1-) Other things equal, if there is an excess demand for money in the money mark

Question

1-) Other things equal, if there is an excess demand for money in the money market, then the interest rate may rise.

   A-) True

     B-) False

2-) To close a recessionary gap, the central bank could adopt an expansionary economic policy.

     A-) True

     B-) False

3-) Monetary policy affects both the aggregate price level and output in the long run.

     A-) True

     B-) False

4-) An increase in the demand for money would result from:

     A-) a decrease in nominal GDP.

     B-) a decrease in real GDP.

     C-) a decrease in the price level.

     D-) an increase in the price level.

5-) Which one of the following events will NOT decrease the demand for money?

     A-) an increase in the aggregate price leve

     B-) the advent of ATMs

     C-) the ability of the stores to process credit cards

     D-) a fall in real GDP

6-) If the aggregate price level doubles:

     A-) the money supply will also double.

     B-) neither the money demand nor money supply will rise.

     C-) both the money demand and the money supply will rise proportionally.

     D-) the money demand at any given interest rate will also double.

Explanation / Answer

1-) Other things equal, if there is an excess demand for money in the money market, then the interest rate may rise.

   A-) True

Yes demand increases the price(interest) paid for a commodity (money)

2-) To close a recessionary gap, the central bank could adopt an expansionary economic policy.

     B-) False

It gap may be recessionary or inflationary, so, it can use either expansionary or contractionary policy

3-) Monetary policy affects both the aggregate price level and output in the long run.

     A-) True

4-) An increase in the demand for money would result from:

     D-) an increase in the price level.

Higher price level higher will be the demand.

5-) Which one of the following events will NOT decrease the demand for money?

     A-) an increase in the aggregate price leve

An increase in price level increases the money demand

6-) If the aggregate price level doubles:

          D-) the money demand at any given interest rate will also double.

An increase in price level will shift the money demand curve towards its right making money demand at any given interest rate to double.

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