07 Jul THE VELOCITY OF MONEY INDICATES THE SPEED WITH WHICH THE U.S. TREASURY CAN MINT NEW COINS.
increa Show more QUESTION 71 To close a recessionary gap the Fed would increase the money supply. increase interest rates. sell bonds. decrease the money supply. 1.11 points QUESTION 72 The direct effect of an increase in the money supply is to increase aggregate demand as interest rates fall and investment spending increases. increase aggregate supply as producers anticipate higher future profits. increase aggregate demand as people spend their excess money balances. decrease the rate of inflation. 1.11 points QUESTION 73 The indirect effect of an increase in the money supply is to increase aggregate supply as firms anticipate future profits. increase aggregate demand as interest rates fall and investment spending increases. decrease the price level. increase aggregate demand as people try to spend their excess money balances. 1.11 points QUESTION 74 An inflationary gap currently exists. The Fed wants to bring the economy to a full employment level by using open market operations. The Fed should increase the differential between the discount rate and the federal funds rate. buy government securities. decrease the differential between the discount rate and the federal funds rate. sell government securities. 1.11 points QUESTION 75 In the real world contractionary monetary policy would be used to increase nominal GDP. combat a recession. increase long-run aggregate supply. reduce the rate of inflation. 1.11 points QUESTION 76 It has been observed that a change in monetary policy in the United States has little or no effect on foreign markets. leads to corresponding changes in other countries. has only short run influences. impacts net exports. 1.11 points QUESTION 77 The net-export effect of expansionary monetary policy is a(n) depreciation of the value of the dollar and the increase of U.S. net exports. depreciation of the value of the dollar and the decrease of U.S. net exports. appreciation of the value of the dollar and the decrease of U.S. net exports. appreciation of the value of the dollar and the increase of U.S. net exports. 1.11 points QUESTION 78 The net-export effect of contractionary monetary policy is a(n) appreciation of the value of the dollar and the decrease of U.S. net exports. depreciation of the value of the dollar and the decrease of U.S. net exports. appreciation of the value of the dollar and the increase of U.S. net exports. depreciation of the value of the dollar and the increase of U.S. net exports. 1.11 points QUESTION 79 Other things being equal the quantity theory of money suggests that any increase in the money supply results in a decrease in the aggregate price level. causes a reduction in the demand for money. causes the aggregate level of nominal Gross Domestic Product (GDP) to fall. results in a proportionate increase in the price level. 1.11 points QUESTION 80 The velocity of money indicates the speed with which the U.S. Treasury can mint new coins. is according to the equation of exchange equal to P/M. indicates the number of times per year a dollar is spent on final goods and services. is according to the equation of exchange equal to M/Y. 1.11 points QUESTION 81 The equation of exchange specifies that Ms = PVY. MsP = VY. MsV = PY. velocity and money supply are directly related. 1.11 points QUESTION 82 The monetary transmission mechanism that assumes that money supply growth stimulates the economy primarily by encouraging investment is pre-Keynesian transmission mechanism. the interest-rate-based transmission mechanism. the classical transmission mechanism. the post-Keynesian transmission mechanism. 1.11 points QUESTION 83 The interest-rate-based monetary policy transmission mechanism emphasizes the direct effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. indirect effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. direct effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. indirect effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. 1.11 points QUESTION 84 If the Fed wants to target interest rates it must control the value for velocity. coordinate its activities with the largest private banks in the United States. give up trying to control the money supply. control the money supply. 1.11 points QUESTION 85 The interest rate that the Fed charges banks to borrow funds from the Fed is the money market rate. discount rate. nominal interest rate. federal funds rate. 1.11 points QUESTION 86 The federal funds rate is the interest rate paid on reserves held with the Fed. the interest rate at which banks can borrow excess reserves from other banks. the interest rate on bonds issued by the federal government. none of the above. 1.11 points QUESTION 87 In addition to open market operations and the required reserve ratio another tool of monetary policy available to the Fed is tax rates and the progressivity of the income-tax system. fiscal policy. the difference between the discount rate and the federal funds rate. government spending and various transfer-payment programs. 1.11 points QUESTION 88 The Taylor rule implies that the Fed should set the federal funds target based on which of the following? an estimated long-run real interest rate the current deviation of the actual inflation rate from the Feds inflation objective the proportionate gap between actual real GDP and a measure of potential real GDP all of the above 1.11 points QUESTION 89 According to Keynes the effect on planned real investment spending resulting from the interest-rate impact of an increase in the money supply impacts the economy by increasing the value of the U.S. dollar. impacts the economy by reducing the deficit. does not impact the economy. impacts the economy through the multiplier. 1.11 points QUESTION 90 According to Keynes the effect on planned real investment spending resulting from the interest-rate impact of a decrease in the money supply impacts the economy by reducing the value of the U.S. dollar. does not impact the economy. impacts the economy by increasing the deficit. impacts the economy through the multiplier. 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