Question 1

Which of the following actions might we logically expect to result from rising stock prices?

Accepted Answer

A)  Jim decreases his consumption spending.
B)  Firms sell fewer shares of new stock.
C)  Firms spend more on investment.
D)  None of the above is correct.

Question 2

In recent years,the Federal Reserve has conducted policy by setting a target for

Accepted Answer

A)  bank reserves.
B)  the monetary growth rate.
C)  the exchange rate.
D)  the federal funds rate.

Question 3

The Fed is concerned about stock market booms because the booms

Accepted Answer

A)  increase consumption spending.
B)  increase investment spending.
C)  increase both consumption and investment spending.
D)  None of the above is correct.

Question 4

Figure 34-2.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
. 
-Refer to Figure 34-2.If the graphs apply to an economy such as the U.S.economy,then the slope of the AD curve is primarily attributable to the

Accepted Answer

A)  wealth effect.
B)  interest-rate effect.
C)  exchange-rate effect.
D)  Fisher effect.

Question 5

Figure 34-1 
-Refer to Figure 34-1.If the current interest rate is 2 percent,

Accepted Answer

A)  there is an excess supply of money.
B)  people will sell more bonds,which drives interest rates up.
C)  as the money market moves to equilibrium,people will buy more goods.
D)  All of the above are correct.

Question 6

Figure 34-3. 
-Refer to Figure 34-3.Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect?

Accepted Answer

A)  1,2,3,4
B)  1,4,3,2
C)  3,4,2,1
D)  3,2,1,4

Question 7

According to liquidity preference theory,a decrease in the price level causes the interest rate to

Accepted Answer

A)  increase,which increases the quantity of goods and services demanded.
B)  increase,which decreases the quantity of goods and services demanded.
C)  decrease,which increases the quantity of goods and services demanded.
D)  decrease,which decreases the quantity of goods and services demanded.

Question 8

If the interest rate is below the Fed's target,the Fed would

Accepted Answer

A)  buy bonds to increase the money supply.
B)  buy bonds to decrease the money supply.
C)  sell bonds to increase the money supply.
D)  sell bonds to decrease the money supply.

Question 9

In the short run,a decrease in the money supply causes interest rates to

Accepted Answer

A)  increase,and aggregate demand to shift right.
B)  increase,and aggregate demand to shift left.
C)  decrease,and aggregate demand to shift right.
D)  decrease,and aggregate demand to shift left.

Question 10

If the interest rate is above the Fed's target,the Fed should

Accepted Answer

A)  buy bonds to increase the money supply.
B)  buy bonds to decrease the money supply.
C)  sell bonds to increase the money supply.
D)  sell bonds to decrease the money supply.

Question 11

If the Federal Reserve decreases the money supply,then initially there is a

Accepted Answer

A)  shortage in the money market,so people will want to sell bonds.
B)  shortage in the money market,so people will want to buy bonds.
C)  surplus in the money market,so people will want to sell bonds.
D)  surplus in the money market,so people will want to buy bonds.

Question 12

If the Fed conducts open-market purchases,then which of the following quantities increase(s) ?

Accepted Answer

A)  interest rates and investment spending
B)  interest rates,but not investment spending
C)  investment spending,but not interest rates
D)  neither interest rates nor investment spending

Question 13

In recent years,the Federal Reserve has conducted policy by setting a target for the

Accepted Answer

A)  size of the money supply.
B)  growth rate of the money supply.
C)  federal funds rate.
D)  discount rate.

Question 14

If there is excess money supply,people will

Accepted Answer

A)  deposit more into interest-bearing accounts,and the interest rate will fall.
B)  deposit more into interest-bearing accounts,and the interest rate will rise.
C)  withdraw money from interest-bearing accounts,and the interest rate will fall.
D)  withdraw money from interest-bearing accounts,and the interest rate will rise.

Question 15

If the Federal Reserve increases the money supply,then initially people want to

Accepted Answer

A)  sell bonds so the interest rate rises.
B)  sell bonds so the interest rate falls.
C)  buy bonds so the interest rate rises.
D)  buy bonds so the interest rate falls.

Question 16

According to liquidity preference theory,an increase in the price level causes the interest rate to

Accepted Answer

A)  increase,which increases the quantity of goods and services demanded.
B)  increase,which decreases the quantity of goods and services demanded.
C)  decrease,which increases the quantity of goods and services demanded.
D)  decrease,which decreases the quantity of goods and services demanded.

Question 17

Consider the following sequence of events:
Price level ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↑
⇒ quantity of goods and services demanded ↓
Τhis sequence explains why the

Accepted Answer

A)  money-supply curve is vertical.
B)  aggregate-demand curve shifts leftward in response to a monetary injection.
C)  aggregate-demand curve shifts rightward in response to a monetary injection.
D)  aggregate-demand curve slopes downward.

Question 18

The Fed can influence the money supply by

Accepted Answer

A)  changing how much it lends to banks.
B)  changing the interest rate it pays banks on the reserves they are holding.
C)  using open-market operations.
D)  All of the above are correct.

Question 19

Other things the same,which of the following responses would we expect to result from a decrease in U.S.interest rates?

Accepted Answer

A)  U.S.citizens decide to hold more foreign bonds.
B)  People choose to hold more currency.
C)  You decide to purchase a new oven for your cookie factory.
D)  All of the above are correct.

Question 20

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  The price level rises.
B)  The price level falls.
C)  The Fed purchases government bonds on the open market.
D)  None of the above is correct.

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

If there is excess money supply,people will

Correct Answer
verified

Which of the following actions might we logically expect to result from rising stock prices?

Correct Answer
verified

Consider the following sequence of events: Price level ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓ Τhis sequence explains why the

Correct Answer
verified

Figure 34-3. -Refer to Figure 34-3.Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect?

Correct Answer
verified

In recent years,the Federal Reserve has conducted policy by setting a target for

Correct Answer
verified

The Fed can influence the money supply by

Correct Answer
verified

If the Federal Reserve increases the money supply,then initially people want to

Correct Answer
verified

In recent years,the Federal Reserve has conducted policy by setting a target for the

Correct Answer
verified

According to liquidity preference theory,an increase in the price level causes the interest rate to

Correct Answer
verified

According to liquidity preference theory,a decrease in the price level causes the interest rate to

Correct Answer
verified

If the interest rate is above the Fed's target,the Fed should

Correct Answer
verified

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

In the short run,a decrease in the money supply causes interest rates to

Correct Answer
verified

Figure 34-1 -Refer to Figure 34-1.If the current interest rate is 2 percent,

Correct Answer
verified

If the Fed conducts open-market purchases,then which of the following quantities increase(s) ?

Correct Answer
verified

Other things the same,which of the following responses would we expect to result from a decrease in U.S.interest rates?

Correct Answer
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Correct Answer
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If the Federal Reserve decreases the money supply,then initially there is a

Correct Answer
verified

If the interest rate is below the Fed's target,the Fed would

Correct Answer
verified

The Fed is concerned about stock market booms because the booms

Correct Answer
verified

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

If there is excess money supply,people will

Correct AnswerverifiedShow Answer

Which of the following actions might we logically expect to result from rising stock prices?

Correct AnswerverifiedShow Answer

Consider the following sequence of events: Price level ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓ Τhis sequence explains why the

Correct AnswerverifiedShow Answer

Figure 34-3. -Refer to Figure 34-3.Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect?

Correct AnswerverifiedShow Answer

In recent years,the Federal Reserve has conducted policy by setting a target for

Correct AnswerverifiedShow Answer

The Fed can influence the money supply by

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the money supply,then initially people want to

Correct AnswerverifiedShow Answer

In recent years,the Federal Reserve has conducted policy by setting a target for the

Correct AnswerverifiedShow Answer

According to liquidity preference theory,an increase in the price level causes the interest rate to

Correct AnswerverifiedShow Answer

According to liquidity preference theory,a decrease in the price level causes the interest rate to

Correct AnswerverifiedShow Answer

If the interest rate is above the Fed's target,the Fed should

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

In the short run,a decrease in the money supply causes interest rates to

Correct AnswerverifiedShow Answer

Figure 34-1 -Refer to Figure 34-1.If the current interest rate is 2 percent,

Correct AnswerverifiedShow Answer

If the Fed conducts open-market purchases,then which of the following quantities increase(s) ?

Correct AnswerverifiedShow Answer

Other things the same,which of the following responses would we expect to result from a decrease in U.S.interest rates?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Federal Reserve decreases the money supply,then initially there is a

Correct AnswerverifiedShow Answer

If the interest rate is below the Fed's target,the Fed would

Correct AnswerverifiedShow Answer

The Fed is concerned about stock market booms because the booms

Correct AnswerverifiedShow Answer

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