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Econ Study Guide Ch.20

Question 1 of 12

1

The demand for money that households keep for emergency purposes is known as-

Select one of the following:

  • precautionary demand

  • emergency demand

  • speculative demand

  • temporary demand

Explanation

Question 2 of 12

1

The quantity of money held in response to interest rates is the-

Select one of the following:

  • transactions motive for holding money

  • precautionary motive for holding money

  • speculative motive for holding money

  • unit-of-account motive for holding money

Explanation

Question 3 of 12

1

the specualtive demand for money

Select one of the following:

  • varies inversely with income

  • is only concerned with active money

  • involves holding money for unexpected problems

  • varies directly with the transactions demand for money

  • varies inversely with the interest rate

Explanation

Question 4 of 12

1

Other things being equal, the quantity of money that people wish to hold can be expected to -

Select one of the following:

  • increase as the interest rate increases

  • decrease as the interest rate increases

  • decrease as real GDP increases

  • none of the answers above are correct

Explanation

Question 5 of 12

1

A decrease in the interest rate, other things being equal, causes a(n)-

Select one of the following:

  • upward movement along the demand curve for money

  • downward movement along the demand curve for money

  • rightward shift of the demand curve for money

  • leftward shift of the demand curve for money

Explanation

Question 6 of 12

1

Which of the following statements is true?

Select one of the following:

  • The speculative demand for money at possible interest rates gives the demand for money curve its upward slope

  • there is an inverse relationship between the quantity of money demanded and the interest rate

  • according to the quantity theory of money, any change in the money supply will have no effect on the price level

  • all of the answers above are correct

Explanation

Question 7 of 12

1

In exhibit 20-11, assume an equilibrium with an interest rate of 6% and the money supply at $400 billion. The fed uses its policy tools to move the economy to a new equilibrium at E2, with money supply of $600 billion and an interest rate of 4%. This change could be the result of a(n)-

Select one of the following:

  • open market sale of securities by the fed

  • higher discount rate set by the fed

  • higher required-reserve ratio set by the Fed

  • open market purchase of securities by the fed

Explanation

Question 8 of 12

1

according to Keynesians, an increase in the money supply will-

Select one of the following:

  • decrease the interest rate, and increase investment, aggregate demand, prices, real GDP, and employment.

  • decrease the interest rate, and decrease investment, aggregate demand, prices, real GDP. and employment.

  • increase the interest rate, and decrease investment, aggregate demand, prices, real GDP, and employment

  • only increase prices

Explanation

Question 9 of 12

1

In Exhibit 20-12 , when the money supply increases from MS1 to MS2, the equilibrium interest rate-

Select one of the following:

  • remains unchanged

  • increases from i1 to i2, increasing investment spending from I1 to I2

  • increases from i2 to i1, decreasing investment spending from I2 to I1

  • decreases from i1 to i2, increasing investment spending from I1 to I2

Explanation

Question 10 of 12

1

In exhibit 20-12, a shift in aggregate demand from AD1 to AD2

Select one of the following:

  • cannot raise real GDP because the economy is at full employment

  • cannot raise real GDP because the aggregate supply curve is upward sloping at GDP2

  • will raise real GDP because the economy is operating below the full-employment level

  • will cause the interest rate to increase from i2 to i1

Explanation

Question 11 of 12

1

The transactions demand for money is the demand for money by households for

Select one of the following:

  • rainy day spending

  • predictable spending purposes

  • liquidity purposes

  • investing purposes

Explanation

Question 12 of 12

1

People react to an excess supply of money by-

Select one of the following:

  • selling bonds, thus driving up the interest rate

  • selling bonds, thus driving down the interest rate

  • buying bonds, thus driving up the interest rate

  • buying bonds, thus driving down the interest rate

Explanation

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