90) When the nominal interest rate is ________ the equilibrium interest rate, the quantity of
money demanded is less than the quantity of money supplied; when the nominal interest
rate is ________ the equilibrium interest rate, the quantity of money demanded exceeds the
quantity of money supplied.
A) less than; greater than
B) equal to; less than
C) greater than; equal to
D) greater than; less than
E) equal to; greater than
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
91) In the money market, if the quantity of money supplied exceeds the quantity of money
demanded, the nominal interest rate will ________ and the prices of assets will ________.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease
E) fall; not change
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
92) If the quantity of money supplied is greater than the quantity of money demanded, then
the
A) nominal interest rate rises.
B) nominal interest rate falls.
C) price of inancial assets falls.
D) money supply decreases.
E) price level falls.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
31
93) When the Fed changes the quantity of money, there is an immediate efect on
A) the nominal interest rate.
B) real GDP.
C) the price level but not the inlation rate.
D) the inlation rate but not the price level.
E) the price level and the inlation rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
94) If the Fed wants to raise the interest rate, in the short run in the money market the Fed
A) decreases the quantity of money.
B) increases the quantity of money.
C) shifts the demand for money curve leftward.
D) shifts the demand for money curve rightward.
E) directly raises the interest rate and does nothing to either the supply of money or the
demand for money.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
95) If the Fed is worried about inlation and wants to raise the interest rate, in the short
run it can
A) increase the demand for money.
B) increase the quantity of money.
C) decrease the demand for money.
D) decrease the quantity of money.
E) directly raise the interest rate without afecting either the demand for money or the
supply of money.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
32
96) In the money market, in the short run if the quantity of money exceeds the quantity of
money demanded, then to achieve equilibrium the
A) supply of money increases.
B) nominal interest rate falls.
C) inlation rate increases.
D) demand for money increases.
E) price level rises.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
97) In the money market, in the short run in order to decrease the nominal interest rate,
the Fed must
A) increase the quantity of money.
B) increase the discount rate.
C) decrease the demand for money.
D) decrease the quantity of money.
E) directly lower the interest rate and not change either the demand for money or the
supply of money.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
98) In the short run, when the Fed increases the quantity of money, the
A) demand for money increases.
B) price level decreases.
C) nominal interest rate falls.
D) quantity demanded of money decreases.
E) demand for money decreases.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
33
99) Other things the same, if the Fed increases the quantity of money, the supply of money
curve shifts
A) rightward and the nominal interest rate decreases.
B) leftward and the nominal interest rate increases.
C) rightward and the real interest rate increases.
D) leftward and the real interest rate increases.
E) leftward and the nominal interest rate decreases.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
100) Other things the same, if the Fed increases the quantity of money, the ________
because ________.
A) nominal interest rate decreases; the supply of money curve shifts rightward
B) nominal interest rate decreases; the supply of money curve shifts leftward
C) nominal interest rate does not change; only the real interest rate is efected
D) nominal interest rate increases; the supply of money curve shifts rightward
E) nominal interest rate increases; the supply of money curve shifts leftward
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: New
AACSB: Analytical thinking
101) In the money market, if real GDP increases, then the demand for money ________ and
the equilibrium nominal interest rate ________.
A) increases; rises
B) increases; falls
C) decreases; rises
D) decreases; falls
E) increases; does not change
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
34
102) In the money market, if the price level rises, then the demand for money ________ and
the equilibrium nominal interest rate ________.
A) increases; rises
B) increases; falls
C) decreases; rises
D) decreases; falls
E) increases; does not change
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
103) A change in inancial technology that reduces the need to hold cash balances ________
the demand for money and ________ the equilibrium nominal interest rate.
A) increases; raises
B) increases; lowers
C) decreases; raises
D) decreases; lowers
E) decreases; does not change
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
35
104) In the above igure, if the interest rate is 8 percent per year, the quantity of money
demanded is
A) less than the quantity of money supplied, and the interest rate will change.
B) greater than the quantity of money supplied, and the interest rate will change.
C) less than the quantity of money supplied, and the demand curve for money will shift.
D) greater than the quantity of money supplied, and the demand curve for money will shift.
E) greater than the quantity of money supplied, and the supply curve of money will shift.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
105) In the above igure, the equilibrium interest rate is ________ and the equilibrium
quantity of money is ________ trillion.
A) 8 percent; $1.2
B) 4 percent; $0.6
C) 4 percent; $1.2
D) 8 percent; $0.6
E) 0 percent; $1.2
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
36
106) In the above igure, if the interest rate is 3 percent per year, the quantity of money
demanded is
A) less than the quantity of money supplied, and the interest rate will change.
B) greater than the quantity of money supplied, and the interest rate will change.
C) less than the quantity of money supplied, and the demand for money curve will shift.
D) greater than the quantity of money supplied, and the demand for money curve will shift.
E) greater than the quantity of money supplied, and the supply of money curve will shift.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
107) In the above igure, if the interest rate is 2 percent per year, the quantity of money
demanded is
A) less than the quantity of money supplied, and the interest rate will change.
B) greater than the quantity of money supplied, and the interest rate will change.
C) less than the quantity of money supplied, and the demand for money curve will shift.
D) greater than the quantity of money supplied, and the demand for money curve will shift.
E) greater than the quantity of money supplied, and the supply of money curve will shift.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
108) In the above igure, if the interest rate is 2 percent per year, the ________ because
________.
A) interest rate will change; the quantity of money demanded is less than the quantity of
money supplied
B) interest rate will change; the quantity of money demanded is greater than the quantity
of money supplied
C) demand for money curve will shift; the quantity of money demanded is less than the
quantity of money supplied
D) demand for money curve will shift; the quantity of money demanded is greater than the
quantity of money supplied
E) supply of money curve will shift; the quantity of money demanded is greater than the
quantity of money supplied
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: New
AACSB: Analytical thinking
37
109) The above table has the demand and supply schedules for money. What is the
equilibrium nominal interest rate?
A) 5 percent
B) 9 percent
C) 8 percent
D) 7 percent
E) 6 percent
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
110) The above table has the demand and supply schedules for money. If the Fed increases
the quantity of money by $0.1 trillion, the new equilibrium nominal interest rate is
A) 8 percent.
B) 9 percent.
C) 7 percent.
D) 5 percent.
E) 6 percent.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
38
111) The above table has the demand and supply schedules for money. Real GDP increases
and, as a result, the demand for money increases by $0.1 trillion at each level of the
nominal interest rate. The new equilibrium interest rate is
A) 3 percent.
B) 7 percent.
C) 10 percent.
D) 5 percent.
E) 2 percent.
Skill: Level 3: Using models
Section: Checkpoint 12.1
Status: Revised
AACSB: Analytical thinking
112) The quantity of money demanded
A) is ininite.
B) has no opportunity cost.
C) is the quantity that balances the beneit of holding an additional dollar of money against
the opportunity cost of doing so.
D) is directly controlled by the Fed.
E) changes very infrequently.
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
113) Which of the following statements is correct?
A) Nominal interest rate = Real interest rate – Inlation rate
B) Nominal interest rate = Real interest rate + Inlation rate
C) Nominal interest rate = Inlation rate – Real interest rate
D) Nominal interest rate = Inlation rate + Price index
E) Nominal interest rate = Inlation rate ÷ Real interest rate
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
39
114) The demand for money ________ when the ________.
A) increases; price level increases
B) decreases; price level increases
C) remains constant; price level increases
D) increases; nominal interest rate increases
E) increases; supply of money decreases
Skill: Level 1: Deinition
Section: Checkpoint 12.1
Status: Old
AACSB: Relective thinking
115) If the nominal interest rate is above its equilibrium value, then
A) people sell inancial assets and the interest rate falls.
B) people buy inancial assets and the interest rate falls.
C) the demand curve for money shifts rightward and the interest rate rises.
D) the supply curve of money shifts leftward and the interest rate rises.
E) the demand curve for money shifts leftward and the interest rate falls.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
116) When the Fed increases the quantity of money, the
A) equilibrium nominal interest rate falls.
B) equilibrium nominal interest rate rises.
C) demand for money curve shifts rightward.
D) supply of money curve shifts leftward.
E) demand for money curve shifts leftward.
Skill: Level 2: Using deinitions
Section: Checkpoint 12.1
Status: Old
AACSB: Analytical thinking
40