Question 1

Refer to the given market-for-money diagrams. The total demand for money is shown by

Accepted Answer

The answer of  Refer to the given market-for-money diagrams....

Question 2

Refer to the diagram of the market for money. Given $D _ { m } \text { and } S _ { m } \text { an interest rate of } I _ { 3 }$ is not sustainable because the

Accepted Answer

The answer of  Refer to the diagram of the...

Question 3

Other things equal, if the supply of money is reduced,

Accepted Answer

When the supply of money is reduced, the demand for money remains the same or increases slightly, resulting in a decrease in bond prices. This is because investors are willing to pay less for a bond with a lower return on investment. The interest rate would likely increase due to decreased demand for borrowing, and investment spending would decrease, not increase, due to higher borrowing costs.

Question 4

Refer to the diagram of the market for money. Other things equal, the money demand curve in the diagram would shift leftward if

Accepted Answer

According to the diagram, a decrease in nominal GDP would lead to a leftward shift in the money demand curve. This is because as the economy produces less output, the demand for money to facilitate transactions decreases.

Question 5

Refer to the given market-for-money diagrams. If the interest rate was at 8 percent, people would

Accepted Answer

According to the market-for-money diagram, at an interest rate of 8 percent, the quantity of money supplied (MS) is greater than the quantity of money demanded (MD). This creates a surplus of money in the market, causing bond prices to fall and the interest rate to fall. In order to reach equilibrium, people would need to buy bonds, which would increase bond prices and decrease the interest rate. Therefore, the correct answer is B.

Question 6

Refer to the given market-for-money diagrams. If each dollar held for transactions is spent four times per year on the average, we can infer that

Accepted Answer

The answer of  Refer to the given market-for-money diagrams....

Question 7

Suppose the demand for money and the supply of money increase simultaneously. We can

Accepted Answer

When both demand and supply for money increase simultaneously, the effect on interest rates and bond prices is not accurately predictable. It will depend on the magnitude of the change in demand and supply and other economic factors. However, an increase in both demand and supply of money can contribute to nominal GDP expansion.

Question 8

If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will

Accepted Answer

When the supply of money exceeds the demand, the interest rate will fall. Lower interest rates make holding money more attractive compared to other investments, so households and businesses will hold more money.

Question 9

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Accepted Answer

The asset demand for money is represented by the vertical line labeled D2, which indicates a fixed level of demand for money at each interest rate.

Question 10

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the

Accepted Answer

According to the market-for-money diagram, an increase in the stock of money would shift the S curve rightward. This would lead to an increase in the quantity of money demanded and a decrease in the equilibrium interest rate. Therefore, the correct answer is B.

Question 11

Refer to the diagram of the market for money. The vertical money supply curve $S _ { m }$ re?ects the fact that

Accepted Answer

The vertical money supply curve reflects the fact that the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes. This means that the supply of money is fixed in the short run, and any changes in the interest rate will only result in movements along the curve, rather than a shift in the curve.

Question 12

Refer to the given market-for-money diagrams. If the interest rate was at 3 percent, people would

Accepted Answer

According to the market-for-money diagram, at an interest rate of 3 percent, the equilibrium quantity of money demanded exceeds the quantity of money supplied, which creates an excess demand for money. To acquire the needed funds, people will sell bonds, which will increase the supply of bonds and decrease their prices. As bond prices fall, the interest rate will rise to bring the market into equilibrium. Therefore, people will sell bonds, which will cause bond prices to fall and the interest rate to rise.

Question 13

Refer to the diagram of the market for money. The downward slope of the money demand curve $D _ { m }$ is best explained in terms of the

Accepted Answer

The answer of  Refer to the diagram of the...

Question 14

Other things equal, if there is an increase in nominal GDP,

Accepted Answer

An increase in nominal GDP would typically lead to an increase in the demand for money. This would put upward pressure on interest rates in order to equate the quantity of money demanded with the quantity of money supplied. Therefore, B is the correct answer. C is incorrect because an increase in bond prices would generally be associated with a decrease in interest rates. D is also incorrect, as an increase in nominal GDP would typically lead to an increase in consumption spending, since income is a key determinant of consumption.

Question 15

Which of the following statements is correct?

Accepted Answer

Interest rates and bond prices have an inverse relationship. When interest rates increase, bond prices decrease and vice versa. This is because when interest rates rise, the opportunity cost of holding a lower-yielding bond increases, making it less attractive to investors. Therefore, bond prices must decrease to increase the yield and become competitive with other investment options. Conversely, when interest rates decrease, bond prices increase as their yield becomes more attractive to investors.

Question 16

Refer to the diagram of the market for money. The equilibrium interest rate is

Accepted Answer

The equilibrium interest rate is where the supply of money intersects with the demand for money (MD=MS) which is at I2.

Question 17

If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will

Accepted Answer

If the quantity of money demanded exceeds the money supply, there is excess demand for money. As a result, lenders will raise the interest rate to discourage borrowing and encourage saving. This increase in the interest rate will cause households and businesses to hold less money, which will ultimately decrease the demand for money and bring the market back into equilibrium.

Question 18

If the demand for money and the supply of money both decrease, the equilibrium

Accepted Answer

When both the demand for money and the supply of money decrease, the equilibrium quantity of money will decrease. This means that people will hold less money, leading to a decrease in the quantity of money. As for the interest rate, we cannot predict the change because it depends on the relative magnitude of the decrease in demand and supply of money.

Question 19

The price of a bond having no expiration date is originally $8,000 and has a ﬁxed annual interest payment of $800. A fall in the price of the bond by $3,000 will provide a new buyer of the bond an interest rate of

Accepted Answer

The answer of The price of a bond having no...

Question 20

Refer to the given market-for-money diagrams. Curve $D _ { 1 }$ represents the

Accepted Answer

Curve D1 represents the transactions demand for money, which is the demand for money to carry out everyday transactions such as buying goods and services. It is not the total demand for money, which would include the asset demand for money as well. It is also not the stock of money, which refers to the total amount of money in circulation.

Quiz 16: Interest Rates and Monetary Policy

$Refer to the given market-for-money diagrams. The total demand for money is shown by A) D _ { 1 } B) \mathrm { D } _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The total demand for money is shown by

Other things equal, if the supply of money is reduced,

Refer to the diagram of the market for money. Other things equal, the money demand curve in the diagram would shift leftward if

Refer to the given market-for-money diagrams. If the interest rate was at 8 percent, people would

Refer to the given market-for-money diagrams. If each dollar held for transactions is spent four times per year on the average, we can infer that

Suppose the demand for money and the supply of money increase simultaneously. We can

If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will

$Refer to the given market-for-money diagrams. The asset demand for money is shown by A) D _ { 1 } B) D _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The asset demand for money is shown by

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the

Refer to the given market-for-money diagrams. If the interest rate was at 3 percent, people would

Other things equal, if there is an increase in nominal GDP,

Which of the following statements is correct?

$Refer to the diagram of the market for money. The equilibrium interest rate is A) I_1. B) I _ { 2 } C) I_ { 3 } D) not determinable without additional information.$ Refer to the diagram of the market for money. The equilibrium interest rate is

If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will

If the demand for money and the supply of money both decrease, the equilibrium

The price of a bond having no expiration date is originally $8,000 and has a ﬁxed annual interest payment of $800. A fall in the price of the bond by $3,000 will provide a new buyer of the bond an interest rate of

$Refer to the given market-for-money diagrams. Curve D _ { 1 } represents the A) total demand for money. B) transactions demand for money. C) asset demand for money. D) stock of money.$ Refer to the given market-for-money diagrams. Curve $D _ { 1 }$ represents the

Quiz 16: Interest Rates and Monetary Policy

Refer to the given market-for-money diagrams. The total demand for money is shown by

Refer to the diagram of the market for money. Given Dm and Sm an interest rate of I3D _ { m } \text { and } S _ { m } \text { an interest rate of } I _ { 3 }Dm​ and Sm​ an interest rate of I3​ is not sustainable because the

Other things equal, if the supply of money is reduced,

Refer to the diagram of the market for money. Other things equal, the money demand curve in the diagram would shift leftward if

Refer to the given market-for-money diagrams. If the interest rate was at 8 percent, people would

Refer to the given market-for-money diagrams. If each dollar held for transactions is spent four times per year on the average, we can infer that

Suppose the demand for money and the supply of money increase simultaneously. We can

If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the

Refer to the diagram of the market for money. The vertical money supply curve SmS _ { m }Sm​ re?ects the fact that

Refer to the given market-for-money diagrams. If the interest rate was at 3 percent, people would

Refer to the diagram of the market for money. The downward slope of the money demand curve DmD _ { m }Dm​ is best explained in terms of the

Other things equal, if there is an increase in nominal GDP,

Which of the following statements is correct?

Refer to the diagram of the market for money. The equilibrium interest rate is

If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will

If the demand for money and the supply of money both decrease, the equilibrium

The price of a bond having no expiration date is originally $8,000 and has a ﬁxed annual interest payment of $800. A fall in the price of the bond by $3,000 will provide a new buyer of the bond an interest rate of

Refer to the given market-for-money diagrams. Curve D1D _ { 1 }D1​ represents the

$Refer to the given market-for-money diagrams. The total demand for money is shown by A) D _ { 1 } B) \mathrm { D } _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The total demand for money is shown by

$Refer to the given market-for-money diagrams. The asset demand for money is shown by A) D _ { 1 } B) D _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The asset demand for money is shown by

$Refer to the diagram of the market for money. The equilibrium interest rate is A) I_1. B) I _ { 2 } C) I_ { 3 } D) not determinable without additional information.$ Refer to the diagram of the market for money. The equilibrium interest rate is

$Refer to the given market-for-money diagrams. Curve D _ { 1 } represents the A) total demand for money. B) transactions demand for money. C) asset demand for money. D) stock of money.$ Refer to the given market-for-money diagrams. Curve $D _ { 1 }$ represents the