Monetary Policy

The use of money and credit controls to change the macroeconomy is

• Monetary policy.

• Considered ineffective by most economists.

• No longer used in the United States.

• Fiscal policy.

____________ is the price paid for the use of money.

• Gold

• Monetary policy

• Fiscal policy

• The interest rate

An increase in the money supply will

• Reduce interest rates and increase aggregate demand.

• Reduce interest rates and decrease aggregate demand.

• Raise interest rates and increase aggregate demand.

• Raise interest rates and decrease aggregate demand.

The speculative, transactions, and precautionary demands for money added together give the

• Market demand curve for money.

• Monetarist demand-for-money curve.

• Keynesian liquidity trap.

• Market supply curve for money.

When the money market is in equilibrium in the liquidity trap,

• The demand for money is perfectly insensitive to interest rates.

• An increase in the money supply does not affect interest rates.

• Investment spending falls to zero.

• There is no speculative demand for money.

Ceteris paribus, the quantities of money people are willing and able to hold

• Decrease as interest rates fall.

• Increase as interest rates fall.

• Increase as the money supply decreases.

• Decrease when the speculative demand increases.

The money supply curve as determined by current Federal Reserve policy is

• Upward-sloping to the right.

• Downward-sloping to the right.

• Vertical since it's not determined by the interest rate.

• Horizontal since it's not determined by the interest rate.

The equilibrium rate of interest is determined by

• Money demand and money supply.

• The U.S. Treasury.

• The president of the Federal Reserve Bank of New York.

• The Federal Closed Market Committee.

Ceteris paribus, if the Fed sells bonds through open market operations, the money

• Supply curve should shift rightward.

• Supply curve should shift leftward.

• Demand curve should shift rightward.

• Demand curve should shift leftward.

Long-term interest rates may not closely follow short-term interest rates if

• People prefer to hold transactions accounts over cash.

• The required reserve ratio decreases.

• Lenders are reluctant to make loans.

• The Fed intervenes in the bond market.