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WorksheetsCh.6 Money Market & Monetary Policy
Total questions: 15
Worksheet time: 15mins
Which of the following statements are correct?
(1) Transactions demand for money is positively related to real national income.
(2) Asset demand is the demand for money as a store of value.
(3) The real interest rate is the cost of holding money.
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Which of the following will reduce money demand?
A rise in real national income
A rise in the expected price level
A rise in the time interval between successive income receipts
None of the above
Which of the following will raise the transactions demand or asset demand for money?
(1) Real national income increases.
(2) The interest rate falls.
(3) Other assets have less risk.
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Which of the following will shift the money demand curve from Md1 to Md2?
A fall in the interest rate
An advance in payment technology
A change from a weekly payroll to a monthly payroll
A decrease in the risk of holding other assets
Refer to the diagram above. Which of the following statements are correct?
(1) When the interest rate is r0, quantity demanded of money is equal to quantity supplied of money.
(2) When the interest rate is r1, quantity demanded of money will fall to eliminate the excess demand for money.
(3) When the interest rate is r2, there is an excess supply of money and the interest rate will tend to fall.
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
The interest rate may increase when there is
a fall in money demand.
a rise in money supply.
a fall in money demand accompanied by a fall in money supply.
a fall in money demand accompanied by a rise in money supply.
Which of the following will increase the money supply?
(1) The government lowers the required reserve ratio.
(2) The government issues more money to finance its infrastructure projects.
(3) Commercial banks decrease their investments to increase their excess reserves.
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Which of the following will shift the money supply curve from Ms1 to Ms2?
A fall in the discount rate
A fall in the required reserve ratio
An open market purchase
None of the above
Suppose the central bank of a country lowers the required reserve ratio. Which of the following will certainly occur as a result?
The deposits in banks will increase.
The reserves in banks will decrease.
The money supply will increase.
The maximum banking multiplier will increase.
Suppose the required reserve ratio is 25%. If the central bank makes an open market sale of $10 million in government bonds, what is the maximum change in the money supply?
An increase of $30 million
An increase of $40 million
A decrease of $30 million
A decrease of $40 million
Suppose the required reserve ratio is 20%. If the central bank makes an open market purchase of $5 million in government bonds, what will the maximum change in the money supply be?
An increase of $20 million
An increase of $25 million
A decrease of $20 million
A decrease of $25 million
Which of the following are contractionary monetary policies?
(1) Raising the discount rate
(2) Raising the required reserve ratio
(3) The central bank makes an open market sale
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Which of the following are the possible effects of a contractionary monetary policy?
(1) A fall in the price level
(2) A fall in real national income
(3) A fall in the unemployment rate
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Which of the following may help combat inflation?
(1) Raising the minimum required ratio
(2) Open market sale
(3) Raising the discount rate
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Which of the following monetary policies will lead to a rise in the interest rate?
The government lowers the minimum reserve ratio.
The central bank sells bonds to the public.
The central bank issues more banknotes.
The central bank lowers the discount rate.
