econ 2035 4.4

An increase in the price level will result in a(n) ________ in the demand for money and cause the nominal interest rate to ________. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase

D. increase;increase

Which of the following will cause the money demand curve to shift to the left? A) a decrease in real GDP B) an increase in the price level C) a decrease in the nominal interest rate D) an increase in the supply of money

A. a decrease in real GDP

A decrease in real GDP will result in a(n) ________ in the demand for money and cause the nominal interest rate to ________. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase

A. decrease; decrease

The two most important factors that cause the money demand curve to shift are A) real GDP and the price level. B) nominal GDP and the Fed. C) the price level and the nominal interest rate. D) the nominal interest rate and the money supply.

A. real GDP and the price level

Which of the following will cause the money demand curve to shift to the right? A) a decrease in real GDP B) an increase in the price level C) an increase in the nominal interest rate D) a decrease in the supply of money

B. an increase in the price level

A decrease in money supply will result in a(n) ________ in the quantity of money demanded and cause the nominal interest rate to ________. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase

B. decrease; increase

When nominal interest rates on financial assets are high, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________. A) high; high B) high; low C) low; high D) low; low

B. high;low

When nominal interest rates fall on financial assets such as U.S. Treasury bills, the amount of interest that households and firms A) gain by holding money decreases. B) lose by holding money decreases. C) lose by holding money increases. D) lose or gain by holding money does not change.

B. lose by holding money decreases

If the Fed increases the money supply and as a result, households and firms buy more short-term financial assets, the prices of those short-term financial assets will ________ and the interest rates on those assets will ________. A) rise; rise B) rise; fall C) fall; rise D) fall; fall

B. rise;fall

Monetary policy has traditionally focused on the A) long-term nominal interest rate. B) short-term nominal interest rate. C) long-term real interest rate. D) short-term real interest rate.

B. short-term nominal interest rate

If the Fed decreases the money supply and as a result, households and firms buy fewer short-term financial assets, the prices of those short-term financial assets will ________ and the interest rates on those assets will ________. A) rise; rise B) rise; fall C) fall; rise D) fall; fall

C. fall;rise

When nominal interest rates rise on financial assets such as U.S. Treasury bills, the amount of interest that households and firms A) gain by holding money increases. B) lose by holding money decreases. C) lose by holding money increases. D) lose or gain by holding money does not change.

C. lose by holding money increases

When nominal interest rates on financial assets are low, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________. A) high; high B) high; low C) low; high D) low; low

C. low;high