chapter_10_-_liquidity_preference_theory

chapter_10_-_liquidity_preference_theory - Test Bank...

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Unformatted text preview: Test Bank Macroeconomics: Theory and Policy Chapter 10: Liquidity Preference Theory B. Modjtahedi Question 1 What is the definition of demand for money? A. The amount of money people are willing and able to hold. B. The amount of money people are willing to hold. C. The amount of money people are willing to borrow. D. The amount of money people actually hold. E. None of the above. Question 2 What is the definition of demand for money? A. The amount of money people need to buy goods and services. B. The amount of money people are willing and able to borrow from banks. C. The amount of money people hold in the form of currency and demand deposits. D. The portion of their wealth people want to allocate to money. E. None of the above. Question 3 In the U.S. the amount of M1 is about $1 trillion while the nominal GDP is around $10 trillion. This indicates that: A. The velocity equals 10. B. The velocity equals 1/10. C. The Cambridge k equals 10. D. M1 is not an accurate measure of money supply. E. None of the above. Question 4 In the Cambridge model the velocity of circulation is V = 5, the general price level is P = $100, and the real GDP equals Y = 1,000. In this model the demand for money equals A. 500,000 B. 20,000 C. 500 D. 200 E. None of the above. Question 5 Which of the following statements is most accurate? A. If, all else the same, the price level increases by 100%, the demand for money will increase by more than 100%. B. If, all else the same, the price level increases by 100% and the real GDP falls by 200%, the demand for money will increase by more than 100%. C. If, all else the same, the price level decreases by 50% and the real GDP increases by 100%, the demand for money will remain the same. D. If, all else the same, the price level increases by 100% and the real GDP increases by 100%, the demand for money will not change. E. None of the above. Question 6 If, all else the same , the general price level increases by 5%, A. The demand for money will increase by 5%. B. Both the demand for and the supply of money will increase by 5%. C. The demand for money will increase by less than 5%. D. The supply of money will increase by 5%. E. None of the above. Question 7 According to Keynes, what will happen if the interest rate increases? A. Demands for both money and bonds will decrease. B. Demand for money will increase but demand for bonds will decrease. C. Demands for both money and bonds will increase. D. Demand for money will decrease but demand for bonds will increase. E. None of the above. Question 8 Consider the graph above that shows the demand-for-money and supply-of-money functions in a country. The solid lines are the original functions. A dashed line indicates the new demand or supply function after the original one has shifted because of an event. The following are the only events to consider. Which of the following events, ceteris paribus , might have caused the equilibrium nominal interest rate to increase from 8% to 12%?...
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chapter_10_-_liquidity_preference_theory - Test Bank...

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