a medium of exchange.

a unit of account.

a store of value.

All of the above.

currency

bank deposits on which check may be written.

both A and B.

travelers’ checks.

A, B and D.

the expected return the asset offers compared with the returns offered by other

assets.

the riskiness of the asset’s expected return.

the asset’s liquidity.

All of the above.

Only A and B.

it is risky to hold money.

it is not risky to hold money.

risk does affect the demand for money.

there is no relationship between risk and holding money.

E. None of the above.

A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall.

A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise.

A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise.

A rise in the average value of transactions carried out by a household or a firm causes its demand for nominal money to rise.

A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.

the interest rate.

the price level.

real national income.

All of the above.

Only A and C.

slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy.

slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy.

has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy.

slopes downward because a fall in the interest rate raises the desired real

money holdings of each household and firm in the economy.

slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy

slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy

has a zero slope because a fall in the interest rate keeps constant the desired

real money holdings of each household and firm in the economy.

slopes downward because a fall in the interest rate raises the desired real

money holdings of each household and firm in the economy.

nominal GNP, changes in interest rates cause movements along the L(R,Y)

schedule

real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule

real GNP, changes in interest rates cause an increase of the L(R,Y) schedule.

nominal GNP, changes in interest rates cause an increase in the L(R,Y)

schedule.

real GNP, changes in interest rates cause movements along the L(R,Y)

schedule.

real GNP decreases aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.

real GNP raises aggregate real money demand for a given interest rate,

moving the L(R,Y) schedule to the left

real GNP raises aggregate real money demand for a given interest rate,

moving the L(R,Y) schedule to the right.

nominal GNP raises aggregate real money demand for a given interest rate, moving the L(R,Y) schedule to the right.

real GNP raises aggregate nominal money demand for a given interest rate, moving the L(R,Y) schedule to the right.

horizontal because MS is set by the central bank while P is taken as given.

vertical because MS is set by the central bank.

vertical because MS is set by the households and firms while P is taken as

given.

vertical because MS and P are set by the central bank.

vertical because MS is set by the central bank while P is taken as given.

excess demand for money, the interest rate falls, and if there is initially an

excess supply, it rises.

excess supply of money, the interest rate falls, and if there is initially an

excess demand, it rises.

excess supply of money, the interest rate increases, and if there is initially an excess demand, it falls.

excess supply of money, the interest rate falls, and if there is initially an

excess demand, it further falls.

A decrease in the money supply lowers the interest rate, while an increase in

the money supply raises the interest rate, given the price level and output

An increase in the money supply lowers the interest rate, while a fall in the money supply raises the interest rate, given the price level

An increase in the money supply lowers the interest rate, while a fall in the

money supply raises the interest rate, given the output level.

An increase in the money supply lowers the interest rate, while a fall in the

money supply raises the interest rate, given the price level and output.

nominal output raises the interest rate, while a fall in real output lowers the

interest rate, given the price level and the money supply

real output decreases the interest rate, while a fall in real output increases the interest rate, given the price level

real output raises the interest rate, while a fall in real output lowers the interest

rate, given the money supply.

nominal output raises the interest rate, while a fall in real output lowers the interest rate, given the price level.

real output raises the interest rate, while a fall in real output lowers the interest rate, given the price level and the money supply.

its currency to appreciate in the foreign exchange market, while a reduction in the money supply causes its currency to depreciate.

its currency to depreciate in the foreign exchange market, while a reduction in the money supply causes its currency to appreciate.

no effect on the values of its currency in international markets.

its currency to depreciate in the foreign exchange market, while a reduction in the money supply causes its currency to further depreciate.

None of the above.

an increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium

an increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market

an increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market.

an increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium.

E. None of the above statements is true.

A. Given PUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.

B. Given YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.

. Given PUS and YUS, when the money supply decreases, the dollar interest rate declines and the dollar depreciates against the euro.

. Given PUS and YUS, when the money supply rises, the dollar interest rate declines and the dollar appreciates against the euro.

Given PUS and YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro

A. the equilibrium that would occur if prices were perfectly flexible.

B. the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately.

the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment.

D. the equilibrium that would occur if prices were perfectly fixed to preserve full employment.

E. the equilibrium that would occur if prices were perfectly fixed at the full employment point.

Only the long-run equilibrium price level is the value of P satisfying P=MS /L(R,Y)

Only the short-run equilibrium price level is the value of P satisfying P=MS /L(R,Y).

. The short and long-run equilibrium price level is the value of P satisfying P=MS /L(R,Y).

The long-run equilibrium price level is the value of P satisfying P=MD/L(R,Y).

E. None of the above.

A. causes a more than proportional increase in its price level.

B. causes a less than proportional increase in its price level.

C. causes a proportional increase in its price level.

D. leaves its price level constant in long-run equilibrium.

E. None of the above.

A. increases the long-run values of the interest rate and real output.

B. decreases the long-run values of the interest rate and real output.

C. has no effect on the long-run value of only the interest rate.

D. has no effect on the long-run value of only real output.

E. has no effect on the long-run values of the interest rate and real output.

A. are neutral in the short run.

B. need not be neutral in the short run.

C. are neutral both in the short and long run.

D. are neutral in the long run.

E. need not be neutral in the long run.

immediately affect equilibrium real money balances by raising the money interest rate

eventually affect equilibrium nominal money balances by raising the money interest rate.

eventually affect equilibrium real money balances by reducing the money interest rate.

eventually affect equilibrium real money balances by raising the real interest rate.

eventually affect equilibrium real money balances by raising the money interest rate.

change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities

. change only as a result of demographic trends.

C. change only as a result of financial innovations such as electronic cashtransfer facilities.

not change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities.

change as a result of demographic trends but not as a result of financial innovations such as electronic cash-transfer facilities.

cross-section of countries, long-term changes in money supplies and price levels show a clear negative correlation.

time series of countries, long-term changes in money supplies and price levels show a clear positive correlation

cross-section of countries, short-term changes in money supplies and price levels show a clear negative correlation

D. cross-section of countries, short-term changes in money supplies and price levels show a clear positive correlation

cross-section of countries, long-term changes in money supplies and price levels show no clear correlation.

A permanent increase in a country’s money supply causes a proportional longrun depreciation of its currency against foreign currencies.

. A temporary increase in a country’s money supply causes a proportional longrun depreciation of its currency against foreign currencies.

A permanent increase in a country’s money supply causes a proportional longrun appreciation of its currency against foreign currencies

A permanent increase in a country’s money supply causes a proportional short-run depreciation of its currency against foreign currencies.

A permanent increase in a country’s money supply causes a proportional short-run appreciation of its currency against foreign currencies.

A. enter indices of the price level directly.

do not enter indices of the price level directly, but they make up a small fraction of the cost of producing goods and services.

. do not enter indices of the price level directly, but they make up a negligible fraction of the cost of producing goods and services

do not enter indices of the price level directly, but they make up a large fraction of the cost of producing goods and services

E. None of the above.

A. the exchange rate is much more variable than relative price levels.

B. the exchange rate is much less variable than relative price levels.

C. the exchange rate is as variable as the relative price levels.

It is hard to tell from the data whether the exchange rate is much more variable than relative price levels.

E. None of the above.

there is much less month-to-month variability of the exchange rate, suggesting that price levels are relatively sticky in the short run

there is much more month-to-month variability of the exchange rate, suggesting that price levels are relatively sticky in the short run.

there is almost the same month-to-month variability of the exchange rate and price levels

it is hard to tell whether month-to-month variability of the exchange rate is similar to changes in price levels.

there is much more month-to-month variability of the exchange rate, suggesting that price levels are relatively sticky in the long run.

There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite fixed.

There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality much more sticky than theory assumes.

There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite flexible.

There is no debate over the possibility that wages and prices are sticky in the long run.

There is no debate over the possibility that wages and prices are sticky in the short run.

fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.

increase over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.

fall over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises.

fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.

fall over time, and this additional monetary change makes money prices decrease even less quickly than the money supply itself rises.

A. the exchange rate overshoots in the short run.

B. the exchange rate overshoots in the long run.

C. the exchange rate smoothly depreciates in the short run.

D. the exchange rate smoothly appreciates in the short run.

the dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising

the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from rising.

the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing.

D. the dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing.