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-Refer to the graph above to answer this question.Why is the money demand curve MD downward-sloping? A) The transactions demand for money is downward-sloping. B) There is a direct relationship between bond prices and interest rates. C) The asset demand for money is downward-sloping. D) Because of the wealth or real-balances effect. E) The opportunity cost of holding money increases as the interest rates decreases. -Refer to the graph above to answer this question.Why is the money demand curve MD downward-sloping?


A) The transactions demand for money is downward-sloping.
B) There is a direct relationship between bond prices and interest rates.
C) The asset demand for money is downward-sloping.
D) Because of the wealth or real-balances effect.
E) The opportunity cost of holding money increases as the interest rates decreases.

F) A) and C)
G) A) and D)

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What will an increase in the money supply tend to do?


A) Increase interest rates and lower the equilibrium GDP.
B) Increase interest rates and increase the equilibrium GDP.
C) Lower interest rates and increase the equilibrium GDP.
D) Lower interest rates and lower the equilibrium GDP.
E) Interest rate and equilibrium GDP does not change.

F) A) and E)
G) B) and C)

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Who regards the velocity of money as constant?


A) All economists.
B) Keynesians.
C) Monetarists.
D) No economist.
E) All those who believe that there is an asset demand for money.

F) A) and E)
G) A) and D)

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-Refer to figure above to answer this question.If the money supply is equal to 180,what are the values of the interest rate and investment spending? A) 4 percent and 150. B) 8 percent and 130. C) 10 percent and 120. D) 12 percent and 110. E) 12 percent and 120. -Refer to figure above to answer this question.If the money supply is equal to 180,what are the values of the interest rate and investment spending?


A) 4 percent and 150.
B) 8 percent and 130.
C) 10 percent and 120.
D) 12 percent and 110.
E) 12 percent and 120.

F) None of the above
G) B) and D)

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See the following graphs: See the following graphs: -Refer to the graph above to answer this question.What is the effect of a decrease in the money supply of 40? A) A decrease in the interest rate of 3 percentage points. B) A decrease in the interest rate of 6 percentage points. C) An increase in investment spending of $20. D) A decrease in investment spending of $20. E) An increase in aggregate demand of $40. -Refer to the graph above to answer this question.What is the effect of a decrease in the money supply of 40?


A) A decrease in the interest rate of 3 percentage points.
B) A decrease in the interest rate of 6 percentage points.
C) An increase in investment spending of $20.
D) A decrease in investment spending of $20.
E) An increase in aggregate demand of $40.

F) C) and D)
G) None of the above

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If the money supply exceeds the quantity of money demanded,what will interest rate do?


A) Rise,causing people to hold less money.
B) Fall,causing people to hold less money.
C) Rise,causing people to hold more money.
D) Fall,causing people to hold more money.
E) Remain unchanged,but the demand for money would increase.

F) A) and B)
G) B) and C)

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In a full-employment economy a rise in M could cause inflation.Under what circumstance will this not happen?


A) If real GDP falls by the same proportion.
B) If real GDP increases by the same proportion.
C) If tax reductions accompany the increase in the money supply.
D) If the velocity of money falls.
E) If the demand for money increases by the same amount.

F) B) and C)
G) B) and D)

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-Refer to the graph above to answer this question.What does the vertical money supply curve MS reflect? A) The fact that lower interest rates imply that a lower opportunity cost of supplying money. B) The fact that the supply of money is determined by the Bank of Canada and is not affected by changes in the interest rate. C) The fact that bond prices and therefore interest rates are not affected by the supply of money. D) The fact that money supply is dependent on the rate of interest. -Refer to the graph above to answer this question.What does the vertical money supply curve MS reflect?


A) The fact that lower interest rates imply that a lower opportunity cost of supplying money.
B) The fact that the supply of money is determined by the Bank of Canada and is not affected by changes in the interest rate.
C) The fact that bond prices and therefore interest rates are not affected by the supply of money.
D) The fact that money supply is dependent on the rate of interest.

E) A) and B)
F) A) and C)

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B

What is the effect of an increase in the money supply?


A) It will lower the interest rate.
B) It will increase the interest rate.
C) It will decrease the demand for money.
D) It will decrease the quantity of investment spending.

E) None of the above
F) A) and B)

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A

What do economists mean when they say "inflation is a monetary phenomenon"?

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According to the equation of exchange,MV...

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What are the advantages and disadvantages of money as a form of wealth holdings?

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Advantages
· Highly liquid
· N...

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Suppose Peter paid $940 for a bond and he expects the value of the bond to increase by $15.If Peter requires a 10% rate of return,what is the value of the bond's coupon interest?


A) +$57.
B) +$63.
C) +$79.
D) +$85.
E) +$94

F) B) and E)
G) B) and C)

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C

Table 9.1 contains data relating to the money market. Table 9.1 contains data relating to the money market. -Refer to Table 8.1 to answer this question.What are the implications if the current supply of money is $160 and the interest rate is 7 percent? A) The interest rate will fall. B) The interest rate will rise. C) The asset demand will fall. D) The transactions demand will fall. -Refer to Table 8.1 to answer this question.What are the implications if the current supply of money is $160 and the interest rate is 7 percent?


A) The interest rate will fall.
B) The interest rate will rise.
C) The asset demand will fall.
D) The transactions demand will fall.

E) A) and D)
F) A) and B)

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What the term asset demand for money refer to?


A) The demand for money by the Bank of Canada in order to settle international transactions.
B) The demand for money by the public in order to purchase real assets such as buildings and real estate.
C) That portion of the money supply which is held by the chartered banks as assets.
D) The desire by people to use money as a store of wealth.

E) B) and D)
F) B) and C)

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The most important function of the Bank of Canada is to regulate the money supply.

A) True
B) False

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If the money supply remains constant and the nominal GDP increases,what can we conclude?


A) The velocity of money will fall.
B) The price index will fall.
C) Interest rates will rise.
D) Bond prices will rise.

E) None of the above
F) All of the above

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The following table shows data for the economy of Malgravia over the past 5 years.(All money figures are in $ billions. ) The following table shows data for the economy of Malgravia over the past 5 years.(All money figures are in $ billions. ) Calculate the value of the velocity of money in each of the five years.(You might want to rearrange the equation of exchange and divide by 100. ) Calculate the value of the velocity of money in each of the five years.(You might want to rearrange the equation of exchange and divide by 100. )

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2012: 12;2013: 12.5;...

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Which of the following statements is correct regarding an interest rate above equilibrium?


A) It will result in a shortage of money in the money market.
B) It will result in a surplus of money in the money market.
C) It is a result of people demanding too much money.
D) It is a result of people demanding too little money.
E) It is the normal state of affairs.

F) C) and D)
G) A) and B)

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Assume the money supply is $1,000,the velocity of money is 12,and the price level is $4.Using the quantity theory of money: (a)Determine the level of real output. (b)Determine the level of nominal output. (c)Assuming velocity remains constant and that the economy is at full-employment equilibrium,what will happen if the money supply rises by 10%?

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(a)Use the equation of exchange to deter...

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In the country of Mycenae,the money supply equals 60 million drachmas,real GDP is 400 million drachmas,the price level is 1.2 and the velocity of money is 8. a)What is the value of its nominal GDP? b)If,in the next year,V remains constant and real GDP increases to 450 million drachmas,what must happen to the money supply in order to keep prices stable?

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a)480 million drachmas.
b)Mone...

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