Question 1

Figure 10.1 
-In Figure 10.1 if money demand increases faster than the money supply then:

Accepted Answer

A)  the price level will rise over time.
B)  the price level will fall over time.
C)  GDP will rise over time.
D)  GDP will fall over time.

Question 2

Commodity money is money that has value because:

Accepted Answer

A)  of the intrinsic value of the commodity.
B)  it is legal tender.
C)  the government says so.
D)  all of the above.

Question 3

If the money supply grows faster than money demand, then the price level rises.

Accepted Answer

A) True 
 B)False

Question 4

What does money neutrality mean?

Accepted Answer

One time changes in the supply...

Question 5

If a person's income doubles we expect their cash holding to:

Accepted Answer

A)  double.
B)  more than double.
C)  less than double.
D)  decline.

Question 6

High powered money is commodity money like gold and silver.

Accepted Answer

A) True 
 B)False

Question 7

Price level targeting implies that the monetary authority:

Accepted Answer

A)  changes the money supply to match movements in money demand.
B)  changes money demand to match movements in the money supply.
C)  changes money demand and money supply to match movements in the price level.
D)  changes money demand to match movements in the price level.

Question 8

Among the source of transactions costs associated with reducing average money balances are:

Accepted Answer

A)  foregone interest payments.
B)  the time spent going to the bank or ATM.
C)  opportunity costs.
D)  all of the above.

Question 9

When the supply of money increases, then

Accepted Answer

A)  the price level rises.
B)  the price level falls.
C)  money demand increases.
D)  money demand decreases.

Question 10

Money is different from other assets like capital and bonds in that:

Accepted Answer

A)  money does not pay interest.
B)  money can be spent for purchases.
C)  capital and bonds are better long term stores of value.
D)  all of the above.

Question 11

If a person holds one dollar and does not lose it, then as long as the person holds that dollar they will have:

Accepted Answer

A)  the commodity value of the dollar.
B)  one dollar in currency.
C)  an interest bearing asset.
D)  all of the above.

Question 12

Why does economizing on money balances lead to greater transactions cost?

Accepted Answer

If a household reduces its money holding...

Question 13

A monetary aggregate is:

Accepted Answer

A)  high powered money.
B)  commodity money.
C)  money defined more broadly than currency.
D)  total currency in circulation plus depository institutions deposits at the central bank.

Question 14

Money is different from other assets like capital and bonds in that:

Accepted Answer

A)  money pays a higher interest rate.
B)  money can be spent for purchases.
C)  money is a better long term store of value.
D)  all of the above.

Question 15

Figure 10.1 
-In Figure 10.1 if the interest rate, i, were to increase, then

Accepted Answer

A)  money demand decreases and the price level increases.
B)  money demand increases and the price level decreases.
C)  the money supply and the price level would increase.
D)  the money supply and the price level would decrease.

Question 16

The neutrality of money means that one time changes in the money supply do not affect real variables.

Accepted Answer

A) True 
 B)False

Question 17

Real money demand is:

Accepted Answer

A)  money demand after taxes.
B)  a function of real GDP and the interest rate.
C)  determined by the central bank.
D)  all of the above.

Question 18

Among the source of transactions costs associated with reducing average money balances are:

Accepted Answer

A)  brokerage fees.
B)  the time spent going to the bank.
C)  the time spent going to the ATM.
D)  all of the above.

Question 19

When the demand of money increases, then

Accepted Answer

A)  the price level rises.
B)  the price level falls.
C)  the money supply increases.
D)  the money supply decreases.

Question 20

US M1 money includes:

Accepted Answer

A)  currency held by the public.
B)  checkable deposits.
C)  traveler's checks.
D)  all of the above.

Exam 11: The Demand for Money and the Price Level

A monetary aggregate is:

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High powered money is commodity money like gold and silver.

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Among the source of transactions costs associated with reducing average money balances are:

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If the money supply grows faster than money demand, then the price level rises.

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When the supply of money increases, then

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The neutrality of money means that one time changes in the money supply do not affect real variables.

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What does money neutrality mean?

Correct AnswerverifiedOne time changes in the supply...View AnswerShow Answer

Money is different from other assets like capital and bonds in that:

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Real money demand is:

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Money is different from other assets like capital and bonds in that:

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Why does economizing on money balances lead to greater transactions cost?

Correct AnswerverifiedIf a household reduces its money holding...View AnswerShow Answer

US M1 money includes:

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Price level targeting implies that the monetary authority:

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If a person's income doubles we expect their cash holding to:

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When the demand of money increases, then

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Figure 10.1 -In Figure 10.1 if money demand increases faster than the money supply then:

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Commodity money is money that has value because:

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If a person holds one dollar and does not lose it, then as long as the person holds that dollar they will have:

Correct AnswerverifiedShow Answer

Figure 10.1 -In Figure 10.1 if the interest rate, i, were to increase, then

Correct AnswerverifiedShow Answer

Among the source of transactions costs associated with reducing average money balances are:

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One time changes in the supply...
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If a household reduces its money holding...
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