Macroeconomics Questions

According to the quantity theory of money and​ prices, a 6​% change in the money​ supply, holding other variables​ constant, leads toA.a 6​% change in real GDP.B.a 6​% change in the price level.C.a greater than 6​% in real GDP.D.a 6​% change in the interest rate.

When the Fed makes an open market​ purchase, the supply curve for bonds in the private market shifts to the​ ________ and the price of bonds​ ________.A.​left; increasesB.​right; decreasesC.​left; decreasesD.​right; increases

Many economists believe that the growth of the money supply isA.inversely related to the price level.B.directly related to interest rate growth.C.not related to output growth.D.positively related to the growth of real GDP.

Contractionary monetary policy by the Fed can be hampered byA.the ability of U.S. citizens and businesses to obtain dollars from foreign sources.B.the inability of U.S. citizens to hold U.S. bank accounts denominated in foreign currencies.C.international banking restrictions regulated by the International Monetary Fund.D.the increased isolation of central banks around the world.

If the Fed decreases the discount​ rate, relative to the federal funds​ rate, then thisA.would cause the money supply to decrease.B.would decrease the cost of funds for institutions borrowing from the Fed.C.would increase the cost of funds for institutions borrowing from the Fed.D.would cause the required reserve ratio to increase.

A member of​ Congress, who has never had an economics​ course, has just been placed on a Money and Banking Committee. The official needs a briefing prior to the first meeting concerning the role of the money supply in the economy. Which of the following statements should you insist that the official remember when entering the first committee​ meeting?A.There is an indirect relationship between the growth of the money supply and the price​ level; and a direct​ (but not​ perfect) relationship between the growth of the money supply and GDP growth.B.There is a​ direct, albeit​ loose, relationship between the growth of the money supply and the price​ level; and an indirect relationship between the growth of the money supply and GDP growth.C.There is an indirect relationship between the growth of the money supply and the price​ level; and an indirect relationship between the growth of the money supply and GDP growth.D.There is a​ direct, albeit​ loose, relationship between the growth of the money supply and the price​ level; and a direct relationship between the growth of the money supply and GDP growth.

The demand for moneyA.is positively related to the opportunity cost of holding money.B.is a downward sloping function of the interest rate.C.is an upward sloping function of the interest rate.D.None of the above.

​Cost-push inflation is caused by persistentA.decreases in aggregate demand.B.increases in​ short-run aggregate supply.C.increases in aggregate demand.D.decreases in​ short-run aggregate supply.

According to classical​ economists, aggregate demand primarily determinesA.total production in the economy.B.the price level.C.aggregate supply at full employment.D.levels of national output and income.

Which of the following events would be likely to increase the supply of​ money?A.The Fed conducts an open market sale of bonds.B.Banks perceive loans to be more risky and wish to hold more excess reserves.C.The Fed decreases the discount rate relative to the federal funds rate.D.

In the Classical​ Model, an increase in aggregate demand will result inA.a decreasein the price level and an increase in output.B.an increasein output and no change in the price level.C.an increasein the price level and no change in output.D.an increasein both the price level and output.E.a decreasein both the price level and output.

In an open​ economy, the net export effectA.may offset an expansionary fiscal policy and an expansionary monetary policy.B.may offset an expansionary fiscal policy but enhance an expansionary monetary policy.Your answer is correct.C.may offset an expansionary monetary policy but enhance an expansionary fiscal policy.D.may enhance an expansionary fiscal policy and an expansionary monetary policy.

The model of​ long-run equilibriumA.assumes that markets always clear but the Classical Model assumes that markets sometimes may not clear.B.is the same as the Classical Model.C.is the same as the Keynesian Model.D.and the Classical Model are based on totally different assumptions.

The​ Fed's credit policy since 2008 hasA.increased the money multiplier.B.lowered the reserve ratio.C.lowered the amount of bank reserves that the private banks keep with the Fed.D.led to a reduction in the money multiplier.

The equation of exchangeA.states that expenditures by some people equal income received by others.B.is an accounting identity and is always correct.C.states that the money supply times velocity equals nominal national income.D.All of the above.

The classical model assumes that wages and pricesA.are flexible downwards but not flexible upwards.B.are flexible upwards but not flexible downwards.C.are flexible in the long run but not in the short run.D.are always completely flexible.

According to the Keynesian theory a decrease in the money supply increases the interest rate and decreases investment spending. The result of this is thatA.real GDP decreases by the same amount as the change in investment.B.real GDP decreases by a larger amount than the change in investment.C.real GDP decreases by a smaller amount than the change in investment.D.real GDP increases by a smaller amount than the change in investment.

Suppose that there is a​ temporary, but significant increase in oil prices in an economy with an​ upward-sloping SRAS curve. As a policy response to this​ short-lived but sudden increase in oil​ prices, a central bankA.can stabilize neither the price level nor the real GDP.B.can stabilize both the price level and the real GDP simultaneously.C.cannot stabilize both the price level and the real GDP simultaneously.Your answer is correct.D.has no responsibility to stabilize the real GDP.

Suppose that the Fed judges inflation to be the most significant problem in the economy and that it wishes to employ all three of its policy​ instruments, then the Fed will engage inA.open market​ sales, increasing the reserve​ requirement, and increasing the discount rate.B.open market​ sales, decreasing the reserve​ requirement, and increasing the discount rate.C.open market​ purchase, increasing the reserve​ requirement, and decreasing the discount rate.D.open market​ purchase, increasing the reserve​ requirement, and increasing the discount rate.

Suppose you go shopping for a gift for a friend and also find a sweater that you want for yourself. You pay cash for the gift and write a check for the sweater. Your purchases are made with money holdings represented byA.the asset demand for money because you used money for both purchases.B.your supply of money to the economy.C.the transaction demand for money because you planned to buy the gift and the precautionary demand for money because you did not anticipate buying the sweater.D.the transaction demand for money because you paid for the gift with cash.