Question 1

As the number of transactions in the economy decreases,

Accepted Answer

A)  the supply of money increases.
B)  the supply of money decreases.
C)  the demand for money increases.
D)  the demand for money decreases.

Question 2

Government securities with terms of more than one year are called

Accepted Answer

A)  Treasury bills.
B)  federal funds bonds.
C)  capital bills.
D)  government bonds.

Question 3

Refer to the information provided in Figure 11.5 below to answer the questions that follow.  Figure 11.5
-Refer to Figure 11.5.The money supply curve will shift from  to  if

Accepted Answer

A)  the Fed increases the reserve requirement.
B)  the Fed increases the discount rate.
C)  the equilibrium level of output increases.
D)  the Fed buys U.S.government securities in the open market.

Question 4

Refer to the information provided in Figure 11.4 below to answer the questions that follow.  Figure 11.4
-Refer to Figure 11.4.At an interest rate of 3%,there is

Accepted Answer

A)  an excess supply of money of $400 billion.
B)  an excess supply of money of $800 billion.
C)  an excess demand for money of $800 billion.
D)  an excess demand for money of $400 billion.

Question 5

Refer to the information provided in Figure 11.3 below to answer the questions that follow.  Figure 11.3
-Refer to Figure 11.3.At an interest rate of 6%,there is a

Accepted Answer

A)  shortage of money and the interest rate will decline.
B)  shortage of money and the interest rate will rise.
C)  surplus of money and the interest rate will decline.
D)  surplus of money and the interest rate will rise.

Question 6

The transaction demand for money depends on all of the following EXCEPT

Accepted Answer

A)  income.
B)  the price level.
C)  the interest rate.
D)  the amount of transactions spending.

Question 7

Refer to the information provided in Figure 11.3 below to answer the questions that follow.  Figure 11.3
-Refer to Figure 11.3.A decrease in the money supply and an increase in nominal aggregate output will,for sure,

Accepted Answer

A)  increase the equilibrium interest rate.
B)  decrease the equilibrium interest rate.
C)  increase equilibrium money holdings.
D)  decrease equilibrium money holdings.

Question 8

Federal funds are

Accepted Answer

A)  interbank loans.
B)  raised by taxes.
C)  loans that banks get from the Fed.
D)  bonds issued by the federal government.

Question 9

Refer to the information provided in Figure 11.1 below to answer the questions that follow.  Figure 11.1
-Refer to Figure 11.1.A movement from Point D to Point A can be caused by

Accepted Answer

A)  a decrease in the interest rate.
B)  an increase in income.
C)  a decrease in nominal aggregate output.
D)  an increase in the interest rate.

Question 10

A decrease in nominal aggregate output will lead to an increase in the interest rate.

Accepted Answer

A) True 
 B)False

Question 11

Ed's monthly starting balance is $3,000.Ed spends $100 per day.Initially,Ed keeps all of his income in a non-interest-bearing checking account.Ed decided to change his strategy and at the beginning of each month he deposits one-third of his income into his checking account and buys two bonds with the remainder of his income.After 10 days he cashes in one bond and 10 days after that he cashes in the other bond.Which of the following statements is TRUE?

Accepted Answer

A)  If Ed uses either strategy,his average monthly balance is $1,500.
B)  The second strategy involves lower money management costs because Ed now earns interest on the bonds he has purchased.
C)  Ed's optimal money balance is $100.
D)  If the interest rate paid on bonds decreases,the opportunity cost of Ed's original strategy is reduced.

Question 12

The speculative demand for money

Accepted Answer

A)  increases when income increases above normal.
B)  decreases when interest rates decrease below normal.
C)  increases when interest rates decrease below normal.
D)  decreases when the price level decreases below normal.

Question 13

If the Federal Reserve lowers the required reserve ratio,then the money supply will fall.

Accepted Answer

A) True 
 B)False

Question 14

Mary is paid on the 1st of every month and her rent is due on the 15th of every month.This is an example of the

Accepted Answer

A)  cash flow problem.
B)  financial float.
C)  money management problem.
D)  nonsynchronization of income and spending.

Question 15

Less switching from bonds to money means less interest revenue lost,but higher money management costs.

Accepted Answer

A) True 
 B)False

Question 16

Investors may wish to hold bonds when interest rates are low with the hope of selling them when interest rates increase.

Accepted Answer

A) True 
 B)False

Question 17

Commercial paper is a short term IOU of a corporation.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the information provided in Figure 11.7 below to answer the questions that follow.  Figure 11.7
-Refer to Figure 11.7.The demand for money curve will shift from  to  if

Accepted Answer

A)  the Fed sells government securities on the open market.
B)  the price level decreases.
C)  the interest rate increases.
D)  the level of nominal aggregate output increases.

Question 19

When interest rates fall,bond values rise.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the information provided in Table 11.1 below to answer the questions that follow.
Table 11.1 
-Refer to Table 11.1.At a price of ________ the optimal number of switches is ________.

Accepted Answer

A)  $7;1
B)  $9;3
C)  $11;1
D)  $13;0

Exam 11: Money Demand and the Equilibrium Interest Rate

Mary is paid on the 1st of every month and her rent is due on the 15th of every month.This is an example of the

Correct Answer
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Federal funds are

Correct Answer
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Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3.A decrease in the money supply and an increase in nominal aggregate output will,for sure,

Correct Answer
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A decrease in nominal aggregate output will lead to an increase in the interest rate.

Correct Answer
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As the number of transactions in the economy decreases,

Correct Answer
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The transaction demand for money depends on all of the following EXCEPT

Correct Answer
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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4.At an interest rate of 3%,there is

Correct Answer
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Commercial paper is a short term IOU of a corporation.

Correct Answer
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When interest rates fall,bond values rise.

Correct Answer
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The speculative demand for money

Correct Answer
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Refer to the information provided in Table 11.1 below to answer the questions that follow. Table 11.1 -Refer to Table 11.1.At a price of the optimal number of switches is .

Correct Answer
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If the Federal Reserve lowers the required reserve ratio,then the money supply will fall.

Correct Answer
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Government securities with terms of more than one year are called

Correct Answer
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Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1 -Refer to Figure 11.1.A movement from Point D to Point A can be caused by

Correct Answer
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Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7.The demand for money curve will shift from to if

Correct Answer
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Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3.At an interest rate of 6%,there is a

Correct Answer
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Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5.The money supply curve will shift from to if

Correct Answer
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Less switching from bonds to money means less interest revenue lost,but higher money management costs.

Correct Answer
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Investors may wish to hold bonds when interest rates are low with the hope of selling them when interest rates increase.

Correct Answer
verified

Exam 11: Money Demand and the Equilibrium Interest Rate

Mary is paid on the 1st of every month and her rent is due on the 15th of every month.This is an example of the

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Federal funds are

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3.A decrease in the money supply and an increase in nominal aggregate output will,for sure,

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A decrease in nominal aggregate output will lead to an increase in the interest rate.

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As the number of transactions in the economy decreases,

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Correct AnswerverifiedShow Answer

The transaction demand for money depends on all of the following EXCEPT

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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4.At an interest rate of 3%,there is

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Commercial paper is a short term IOU of a corporation.

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When interest rates fall,bond values rise.

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The speculative demand for money

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Refer to the information provided in Table 11.1 below to answer the questions that follow. Table 11.1 -Refer to Table 11.1.At a price of ________ the optimal number of switches is ________.

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If the Federal Reserve lowers the required reserve ratio,then the money supply will fall.

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Government securities with terms of more than one year are called

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Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1 -Refer to Figure 11.1.A movement from Point D to Point A can be caused by

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Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7.The demand for money curve will shift from to if

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Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3.At an interest rate of 6%,there is a

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Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5.The money supply curve will shift from to if

Correct AnswerverifiedShow Answer

Less switching from bonds to money means less interest revenue lost,but higher money management costs.

Correct AnswerverifiedShow Answer

Investors may wish to hold bonds when interest rates are low with the hope of selling them when interest rates increase.

Correct AnswerverifiedShow Answer

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Refer to the information provided in Table 11.1 below to answer the questions that follow. Table 11.1 -Refer to Table 11.1.At a price of the optimal number of switches is .

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