Question

1) In the income-expenditure model, expansionary monetary policy leads to:

a. lower interest rates, a decrease in planned investment spending, and an increase in equilibrium GDP.

b. higher interest rates, a decrease in planned investment spending, and a decrease in equilibrium GDP.

c. higher interest rates, an increase in planned investment spending, and an increase in equilibrium GDP.

d. lower interest rates, an increase in planned investment spending, and an increase in equilibrium GDP.

2) The Federal Open Market Committee does NOT control the:

a. discount rate.

b. federal funds rate.

c. prime rate.

d. reserve ratio.

3) If Congress places a $5 tax on each ATM transaction, there will likely be:

a. a movement up a stationary money demand curve.

b. a movement down a stationary money demand curve.

c. a shift to the left of the money demand curve.

d. a shift to the right of the money demand curve.

4) If the AD curve shifts to the right, in the short run there will be:

a. an increase in aggregate output and a decrease in the price level.

b. a decrease in aggregate output and a decrease in the price level.

c. an increase in aggregate output and an increase in the price level.

d. a decrease in aggregate output and an increase in the price level.

5) A high demand for money (as in Japan) would result from:

a. low crime rates and inability of businesses to accept noncash payments.

b. a decrease in the price level.

c. a decrease in real GDP and a preference from businesses to accept only debit cards.

d. a decrease in nominal GDP and a high crime rate.

6) If a central bank announces an inflation target:

a. it must do so in coordination with fiscal policy makers.

b. it may have to sacrifice some control over interest rates.

c. it is in effect also announcing an interest rate target.

d. it will achieve this goal only by allowing price levels to vary.

7) U.S. banks did not offer interest on checking accounts until the beginning of the 1980s. Then banking regulations changed, allowing banks to pay interest on checking account funds. As a result:

a. the demand for money rose and shifted the money demand curve to the right.

b. the demand for money fell and shifted the money demand curve to the left.

c. the supply of money fell and shifted the money demand curve to the left.

d. the supply of money rose and shifted the money demand curve to the right.

8) The demand curve for money will shift to the right because of a:

a. rise in the interest rate.

b. fall in real GDP.

c. rise in real GDP.

d. fall in the interest rate.

9) All of the following factors will shift the money demand curve EXCEPT:

a. changes in the aggregate price level.

b. changes in inflation.

c. changes in the real GDP.

d. changes in the interest rate.