Chapter 17 Monetary Policy and Inflation

| November 9, 2018

3)
Equilibrium in the money market occurs when
A)
the quantity of money demanded equals the quantity of money supplied.
B)
the quantity of money demanded is less than the quantity of money supplied.
C)
the quantity of money demanded is more than the quantity of money supplied.
D)
the interest rate equals the money supply.

4)
If the quantity of money demanded exceeds the quantity of money supplied, then
the
A)
equilibrium interest rate stays the same.
B)
equilibrium interest rate will increase.
C)
equilibrium interest rate will decrease.
D)
effect on the equilibrium interest rate is indeterminate.

5)
If the quantity of money demanded is less than the quantity of money supplied,
then the
A)
interest rate stays the same.
B)
interest rate will increase.
C)
interest rate will decrease.
D)
effect on the interest rate is indeterminate.

6)
If the Federal Reserve conducts an open market purchase, the
A)
interest rate will not change.
B)
interest rate will increase.
C)
interest rate will decrease.
D)
money supply is decreased.

7)
If the Federal Reserve conducts an open market sale, the
A)
interest rate will not change.
B)
interest rate will increase.
C)
interest rate will decrease.
D)
money supply is increased.

8)
Based on the model of the money market, if prices in the economy decrease, the
equilibrium interest rate should
A)
stay the same.
B)
increase.
C)
decrease.
D)
increase to the same extent that the supply of money increases.

9)
Based on the model of the money market, when real GDP increases, the
equilibrium interest rate should
A)
stay the same.
B)
increase.
C)
decrease.
D)
increase to the same extent that the supply of money increases.

10)
Based on the model of the money market, when real income decreases, the
equilibrium interest rate should
A)
stay the same.
B)
increase.
C)
decrease.
D)
increase to the same extent that the supply of money increases.

11)
Based on the model of the money market, if the Federal Reserve increases the
reserve requirement, the equilibrium interest rate should
A)
stay the same.
B)
increase.
C)
decrease.
D)
increase to the same extent that the demand for money increases.

12)
The supply of money is determined by the Federal Reserve and is dependent on
the demand for money.

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