Macro 2017 FRQ #2- Money Market, Bond Prices, Open Market Operations

Jacob Clifford explains a macroeconomics free response question from the 2017 AP test, focusing on the money market, interest rates, bond prices, and the velocity of money. He discusses the inverse relationship between interest rates and bond prices, the impact of interest rates on price levels and GDP, and how the central bank can use open market operations to influence interest rates.

What is the main focus of the 2017 macroeconomics question discussed in the video?

• The labor market

• The stock market

• The money market

• The housing market

Which graph is used to represent the money market in macroeconomics?

• Aggregate demand and supply graph

• Phillips curve

• Money market graph

• Production possibilities curve

What happens to the demand for money when people use credit cards more frequently?

• It increases

• It decreases

• It remains the same

• It fluctuates randomly

How are interest rates and bond prices related?

• They fluctuate independently

• They are not related

• They are inversely related

• They are directly related

What effect does a lower interest rate have on consumer spending and investment?

• Increases spending, decreases investment

• Decreases spending, increases investment

• Increases both

• Decreases both

What happens to the velocity of money if the nominal GDP increases while the money supply remains constant?

• Velocity decreases

• Velocity becomes unpredictable

• Velocity remains constant

• Velocity increases

What open market operation can the central bank use to increase interest rates?

• Decrease money demand

• Buy bonds

• Increase money supply

• Sell bonds