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61) During an economic expansion when real GDP increases, the
A) demand for money increases.
B) demand for money decreases.
C) supply of money decreases.
D) nominal interest rate is constant.
E) real interest rate is constant.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
62) During an economic expansion, the demand for money ________ because ________.
A) increases; real GDP increases
B) increases; nominal GDP does not change
C) decreases; real GDP increases
D) decreases; nominal GDP increases
E) does not change; people make more purchases with credit cards
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: New
AACSB: Relective thinking
63) During a(n) ________ the demand for money decreases because ________.
A) recession; real GDP decreases
B) expansion; real GDP decreases
C) recession; nominal GDP increases
D) recession; the price level rises
E) equilibrium; real GDP decreases
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: New
AACSB: Relective thinking
21
64) Which of the following shifts the demand for money curve?
i. change in the nominal interest rate
ii. change in real GDP
iii. change in the price level
A) i only
B) ii only
C) iii only
D) ii and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
65) Which statement most accurately describes the efect inancial technology has had on
the demand for money in the United States?
A) Advances in inancial technology have all decreased the demand for money.
B) Advances in inancial technology have all increased the demand for money.
C) Some advances in inancial technology have increased the demand for money while
others have decreased it.
D) Advances in inancial technology have had no efect on the demand for money.
E) It is not possible to tell what would be the efect because inancial technology has not
changed over the past three decades.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
66) Advances in inancial technology
A) must increase the demand for money.
B) must decrease the demand for money.
C) have no efect on the demand for money or on the supply of money.
D) might increase or decrease the demand for money.
E) afect only the supply of money.
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
22
67) The increased use of credit cards leads to
A) a rightward shift in the demand for money curve.
B) a movement upward along the demand for money curve.
C) a leftward shift in the demand for money curve.
D) a movement downward along the demand for money curve.
E) no movement along the demand curve for money nor a shift in the demand curve.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
68) As more and more businesses accept credit cards, the
A) demand for money increases.
B) demand for money decreases.
C) quantity of money demanded increases.
D) supply of money decreases.
E) quantity of money demanded decreases.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
69) If credit card usage exhibits a sharp increase, there is
A) an upward movement along the demand for money curve.
B) a downward movement along the demand for money curve.
C) a rightward shift of the demand for money curve.
D) a leftward shift of the demand for money curve.
E) a leftward shift of the supply of money curve.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
23
70) All of the following shift the demand for money curve EXCEPT
A) an improvement in inancial technology.
B) an increase in real GDP.
C) a rise in the nominal interest rate.
D) a decrease in real GDP.
E) an increase in the price level.
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
71) In the above igure, a movement from point A to point B represents
A) an increase in the demand for money that might be the result of an increase in real GDP.
B) a decrease in the demand for money that might be the result of a fall in the price level.
C) a decrease in the quantity of money demanded.
D) an increase in the quantity of money demanded.
E) an increase in the demand for money that might be the result of a fall in the price level.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
24
72) In the above igure, a movement from point B to point C represents
A) an increase in the demand for money that might be the result of an increase in real GDP.
B) a decrease in the demand for money that might be the result of an increase in real GDP.
C) a decrease in the quantity of money demanded.
D) an increase in the quantity of money demanded.
E) an increase in the demand for money that might be the result of a fall in the price level.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
73) From 1970 to 2010, as a fraction of GDP, the quantity of money that people and
businesses have held has been
A) decreasing.
B) increasing.
C) luctuating erratically.
D) independent of people's use of credit cards.
E) changing only as the interest rate changed.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Written and oral communication
74) Since 1970, as a percent of GDP, M1 held has steadily decreased. Which of the
following can account for this fact?
A) Real GDP has increased since 1970.
B) The price level has risen since 1970.
C) Credit cards have become more widely available since 1970.
D) The nominal interest rate has steadily risen since 1970.
E) The nominal interest rate has steadily fallen since 1970.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Written and oral communication
25
75) In the United States since 1970, the quantity of M1 money people hold as a percentage
of GDP has
A) increased.
B) decreased.
C) remained constant.
D) increased at irst and the decreased.
E) decreased at irst and then increased.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Written and oral communication
76) As a result of increased use of credit cards,
A) the demand for money has decreased and the demand for money curve has shifted
leftward.
B) the demand for money has decreased and there has been a movement up along the
demand for money curve.
C) the demand for money has decreased and there has been a movement down along the
demand for money curve.
D) the equilibrium nominal interest rate has increased and bond prices have decreased.
E) the equilibrium nominal interest rate has decreased and bond prices have fallen.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
77) From 1970 to 2007 the quantity of M1 fell from 20 percent of GDP to less than 10
percent. This change is because the ownership of credit cards ________ during this time
period since ________.
A) expanded from 18 percent to 76 percent; credit cards became more widely available and
utilized
B) fell from 76 percent to 18 percent; credit cards became less widely available and utilized
C) remained unchanged; credit cards do not afect the quantity of money
D) fell from 76 percent to 18 percent; there were several recessions during that period
E) expanded from 18 percent to 76 percent; there were several recessions during that
period
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: New
AACSB: Analytical thinking
26
78) From 1970 to 2007 households held ________ because ________.
A) less money relative to income; people began using credit cards more often
B) less money relative to income; people began using credit cards less often
C) less money relative to income; the price level began to rise
D) more money relative to income; people began using credit cards more often
E) more money relative to income; people began using credit cards less often
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: New
AACSB: Analytical thinking
79) The supply of money curve is
A) upward sloping, showing the inluence of the interest rate.
B) horizontal because interest rates are ixed at any one moment.
C) vertical because the quantity of money is ixed at any one moment.
D) downward sloping, showing the negative inluence of the interest rate.
E) horizontal because the Fed controls the quantity of money supplied.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
80) In the demand and supply model of the money market, the
i. supply of money curve is a vertical straight line.
ii. supply of money is the quantity that must be held by households and irms.
iii. quantity of money is determined by Fed actions.
A) i only
B) ii only
C) iii only
D) ii and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
27
81) On any given day, ________ changes to achieve equilibrium in the money market.
A) real GDP
B) the price level
C) the inlation rate
D) the nominal interest rate
E) the real interest rate
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
82) Every day, ________ changes to make the quantity of money demanded equal the
quantity of money supplied.
A) real GDP
B) the money supply
C) the price level
D) the nominal interest rate
E) the inlation rate
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
83) In the money market, if the nominal interest rate is below the equilibrium level,
A) the quantity of money demanded exceeds the quantity of money supplied.
B) the quantity of money supplied exceeds the quantity of money demanded.
C) asset prices will rise.
D) the demand for money curve will shift leftward.
E) the supply of money curve will shift leftward.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
28
84) Suppose that the equilibrium nominal interest rate is 4 percent and the equilibrium
quantity of money is $1 trillion. At any interest rate above 4 percent,
A) less than $1 trillion will be demanded and bond prices will increase.
B) less than $1 trillion will be demanded and bond prices will fall.
C) more than $1 trillion will be supplied and bond prices will fall.
D) more than $1 trillion will be supplied and the interest rate will rise.
E) there is a shortage of money and the interest rate will rise.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
85) Suppose that the equilibrium nominal interest rate is 5 percent and the equilibrium
quantity of money is $1 trillion. At any interest rate below 5 percent,
A) the interest rate will rise and bond prices will fall.
B) the interest rate will fall and bond prices will fall.
C) there will be a surplus of money and bond prices will fall.
D) there will be a surplus of money and bond prices will increase.
E) the supply of money will decrease.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
86) If the quantity of money demanded is greater than the quantity supplied, then in the
short run the
A) demand for inancial assets increases.
B) nominal interest rate falls.
C) nominal interest rate rises.
D) price of inancial assets rises.
E) price level rises.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
29
87) If the nominal interest rate is less than the equilibrium nominal interest rate
determined in the money market, then households and irms
A) are holding more money than they prefer.
B) are holding less money than they prefer.
C) expect the nominal interest rate to decrease.
D) expect the price level to increase.
E) expect real GDP to increase.
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
88) If the nominal interest rate is less than the equilibrium nominal interest rate
determined in the money market, then in the short run households and irms
A) sell inancial assets.
B) buy inancial assets.
C) raise the price level.
D) lower the price level.
E) increase real GDP.
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
89) When households and irms sell inancial assets, such as government securities, the
A) nominal interest rate falls.
B) market price of the securities increases.
C) nominal interest rate rises.
D) demand for money curve shifts leftward.
E) supply of money curve shifts leftward.
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
30
