Exam
Name___________________________________
M U L T IPLE C H O I C E. C hoose the one alternative that best completes the statement or answ ers the q uestion.
Bic
1) W hich one of the follow ing statements is the M OST accurate?
A) A reduction in the average value of transactions carried out by a household or a firm causes
its demand for money to rise.
B) a decrease in the average value of transactions carried out by a household or a firm causes its
demand for real money to rise.
C) A rise in the average value of transactions carried out by a household or a firm causes its
demand for real money to rise.
D) A rise in the average value of transactions carried out by a household or a firm causes its
demand for money to rise.
E) A rise in the average value of transactions carried out by a household or a firm causes its
demand for money to fall.
1)
2) A n individual's need for liquidity would increase if
A) the individual got a raise.
B) the individual received a new A T M card.
C) the average value of transactions carried out by the individual rose.
D) the individual w anted to avoid risks.
E) the average value of transactions carried out by the individual fell.
2)
C
3) If there is initially an
A) excess supply of money, the interest rate w ill rise, and if there is also an excess demand, it w ill
rise rapidly.
B) excess demand for money, the interest rate w ill fall, and the supply of money it w ill rise.
C) excess sup ply of money, the interest rate w ill rise, and if there is initially an excess demand, it
w ill fall.
D) excess supply of money, the interest rate w ill fall, and if there is initially an excess demand, it
w ill rise.
E) excess sup ply of money, the interest rate w ill fall, and if there is also an excess demand, it w ill
fall rapidly.
3)
D
4) W hich one of the follow ing statements is the M OST accurate?
A) A n increase in the money supply lowers the interest rate w hile a fall in the money sup ply
raises the interest rate, given the output level.
B) A decrease in the money su pply lowers the interest rate w hile an increase in the money
sup ply raises the interest rate, given the price level and output.
C) A n increase in the money supply lowers the interest rate w hile a fall in the money sup ply
raises the interest rate, given the price level and output.
D) A n increase in the money supply lowers the interest rate w hile a fall in the money sup ply
raises the interest rate, given the price level.
E) A n increase in the money supply does not usually affect the interest rate.
4)
C
1
5) A n increase in
A) nominal output raises the interest rate w hile a fall in real output lowers the interest rate, given
the price level.
B) nominal output raises the interest rate w hile a fall in real output lowers the interest rate, given
the price level and the money supply.
C) real outp ut decreases the interest rate w hile a fall in real outp ut increases the interest rate,
given the price level.
D) real output raises the interest rate w hile a fall in real output lowers the interest rate, given the
money supply.
E) real output raises the interest rate w hile a fall in real output lowers the interest rate, given the
price level and the money suppl y.
5)
E
6) The aggregate
A) M d = P
B) M d = R
C) M d = L
D) M d = R
E) M d = P
6)
E
7) T he aggregate real money demand schedule L(R,Y)
A) slopes dow n w ard because a fall in the interest rate raises the desired real money holdings of
each household and firm in the economy.
B) slopes up ward because a fall in the interest rate raises the desired real money holdings of
each household and firm in the economy.
C) slopes dow n w ard because a fall in the interest rate reduces the desired real money holdings
of each household and firm in the economy.
D) slopes dow n ward because a rise in the interest rate makes consumers less focused on the
liquidity of their assets.
E) 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.
7)
A
8) For a given level of
A) real G N P, changes in interest rates cause an increase of the L(R,Y) schedule.
B) nominal G N P, changes in interest rates cause an increase in the L(R,Y) schedule.
C) real G N P, changes in interest rates cause movements along the L(R,Y) schedule.
D) nominal G N P, changes in interest rates cause movements along the L(R,Y) schedule.
E) real G N P, changes in interest rates cause a decrease of the L(R,Y) schedule.
8)
c
9) The money supply schedule is
A) vertical because M S is set by the households and firms w hile P is taken as given.
B) horizontal because M S is set by the central bank.
9)
demand for money can be expressed by
Y(R, L).
L(R, P).
P(R,Y).
L(P,Y).
L(R,Y).
C) vertical because M S and P are set by the central bank.
D) horizontal because M S is set by the central bank w hile P is taken as given.
E) vertical because M S is set by the central bank w hile P is taken as given.
2
E
10) A reduction in a country's money supply causes
A) does not affect its currency in the foreign market.
B) does affect its currency in the foreign market in an ambiguous manor.
C) affects other countries currency in the foreign market.
D) its currency to appreciate in the foreign exchange market.
E) its currency to depreciate in the foreign exchange market.
3
10)
D