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WorksheetsThe Money Market
Total questions: 20
Worksheet time: 10mins
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
Nominal interest rates and prices of previously issued bonds will be affected in which of the following ways when money demand exceeds money supply?
Nominal interest rates will decrease, and bond prices will decrease.
Nominal interest rates will increase, and bond prices will decrease.
Nominal interest rates will decrease, and bond prices will increase.
Nominal interest rates will increase, and bond prices will increase.
The amount of money that the public wants to hold is $10 billion. With a monetary base of $2 billion and a money multiplier of 4, 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.
An increase in money demand will cause which of the following?
A decrease in the nominal interest rate
A decrease in bond prices
A decrease in the money supply
An increase in the price level
The demand for money increases when national income increases because
spending on goods and services increases
interest rates increase
the budget deficit increases
the money supply increases
The demand curve for money shifts to the right when
the nominal interest rate decreases
the nominal gross domestic product increases
the real gross domestic product decreases
inflation decreases
Which of the following is true when interest rates rise?
The opportunity cost of holding cash decreases.
The opportunity cost of holding cash increases.
The opportunity cost of holding cash stays the same.
The money supply curve shifts to the right.
The money demand curve is downward sloping because
the transaction demand for money decreases as interest rates fall
people hold less money as the opportunity cost of holding money rises
money is less liquid as interest rates rise, so people are able to hold less of it
banks are more willing to create money when interest rates fall
Which of the following is most likely to increase if the public decides to increase its holdings of currency?
The interest rate
The price level
Disposable personal income
Employment
Which of the following will most likely occur in an economy if more money is demanded than is supplied?
The amount of investment spending will increase.
Interest rates will decrease.
Interest rates will increase.
The demand curve for money will shift to the left.
Which of the following is true of the quantity of money demanded?
It rises when interest rates rise, because the return from holding money increases.
It falls when interest rates rise, because the opportunity cost of holding money increases.
It remains constant when interest rates rise, as long as inflation remains constant.
It rises when interest rates rise, as long as inflation is declining.
