1.
Suppose in the second quarter of 2006, the following values were observed: Real GDP - $1671.6B, Price level - 2.36, and M1 - $582.6B. What was the value of velocity?
a. 6.6 b. 3.17 c. 283 d. cannot be determined
2. Which of the following actions would not fit into a restrictive monetary policy?
a. raising reserve requirements
b. raising the discount rates
c. open market sales of government securities d. none of the above
3. Which one or more of the following will cause velocity to rise?
a. switching from a weekly to a monthly payroll
b. increasing the efficiency of the payments mechanism
c. an increase in the supply of money d. a decrease in the rate of interest
4. Increases in government spending or tax outs normally:
a. have no effect on interest rates b. push interest rates higher
c. pull interest rates down d. result in a decrease in the quantity of money supplied
5. The velocity of money is related:
a. directly to the frequency with which paychecks are received and inversely to the efficiency of the payments mechanism
b. inversely to the frequency with which paychecks are received and directly to the efficiency of the payments mechanism
c. directly to both the frequency with which paychecks are received and the efficiency of the payments mechanism
d. inversely to both the frequency with which paychecks are received and the efficiency of the payments mechanism
6. According to the monetarists, the velocity of money is:
a. constant, by definition b. constant, not by definition but as a matter of empirical fact
c. not constant, but fairly predictable d. highly variable in an unpredictable manner
7. A decrease in government spending normally pushes interest rates:
a. lower and decreases the velocity of money b. higher and increases the velocity of money
c. lower and increases the velocity of money d. higher and decreases the velocity of money
8. The demand for money varies
a. directly with both the price level and the level of real GDP
b. inversely with both the price level and the level of real GDP
c. inversely with the price level and directly with the level of real GDP
d. directly with the price level and inversely with the level of real GDP
e. inversely with the level of nominal GDP
9. An increase in the price level will
a. shift the demand for money curve to the right
b. shift the demand for money curve to the left
c. increase the quantity of money people want to hold
d. decrease the quantity of money people want to hold
e. have no impact on the demand for money curve
10 If the interest rate rises, people hold
a. less money because its opportunity cost has increased
b. more money because its opportunity cost has increased
c. less money because its opportunity cost has declined
d. more money because its opportunity cost has declined
e. the same amount of money
11. A decrease in the interest rate will
a. shift the demand for money curve to the right
b. shift the demand for money curve to the left
c. increase the quantity of money people want to hold
d. decrease the quantity of money people want to hold
e. have no impact on the demand for money curve
12. Which of the following is not held constant along the demand for money curve?
a. the price level
b. the interest rate
c. real GDP
d. nominal GDP
e. individual’s tastes and preference
13.
Which of the following, other things constant, will shift the demand for
money curve to
the right?
a. an increase in the interest rate
b. a decrease in the interest rate
c. an increase in real GDP
d. a decrease in real GDP
e. a decrease in the price level
14. In the aggregate demand-aggregate supply model, an increase in the money supply will cause in the short run a(n)
a. increase in both the price level and real GDP
b. decrease in both the price level and real GDP
c. increase in real GDP and a decrease in the price level
d. decrease in real GDP and an increase in the price level
e. increase in the price level only
15. If the Fed wanted to stimulate the economy, it might
a. buy bonds to lower the money supply
b. sell bonds to lower the money supply
c. raise the discount rate to increase the money supply
d. lower the discount rate to increase the money supply
e. increase the required reserve ratio to lower the money supply
16. If the Fed buys bonds, then the money supply
a. increases, the interest rate falls, and the quantity of money demanded increases
b. falls, the interest rate falls, and the quantity of money demanded increases
c. increases, the interest rate increases, and the quantity of money demanded increases
d. falls, the interest rate increases, and the quantity of money demanded falls
e. falls, the interest rate falls, and the quantity of money demanded falls
17. When the Fed decreases the money supply, causing the interest rate to rise, GDP
a. increases by the same amount as the increase in the interest rate
b. decreases by more than the increase in the interest rate because of the multiplier
c. decreases by the same amount as the decrease in investment
d. decreases by more than the decrease in investment because of the multiplier
e. decreases by less than the decrease in investment because of the multiplier
18. When the Fed decreases the money supply, GDP
a. increases because the resulting increase in the interest rate leads to a decrease in investment
b. increases because the resulting decrease in the interest rate leads to an increase in investment
c. decreases because the resulting increase in the interest rate leads to a decrease in investment
d. decreases because the resulting increase in the interest rate leads to an increase in investment
e. decreases because the resulting decrease in the interest rate leads to an increase in investment
ECO 203