The Money Market

Assume that the economy is in equilibrium. If aggregate demand increases, nominal interest rates and bond prices will most likely change in which of the following ways?

• NIR : Increase

  Bond $ : Increase

• NIR : Increase

  Bond $ : Decrease

• NIR : Increase

  Bond $ : No change

• NIR : Decrease

  Bond $ : Increase

Which of the following would lead to an increase in nominal interest rates?

• An expansionary monetary policy accompanied by an increase in the demand for money

• An expansionary monetary policy accompanied by a decrease in the demand for money

• An expansionary monetary policy conducted without any change in the demand for money

• A contractionary monetary policy accompanied by an increase in the demand for money

Which of the following changes will necessarily occur as a result of an increase in the nominal interest rate?

• The money demand curve will shift to the left.

• The money demand curve will shift to the right.

• The money supply curve will shift to the left.

• The quantity of money demanded will decrease.

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?

• ir : Increase

  QM : Decrease

• ir : Increase

  QM : No Change

• ir : Decrease

  QM : Decrease

• ir : Decrease

  QM : No Change

Expansionary fiscal policy will most likely result in

• a decrease in the money supply

• an increase in the marginal propensity to consume

• an increase in nominal interest rates

• a decrease in the level of output

If there is an increase in nominal income, which of the following will most likely occur in the short run?

• The supply of money will decrease.

• The supply of money will increase.

• The demand for money will increase.

• The demand for money will decrease.

The amount of money that the public wants to hold in the form of cash will

• be unaffected by any change in interest rates or the price level

• increase if interest rates increase

• decrease if interest rates increase

• increase if the price level decreases

An increase in government spending will affect the demand for money and nominal interest rates in which of the following ways?

• MD : Increase

  NIR : Increase

• MD : Increase

  NIR : Decrease

• MD : Increase

  NIR : Indeterminate

• MD : Decrease

  NIR : Increase

An increase in which of the following will cause an increase in the demand for money?

• The interest rate

• The supply of money

• The price level

• The velocity of money

An increase in inflationary expectations will most likely affect nominal interest rates and bond prices in which of the following ways in the short run?

• NIR : Increase

  Bond $ : No change

• NIR : Increase

  Bond $ : Decrease

• NIR : No change

  Bond $ : Increase

• NIR : Decrease

  Bond $ : Decrease