An increase in the interest rate should ________ the demand for dollars and the
ID: 1207695 • Letter: A
Question
An increase in the interest rate should ________ the demand for dollars and the value of the dollar, and net exports should ________.
a. increase; not change
b. increase; decrease
c. decrease; increase
d. decrease; decrease
e. increase; increase I
f the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply?
a. An increase in government purchases.
b. oil prices.
c. taxes.
d. the money supply and a decrease in interest rates.
Economies where goods and services are traded directly for other goods and services are called ________ economies.
a. seigniorage
b. direct
c. barter
d. trade
If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy?
a. medium of exchange
b. certificate of gold
c. unit of account
d. store of value
The Fed can increase the federal funds rate by
a. selling Treasury bills, which decreases bank reserves.
b.selling Treasury bills, which increases bank reserves.
c. buying Treasury bills, which decreases bank reserves.
d. buying Treasury bills, which increases bank reserves.
Which of the following is true?
a. The money market model is essentially a model that determines the short-term real rate of interest.
b. The loanable funds model is essentially a model that determines the short-term real rate of interest.
c. The money market model is essentially a model that determines the short-term nominal rate of interest.
d. The loanable funds model is essentially a model that determines the long-term nominal rate of interest.
When the Federal Reserve System was established in 1913, its main policy goal was
a. promoting price stability.
b. keeping employment high.
c. encouraging strong economic growth.
d. preventing bank panics.
Fiscal policy refers to changes in
a.f ederal taxes and purchases that are intended to achieve macroeconomic policy objectives.
b. federal taxes and purchases that are intended to fund the war on terrorism.
c. state and local taxes and purchases that are intended to achieve macroeconomic policy objectives.
d. the money supply and interest rates that are intended to achieve macroeconomic policy objectives.
To decrease the money supply, the Federal Reserve could
a. lower the discount rate.
b. conduct an open market sale of Treasury securities. raise income taxes.
c. lower the required reserve ratio.
d. raise transfer payments.
The multiplier effect refers to the series of
a. induced increases in investment spending that result from an initial increase in autonomous expenditures.
b. autonomous increases in consumption spending that result from an initial increase in induced expenditures.
c. autonomous increases in investment spending that result from an initial increase in induced expenditures.
d. induced increases in consumption spending that result from an initial increase in autonomous expenditures.
Which of the following determines the amount of money the banking system as a whole can create?
a. the quantity of bank reserves
b. the gold reserves held by the Federal Reserve
c. the limit on profits by banks imposed by the U.S. Congress
d. the quantity of vault cash held by banks
The use of fiscal policy to stabilize the economy is limited because
a. the Internal Revenue Service (IRS) resists changes in tax rates because of all the changes they would have to make to the tax code.
b. changes in government spending and tax rates have a small effect on interest rates.
c. changes in government spending and tax rates have a small effect on aggregate demand.
d the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way.
Using the money demand and money supply model, an open market sale of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to
a. increase, then decrease.
b. decrease.
c. increase.
d. not change.
The money demand curve has a
a. negative slope because an increase in the price level decreases the quantity of money demanded.
b. negative slope because an increase in the interest rate decreases the quantity of money demanded.
c. positive slope because an increase in the interest rate increases the quantity of money demanded.
d. positive slope because an increase in the price level increases the quantity of money demanded
The Federal Reserve's narrowest definition of the money supply is
a. M0.
b. M1.
c. M2.
d. M3.
If households and firms decide to hold less of their money in checking account deposits and more in currency, then the money supply
a. will increase.
b. will not change.
c. will decrease.
d. may increase or decrease.
Suppose that you deposit $2,000 in your bank and the required reserve ratio is 10 percent. The maximum loan your bank can made as a direct result of your deposit is
a. $200.
b. $1,800.
c. $2,000.
d. $20,000.
Silver is an example of a
a. representative money.
b. barter money.
c. fiat money.
d. commodity money.
An increase in the price level causes
a. a movement down along the money demand curve.
b. the money demand curve to shift to the left.
c. the money demand curve to shift to the right.
d. a movement up along the money demand curve.
The Federal Reserve was established in 1913 to
a. stimulate the economy by increasing bank reserves.
b. prevent bad loans by requiring banks to hold reserves.
c. stop bank panics by acting as a lender of last resort.
d. prevent inflation by decreasing the money supply.
Fiat money has a
a. great intrinsic value that is independent of its use as money.
b. little to no intrinsic value but is backed by the quantity of gold held by the central bank
c. . little to no intrinsic value and is authorized by the central bank or governmental body.
d. value, because it can be redeemed for gold by the central bank.
An increase in interest rates
a. decreases investment spending on machinery, equipment and factories, consumption spending on durable goods, and net exports.
b. decreases investment spending on machinery, equipment and factories, but increases consumption spending on durable goods and net exports.
c. decreases investment spending on machinery, equipment and factories, and consumption spending on durable goods, but increases net exports.
d. increases investment spending on machinery, equipment and factories, consumption spending on durable goods, and net exports.
Explanation / Answer
d. decrease; decrease. Decrease in demand for dollar makes it a weaker currency and so exports fall. a. An increase in government purchases. By purchasing, government is increasing money supply which can help in increasing GDP. c. Barter. Excahnge of a good for good. d. Store of value. Toamtoes will rot in few days.
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