tbch14 - Chapter 14: Money, Interest Rates, and Exchange...

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Chapter 14: Money, Interest Rates, and Exchange Rates Multiple Choice Questions 1. The exchange rate between currencies depends on A. the interest rate that can be earned on deposits of those currencies. B. the expected future exchange rate. C. the interest rate that can be earned on deposits of those currencies and the expected future exchange rate. D. national output. E. None of the above. Answer: B 2. Money serves as A. a medium of exchange. B. a unit of account. C. a store of value. D. All of the above. E. Only A and B Answer: D 3. Money includes A. currency. B. bank deposits on which check may be written. C. both A and B. D. travelers’ checks. E. A, B and D. Answer: E 4. In the United States at the end of 2000, the total money supply, M1, amounted to approximately A. 10 percent of that year’s GNP. B. 20 percent of that year’s GNP. C. 30 percent of that year’s GNP. D. 40 percent of that year’s GNP. E. 50 percent of that year’s GNP. Answer: A 189
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5. Individuals base their demand for an asset on A. the expected return the asset offers compared with the returns offered by other assets. B. the riskiness of the asset’s expected return. C. the asset’s liquidity. D. All of the above. E. Only A and B. Answer: D 6. The family summer house on Cape Code pays a return in the form of A. interest rate. B. capital gains. C. the pleasure of vacations at the beach. D. A, B and C. E. B and C only. Answer: E 7. In a world with money and bonds only, A. it is risky to hold money. B. it is not risky to hold money. C. risk does affect the demand for money. D. there is no relationship between risk and holding money. E. None of the above. Answer: A 8. Which one of the following statements is the most accurate? A. A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall. B. A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise. C. A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise. D. A rise in the average value of transactions carried out by a household or a firm causes its demand for nominal money to rise. E. A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise. Answer: E 190
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9. The aggregate money demand depends on A. the interest rate. B. the price level. C. real national income. D. All of the above. E. Only A and C. Answer: D 10. The aggregate real money demand schedule L(R,Y) A. slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. B.
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This note was uploaded on 05/30/2011 for the course ECONOMICS 120 taught by Professor Dr.mohamed during the Spring '11 term at Faculty of English Commerce Ain Shams University.

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tbch14 - Chapter 14: Money, Interest Rates, and Exchange...

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