Quiz Chapter 16
1. The asset demand for money: A. is unrelated to both the interest rate and the level of GDP. B. varies inversely with the rate of interest. C. varies inversely with the level of real GDP. D. varies directly with the level of nominal GDP
B
6. In recent years, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in targets for the: A. Exchange rate B. Federal funds rate C. Prime interest rate D. Consumer price index
B
2. The opportunity cost of holding money: A. is zero because money is not an economic resource. B. varies inversely with the interest rate. C. varies directly with the interest rate. D. varies inversely with the level of economic activity.
C
4. If the amount of money demanded exceeds the amount supplied, the: A. demand-for-money curve will shift to the left. B. money supply curve will shift to the right. C. interest rate will rise. D. interest rate will fall.
C
7. A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to: A. Reduce inflation in the economy B. Raise interest rates C. Ease monetary policy D. Tighten monetary policy
C
8. The level of GDP will tend to increase when: A. Reserve requirements are increased B. There is an increase in the discount rate C. The Federal Reserve buys government securities in the open market D. The Federal Reserve sells government securities in the open market
C
9. Which is considered a strength of monetary policy compared to fiscal policy? A. The ability to increase the budget deficit B. The ability to decrease the budget surplus C. Its protection from political pressure D. It is sluggish
C
3. A contraction of the money supply: A. increases the interest rate and decreases aggregate demand. B. increases both the interest rate and aggregate demand. C. lowers the interest rate and increases aggregate demand. D. lowers both the interest rate and aggregate demand.
A
5. If the interest rate increases, there will be a(n): A. Decrease in the amount of money held as assets B. Decrease in the transactions demand for money C. Increase in the transactions demand for money D. Increase in the amount of money held as assets
A