Figure 34-4.On the figure,MS represents money supply and MD represents money demand. 1.If the current interest rate is r2,then A) the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied. B) people will respond by selling interest-bearing bonds or by withdrawing money from interest-bearing bank accounts. C) bond issuers and banks will respond by lowering the interest rates they offer. D) in response,the money-demand curve will shift rightward from its current position to establish equilibrium in the money market." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 34-4.Suppose the money-demand curve is currently MD1.If the current interest rate is r2,then

Accepted Answer

A)  the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied.
B)  people will respond by selling interest-bearing bonds or by withdrawing money from interest-bearing bank accounts.
C)  bond issuers and banks will respond by lowering the interest rates they offer.
D)  in response,the money-demand curve will shift rightward from its current position to establish equilibrium in the money market.E) B) and D)
F) None of the above

Question 8

When the Fed sells government bonds,the reserves of the banking system

Accepted Answer

A)  increase,so the money supply increases.
B)  increase,so the money supply decreases.
C)  decrease,so the money supply increases.
D)  decrease,so the money supply decreases.E) All of the above
F) C) and D)

Question 9

An increase in the money supply will

Accepted Answer

A)  increase interest rates,decreasing investment and aggregate demand.
B)  reduce interest rates,increasing investment and aggregate demand.
C)  reduce interest rates,decreasing investment and increasing aggregate demand.
D)  increase interest rates,increasing investment and aggregate demand.E) A) and B)
F) A) and C)

Question 10

Which of the following claims concerning the importance of effects that explain the slope of the U.S.aggregate-demand curve is correct?

Accepted Answer

A)  The exchange-rate effect is relatively small because exports and imports are a small part of real GDP.
B)  The interest-rate effect is relatively small because investment spending is not very responsive to interest rate changes.
C)  The wealth effect is relatively large because money holdings are a significant portion of most households' wealth.
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 11

The theory of liquidity preference is most helpful in understanding

Accepted Answer

A)  the wealth effect.
B)  the exchange-rate effect.
C)  the interest-rate effect.
D)  misperceptions theory.E) A) and B)
F) A) and C)

Question 12

According to liquidity preference theory,equilibrium in the money market is achieved by adjustments in

Accepted Answer

A)  the price level.
B)  the interest rate.
C)  the exchange rate.
D)  real wealth.E) C) and D)
F) A) and D)

Question 13

Economists who are skeptical about the relevance of "liquidity traps" argue that

Accepted Answer

A)  a central bank continues to have tools to stimulate the economy,even after its interest rate target hits its lower bound of zero.
B)  a central bank continues to have the option of committing itself to future monetary contraction,even after its interest rate target hits its lower bound of zero.
C)  a central bank can greatly reduce the likelihood of a liquidity trap by setting the target rate of inflation at zero.
D)  while the concept of a liquidity trap is theoretically possible,nothing resembling a liquidity trap ever has been observed in the real world.E) All of the above
F) A) and D)

Question 14

Which of the following events would shift money demand to the right?

Accepted Answer

A)  an increase in the interest rate or an increase in the price level
B)  an increase in the interest rate,but not an increase in the price level
C)  an increase in the price level,but not an increase in the interest rate
D)  neither an increase in the interest rate nor an increase in the price levelE) C) and D)
F) None of the above

Question 15

People choose to hold a smaller quantity of money if​

Accepted Answer

A)  ​the interest rate increases,which causes the opportunity cost of holding money to increase.
B)  ​the interest rate increases,which causes the opportunity cost of holding money to decrease.
C)  ​the interest rate decreases,which causes the opportunity cost of holding money to increase.
D)  ​the interest rate decreases,which causes the opportunity cost of holding money to decrease.E) B) and D)
F) A) and B)

Question 16

Using the liquidity-preference model,when the Federal Reserve decreases the money supply,

Accepted Answer

A)  the equilibrium interest rate increases.
B)  the aggregate-demand curve shifts to the right.
C)  the quantity of goods and services demanded is unchanged for a given price level.
D)  the short-run aggregate-supply curve shifts to the left.E) All of the above
F) A) and C)

Question 17

The interest-rate effect

Accepted Answer

A)  depends on the idea that decreases in interest rates increase the quantity of goods and services demanded.
B)  depends on the idea that decreases in interest rates decrease the quantity of goods and services demanded.
C)  is responsible for the downward slope of the money-demand curve.
D)  is the least important reason,in the case of the United States,for the downward slope of the aggregate-demand curve.E) All of the above
F) A) and B)

Question 18

Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities.Most economists would say that Charisse's opinion is

Accepted Answer

A)  Keynesian in nature,and that her view is more valid for the long run than for the short run.
B)  classical in nature,and that her view is more valid for the long run than for the short run.
C)  Keynesian in nature,and that her view is more valid for the short run than for the long run.
D)  classical in nature,and that her view is more valid for the short run than for the long run.E) A) and B)
F) All of the above

Exam 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: How Monetary Policy Influences Aggregate Demand

Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities.Most economists would say that Charisse's opinion is

Correct Answer
verified

According to liquidity preference theory,if there were a surplus of money,then

Correct Answer
verified

In recent years,the Fed has chosen to target interest rates rather than the money supply because

Correct Answer
verified

The idea that a decrease in the price level raises the real value of households' money holdings,which increases consumer spending and the quantity of goods and services demanded is known as

Correct Answer
verified

People choose to hold a smaller quantity of money if

Correct Answer
verified

The interest-rate effect

Correct Answer
verified

The theory of liquidity preference is most helpful in understanding

Correct Answer
verified

Which of the following events would shift money demand to the right?

Correct Answer
verified

Economists who are skeptical about the relevance of "liquidity traps" argue that

Correct Answer
verified

In which of the following cases does the aggregate-demand curve shift to the right?

Correct Answer
verified

Using the liquidity-preference model,when the Federal Reserve decreases the money supply,

Correct Answer
verified

Which of the following sequences best explains the negative slope of the aggregate-demand curve?

Correct Answer
verified

When the Fed sells government bonds,the reserves of the banking system

Correct Answer
verified

According to liquidity preference theory,equilibrium in the money market is achieved by adjustments in

Correct Answer
verified

The opportunity cost of holding money

Correct Answer
verified

Which of the following claims concerning the importance of effects that explain the slope of the U.S.aggregate-demand curve is correct?

Correct Answer
verified

An increase in the money supply will

Correct Answer
verified

Figure 34-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 34-4.Suppose the money-demand curve is currently MD₁.If the current interest rate is r₂,then

Correct Answer
verified

Exam 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: How Monetary Policy Influences Aggregate Demand

Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities.Most economists would say that Charisse's opinion is

Correct AnswerverifiedShow Answer

According to liquidity preference theory,if there were a surplus of money,then

Correct AnswerverifiedShow Answer

In recent years,the Fed has chosen to target interest rates rather than the money supply because

Correct AnswerverifiedShow Answer

The idea that a decrease in the price level raises the real value of households' money holdings,which increases consumer spending and the quantity of goods and services demanded is known as

Correct AnswerverifiedShow Answer

People choose to hold a smaller quantity of money if​

Correct AnswerverifiedShow Answer

The interest-rate effect

Correct AnswerverifiedShow Answer

The theory of liquidity preference is most helpful in understanding

Correct AnswerverifiedShow Answer

Which of the following events would shift money demand to the right?

Correct AnswerverifiedShow Answer

Economists who are skeptical about the relevance of "liquidity traps" argue that

Correct AnswerverifiedShow Answer

In which of the following cases does the aggregate-demand curve shift to the right?

Correct AnswerverifiedShow Answer

Using the liquidity-preference model,when the Federal Reserve decreases the money supply,

Correct AnswerverifiedShow Answer

Which of the following sequences best explains the negative slope of the aggregate-demand curve?

Correct AnswerverifiedShow Answer

When the Fed sells government bonds,the reserves of the banking system

Correct AnswerverifiedShow Answer

According to liquidity preference theory,equilibrium in the money market is achieved by adjustments in

Correct AnswerverifiedShow Answer

The opportunity cost of holding money

Correct AnswerverifiedShow Answer

Which of the following claims concerning the importance of effects that explain the slope of the U.S.aggregate-demand curve is correct?

Correct AnswerverifiedShow Answer

An increase in the money supply will

Correct AnswerverifiedShow Answer

Figure 34-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 34-4.Suppose the money-demand curve is currently MD1.If the current interest rate is r2,then

Correct AnswerverifiedShow Answer

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People choose to hold a smaller quantity of money if

Correct Answer
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Figure 34-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 34-4.Suppose the money-demand curve is currently MD₁.If the current interest rate is r₂,then

Correct Answer
verified