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1) If the money supply is $600 and nominal income is $3,000, the velocity of money is
A) 1/50
B) 1/5
C) 5
D) 50
2) When we say that money is a stock variable, we mean that
A) the quantity of money is measured at a given point in time
B) we must attach a time period to the measure
C) it is sold in the equity market
D) money never loses purchasing power
3) The evidence on the interest sensitivity of the demand for money suggests that the
demand for money is ________ to interest rates, and there is ________ evidence that a
liquidity trap exists
A) sensitive; substantial
B) sensitive; little
C) insensitive; substantial
D) insensitive; little
4) Which of the following statements concerning external sources of financing for
nonfinancial businesses in the United States are true?
A) Issuing marketable securities is the primary way that they finance their activities
B) Bonds are the least important source of external funds to finance their activities
C) Stocks are a relatively unimportant source of finance for their activities
D) Selling bonds directly to the American household is a major source of funding for
American businesses
5) If a bank's liabilities are more sensitive to interest rate movements than are its assets,
then
A) an increase in interest rates will reduce bank profits
B) a decrease in interest rates will reduce bank profits
C) interest rates changes will not impact bank profits
D) an increase in interest rates will increase bank profits
6) The mandate for the monetary policy goals that has been given to the European
Central Bank is an example of a ________ mandate
A) primary
B) dual
C) secondary
D) hierarchical
7) A credit market instrument that provides the borrower with an amount of funds that
must be repaid at the maturity date along with an interest payment is known as a
A) simple loan
B) fixed-payment loan
C) coupon bond
D) discount bond
8) ________ in the foreign interest rate causes the demand for domestic assets to
________ and the domestic currency to depreciate, everything else held constant
A) An increase; increase
B) An increase; decrease
C) A decrease; increase
D) A decrease; decrease
9) Everything else held constant, in the market for reserves, when the federal funds rate
is 1%, increasing the interest rate paid on excess reserves from 1% to 2%
A) lowers the federal funds rate
B) raises the federal funds rate
C) has no effect on the federal funds rate
D) has an indeterminate effect on the federal funds rate
10) In the Baumol-Tobin analysis of transactions demand, scale economies imply that
an increase in real income increases the quantity of money demanded ________, while
an increase in the price level increases the quantity of money demanded ________
A) proportionately; less than proportionately
B) more than proportionately; proportionately
C) less than proportionately; proportionately
D) proportionately; more than proportionately
11) A return to the gold standard, that is, using gold for money will ________ the
________ for gold, ________ its price, everything else held constant
A) increase; demand; increasing
B) decrease; demand; decreasing
C) increase; supply; increasing
D) decrease; supply; increasing
12) The quantity of reserves demanded equals
A) required reserves plus borrowed reserves
B) excess reserves plus borrowed reserves
C) required reserves plus excess reserves
D) total reserves minus excess reserves
13) A deposit outflow results in equal reductions in
A) loans and reserves
B) assets and liabilities
C) reserves and capital
D) assets and capital
14) A negative supply shock causes ________ to ________
A) aggregate demand; increase
B) aggregate demand; decrease
C) short-run aggregate supply; decrease
D) short-run aggregate supply; increase
15) ________ means people are more unhappy when they suffer losses than they are
happy when they achieve gains
A) Loss fundamentals
B) Loss aversion
C) Loss leader
D) Loss cycle
