1) In Irving Fisher’s quantity theory of money, velocity was determined by
A) interest rates
B) real GDP
C) the institutions in an economy that affect individuals’ transactions
D) the price level
2) Everything else held constant, an increase in the cost of production ________
aggregate ________
A) increases; demand
B) decreases; demand
C) increases; supply
D) decreases; supply
3) An increase in US Treasury deposits at the Fed reduces both ________ and the
________
A) reserves; monetary base
B) Fed liabilities; money multiplier
C) Fed assets; monetary base
D) Fed assets; money multiplier
4) Because it is a unit of account, money
A) increases transaction costs
B) reduces the number of prices that need to be calculated
C) does not earn interest
D) discourages specialization
5) Of the four effects on interest rates from an increase in the money supply, the initial
effect is, generally, the
A) income effect
B) liquidity effect
C) price level effect
D) expected inflation effect
6) Policymakers in a country with a balance of payments surplus may not want to see
their country’s currency appreciate because this would
A) hurt consumers in their country by making foreign goods more expensive
B) hurt domestic businesses by making foreign goods cheaper in their country
C) increase inflation in their country
D) decrease the wealth of the country
7) Since the passage of the International Banking Act of 1978, the competitive
advantage enjoyed by foreign banks in the US has been
A) reduced
B) mildly expanded
C) completely eliminated
D) greatly expanded
8) If aggregated demand is less than actual output, unplanned inventory ________ will
cause output to ________
A) accumulation; rise
B) depletion; fall
C) depletion; rise
D) accumulation; fall
9) A problem for equity contracts is a particular type of ________ called the ________
problem
A) adverse selection; principal-agent
B) moral hazard; principal-agent
C) adverse selection; free-rider
D) moral hazard; free-rider
10) Recent financial innovation makes the Federal Reserve’s job of conducting
monetary policy
A) easier, since the Fed now knows what to consider money
B) more difficult, since the Fed now knows what to consider money
C) easier, since the Fed no longer knows what to consider money
D) more difficult, since the Fed no longer knows what to consider money