**** me:4.3

In the short run, an expansionary monetary policy would most likely result in which of the following changes in the price level and real gross domestic product (GDP)? Price Level Real GDP (A) Decrease Increase (B) No change Decrease (C) Increase No chance (D) Increase Decrease (E) Increase Increase

Price level Real GDP (E) Increase Increase

In the short run, which of the following would occur to bond prices and interest rates if a central bank bought bonds through open-market operations? Bonds Prices Interest Rates (A) No change. Increase (B) Increase. Increase (C) Increase. Decrease (D) Decrease. Increase (E) Decrease. Decrease

Bonds Prices. Interest Rates (C) Increase. Decrease

Which of the following sequences of events would occur if the Federal Reserve implemented contractionary monetary policy? (A) Interest rates increase, investment and consumption spending decrease, aggregate demand decreases, and output and prices decrease. (B) Interest rates increase, investment and consumption spending decrease, aggregate demand increase, and output and prices decrease. (C) Interest rates increase, investment and consumption spending increase, aggregate demand decreases, and output and prices decrease. (D) Interest rates decrease, investment and consumption spending decrease, aggregate demand decreases, and output and prices decrease. (E) Interest rates decrease, investment and consumption spending decrease, aggregate demand decreases, and output and prices increase.

(A) Interest rates increase, investment and consumption spending decrease, aggregate demand decreases, and output and prices decrease.

In the narrowest definition of money .M1, savings accounts are excluded because they are (A) not a medium of exchange (B) not insured by federal deposit insurance (C) available from financial institutions other than banks (D) a store of purchasing power (E) interest-paying accounts

(A) not a medium of exchange

Which of the following is most likely to occur in the Federal Reserve engages in open market operations to reduce inflation? (A) A decrease in interest rates (B) A decrease in reserves in the banking system (C) A decrease in the government deficit (D) An increase in the money supply (E) An increase in exports

(B) A decrease in reserves in the banking system

A barter economy is different from a money economy in that a barter economy (A) encourages specialization and division of labor (B) involves higher costs for each transaction (C) eliminates the need for a double coincidence of wants (D) has only a few assets that serve as a medium of exchange (E) promotes market exchanges

(B) involves higher costs for each transaction

Suppose that all banks keep only the minimum reserve required by law and that there are no currency drains. The legal reserve requirements is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift form her grandmother into her checking account, the maximum increase in the total money supple will be (A) $10 (B) $100 (C) $900 (D) $1,000 (E) $1,100

(C) $900

Which of the following is NOT a function of fiat money ? (A) A standard of deferred payment (B) A unit of account (C) A source of intrinsic value (D) A store of value (E) A medium of exchange

(C) A source of intrinsic value

Suppose that a national government increased deficit spending on goods and services, increasing its demand for loanable funds. In the long run, this policy would most likely result in which of the following changes in this country? A) Real Interest Rate: Decrease Investment: Decrease B) Real Interest Rate: Decrease Investment: Increase C) Real Interest Rate: Increase Investment: Decrease D) Real Interest Rate: Increase Investment: No Change E) Real Interest Rate: No Change Investment: Increase

(C) Real Interest Rate: Increase Investment: Decrease

The amount of money that the public wants to hold in the form of cash will (A) be unaffected by any change in interest rates or the price level (B) increase if interest rates increase (C) decrease if interest rates increase (D) increase if the price level decreases (E) decrease if the price level remains constant

(C) decrease if interest rates increase

If a country's economy is operating below the full-employment level of output at a very low inflation rate, the central bank of the country is most likely to (A) purse an expansionary monetary policy because it is required to do so by law whenever output is below the full-employment level (B) purse an expansionary fiscal policy because it is required to do so by law-employment level (C) lower the discount rate and buy bonds on the open market to generate and increase in output (D) loser the required reserve ratio and sell bonds on the open market to generate an increase in output (E) raise the discount rate and lower the required reserve ratio to generate an increase in output

(C) lower the discount rate and buy bonds on the open market to generate an increase in output

Which of the following will lead to a decrease in a nation's money supply? (A) A decrease in income tax rates (B) A decrease in the discount rate (C) An open market purchase of government securities by central bank (D) An increase in reserve requirements (E) An increase in government expenditures on goods and services

(D) An increase in reserves requirements

When an economy is operating below the full-employment level of output, an appropriate monetary policy would be to increase which of the following? (A) The discount rate (B) The required reserve ratio (C) The international value of the dollar (D) Open market purchases of government bonds (E) Government expenditure on goods and services

(D) Open market purchases of government bonds

Which Federal Reserve action can shift the aggregate demand curve to the left? (A) Lowering the federal funds rate (B) Lowering income taxes (C) Lowering reserve requirements (D) Raising the discount rate (E) Raising government spendings in national defense

(D) Raising the discount rate

The transaction demand for money is very closely associated with money's use as a (A) store of value (B) standard unit of account (C) measure of value (D) medium of exchange (E) standard of deferred payment

(D) medium of exchange

The Federal Reserve decreases the federal funds rate by (A) decreasing the reserve requirement (B) decreasing the discount rate (C) increasing the discount rate (D) selling government bonds on the open market (E) buying government bonds on the open market

(E) buying government bonds on the open market

When the economy is at full employment, which of the following will most likely create demand pull inflation in the short run? A) An increase in discount rate B) An increase in personal income taxes C) A decrease in real rate of interest D) A decrease in government spending E) A decrease in money supply

C) A decrease in real rate of interest

The purchase of bonds by the federal by the federal reserve will have the greatest effect on real gdp if which of the following situations exist in the economy? A)The required reserve ratio is high and the interest rate has a large effect on investment spending B) The required reserve ratio is high and interest rates has a small effect on investment spending C) The required reserve ratio is low and interest rate has a large effect on investment spending D) The required reserve ratio is low and marginal propensity to consume is low E) The marginal propensity to consume is high and the interest rate has a small effect on investment spending

C) The required reserve ratio is low and interest rate has a large effect on investment spending

With a constant money supply, if the demand for money decreases, the equilibrium interest rate and quantity of money will change in which of the following ways? A)Interest rate: Increase Quantity of Money: Decrease B) Interest rate: Increase Quantity of Money: No change C) Interest rate: Decrease Quantity of Money: Decrease D) Interest rate: Decrease Quantity of Money: Decrease E) Interest rate: Decrease Quantity of Money: No change

Interest Rate: Decrease, Quantity of money: Not Change