Chapter 17 Monetary Policy and Inflation

| November 9, 2018

11)
A decrease in the price level in the economy leads to
A)
a leftward shift in the demand for money curve.
B)
a rightward shift in the demand for money curve.
C)
a leftward movement along the demand for money curve.
D)
a rightward movement along the demand for money curve.

12)
An increase in the level of real GDP in the economy leads to
A)
a leftward shift in the demand for money curve.
B)
a rightward shift in the demand for money curve.
C)
a leftward movement along the demand for money curve.
D)
a rightward movement along the demand for money curve.

13)
A decrease in the level of real GDP in the economy leads to
A)
a leftward shift in the demand for money curve.
B)
a rightward shift in the demand for money curve.
C)
a leftward movement along the demand for money curve.
D)
a rightward movement along the demand for money curve.

14)
Which of the following factors does NOT shift the demand curve for money?
A)
changes in the interest rate
B)
changes in the price level in the economy
C)
changes in real income
D)
changes in real GDP

15)
The demand for money that arises so that individuals or firms can make
purchases on quick notice is called the
A)
real demand for money.
B)
transaction demand for money.
C)
liquidity demand for money.
D)
speculative demand for money.

16)
The demand for money that arises because holding money over short periods is
less risky than holding stocks or bonds is called the
A)
transactions demand for money.
B)
liquidity demand for money.
C)
opportunity cost demand for money.
D)
speculative demand for money.

17)
If your wealth is held as currency or in checking accounts, or other assets
that you can convert to money on short notice, your assets are considered to be
A)
abundant.
B)
fast moving.
C)
interest bearing.
D)
liquid.

18)
What is the motivation for individuals to hold money?
A)
to reduce risk
B)
to have liquidity
C)
to facilitate transactions
D)
all of the above

Recall
the Application about the Fed’s expanded involvement in the economy following
the financial crisis in 2008 to answer the following question(s).

19)
Recall the Application. Prior to the financial crisis in 2008, the Fed’s
traditional method of conducting monetary policy to expand the money supply was
A)
purchasing Treasury securities.
B)
purchasing mortgage-backed securities.
C)
lowering reserve requirements.
D)
raising the discount rate.

20)
Recall the Application. During 2008, the value of the Fed’s total assets
A)
fell by over $2 trillion.
B)
remained virtually unchanged.
C)
became negative.
D)
more than doubled.

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