WorksheetsMacro Unit 4.5 - 4.7 Quiz
Total questions: 12
Worksheet time: 10mins
In the short run, a contraction in the money supply will most likely change the nominal interest rate and aggregate demand in which of the following ways?
Nominal Interest Rates/Aggregate Demand
Increase/decrease
Increase/increase
Increase/not change
decrease/decrease
decrease/increase
If the money supply stays constant but the demand for money decreases, the equilibrium interest rate and quantity of money will change in which of the following ways?
Interest Rate/Quantity of Money
Increase/decrease
Increase/not change
Decrease/decrease
Decrease/increase
Decrease/not change
The public wants to hold $10 billion in money. The monetary base is $2 billion and the money multiplier is 4. Based on the above data, which of the following will most likely occur?
The monetary base will increase.
The nominal interest rate will increase.
The money multiplier will increase.
The money demand curve will shift right.
Spending will increase.
Which of the following changes would cause an increase in the equilibrium nominal interest rate?
An increase in the monetary base
An increase in the money supply
An increase in real income
A decrease in the amount of cash the public wants to hold
A decrease in the price level
Which of the following will most likely result in a country's lower real interest rate?
The nation provides an investment tax credit to new businesses.
The citizens of the nation increase their savings for retirement.
The nation is experiencing political instability and economic risk.
The nation’s central bank sells government bonds in the open market.
The nation’s government increases its borrowing to finance spending on capital projects.
Which of the following changes must have happened in the loanable funds market to cause a decrease the equilibrium real interest rate?
A decrease in private savings
A decrease in the expected inflation rate
An increase in government spending on highways financed by borrowing
An increase in foreign financial capital inflows
An investment tax credit for plant and equipment
Which of the following must be true if the loanable funds market is in equilibrium?
Government spending equals tax revenues.
Investment spending equals national savings.
Investment spending equals private savings.
Borrowing equals lending.
Foreign inflows of financial capital equal investment spending.
The graph above shows the effect of a monetary policy action on aggregate demand. Which of the following will shift the aggregate demand curve in the direction shown?
A decrease in the money supply
A decrease in the monetary base
A decrease in the overnight interbank lending rate
An increase in the required reserve ratio
The sale of bonds to the private sector by the central bank
Which monetary policy action could the Fed implement in order to control inflation?
Target a lower overnight interbank lending rate
Sell government bonds to the public
Lower the discount rate
Lower the required reserve ratio
Increase the monetary base
Which of the following will most likely increase when the Fed sells government bonds on the open market?
Bank reserves
Price of bonds
Money supply
Nominal interest rates
The required reserve ratio
If the Fed implemented contractionary monetary policy, which of the following sequences of events would occur?
Interest rates increase, investment and consumption spending decrease, aggregate demand decreases, and output and prices decrease.
Interest rates increase, investment and consumption spending decrease, aggregate demand increases, and output and prices decrease.
Interest rates increase, investment and consumption spending increase, aggregate demand decreases, and output and prices decrease.
Interest rates decrease, investment and consumption spending decrease, aggregate demand decreases, and output and prices decrease.
Interest rates decrease, investment and consumption spending decrease, aggregate demand decreases, and output and prices increase.
Which event would have caused the shift of the money supply curve from S1 to S2 in the above money market graph?
The purchase of government bonds on the open market by the Federal Reserve
An increase in the required reserve ratio
A short-run increase in output, employment, and income
An increase in general price level in the United States
An increase in the supply of dollars in foreign exchange markets
