1) Rising prices erode the value of money as a ________ and a ________.
A) medium of exchange; store of value
B) unit of barter; unit of account
C) store of value; unit of barter
D) store of value; unit of liquidity - answer-A) medium of exchange; store of value
2) The Fed's two main monet...
ECO 213 - exam 3 questions and
solutions
1) Rising prices erode the value of money as a ________ and a ________.
A) medium of exchange; store of value
B) unit of barter; unit of account
C) store of value; unit of barter
D) store of value; unit of liquidity - answer-✔A) medium of exchange; store of
value
2) The Fed's two main monetary policy targets are
A) the money supply and short term interest rates.
B) the inflation rate and real GDP
C) short term interest rates and real GDP.
D) the money supply and the inflation rate. - answer-✔A) the money supply and
short term interest rates.
3) The money demand curve has a negative slope because
A) lower interest rates cause households and firms to switch from money to
financial assets.
B) lower interest rates cause households and firms to switch from financial assets
to money.
C) lower interest rates cause households and firms to switch from money to bonds.
D) lower interest rates cause households and firms to switch from money to stocks.
- answer-✔B) lower interest rates cause households and firms to switch from
financial assets to money.
,4) Which of the following is NOT a goal of monetary policy?
A) price stability
B) low unemployment
C) maximizing the value of the dollar relative to other currencies
D) economic growth - answer-✔C) maximizing the value of the dollar relative to
other currencies
5) Money demand will increase if the price level ________ or if real GDP
________.
A) decreases; decreases
B) decreases; increases
C) increases; decreases
D) increases; increases - answer-✔D) increases; increases
6) An increase in real GDP
A) increases the buying and selling of goods and increases the demand for money
as a medium of exchange.
B) decreases the buying and selling of goods and decreases the demand for money
as a medium of exchange.
C) decreases the buying and selling of goods and increases the demand for money
as a medium of exchange.
D) increases the buying and selling of goods and decreases the demand for money
as a medium of exchange. - answer-✔A) increases the buying and selling of goods
and increases the demand for money as a medium of exchange.
7) When the market price of a financial asset ________ its interest rate will
________.
A) falls; rise
, B) rises; rise
C) falls; fall
D) rises; does not change - answer-✔A) falls; rise
8) Suppose the Fed raises the money supply. Which of the following is true?
A) At the original interest rate, the quantity of money demanded is equal to the
quantity of money supplied.
B) The interest rate must rise for the money market to clear.
C) At the original interest rate, the quantity of money demanded is greater than the
quantity of money supplied.
D) At the original interest rate, the quantity of money demanded is less than the
quantity of money supplied. - answer-✔D) At the original interest rate, the quantity
of money demanded is less than the quantity of money supplied.
9) All else equal, an increase in the money supply will
A) have no affect on the interest rate.
B) decrease the interest rate.
C) decrease the equilibrium quantity of money in the economy.
D) increase the interest rate. - answer-✔B) decrease the interest rate.
10) If the Fed FOMC buys Treasury bills through an open market purchase, this
will
A) shift the money supply curve to the left.
B) shift the money supply curve to the right.
C) shift the money demand curve to the right.
D) shift the money demand curve to the left. - answer-✔B) shift the money supply
curve to the right.
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