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Exam 11: Money Demand and the Equilibrium Interest Rate

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Question 51

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As the number of transactions in the economy decreases,

A) the supply of money increases.
B) the supply of money decreases.
C) the demand for money increases.
D) the demand for money decreases.

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Question 52

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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4.The money market will be in equilibrium at an interest rate of

A) 0%.
B) 3%.
C) 5%.
D) 8%.

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Question 53

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Which of the following causes the quantity demanded of money to increase?

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5.The money supply curve will shift from to if

Refer to the information provided in Figure 11.6 below to answer the questions that follow. Figure 11.6 -Refer to Figure 11.6.The demand for money curve will shift from to if

Related to the Economics in Practice on p.526: If the estate in the Chekhov play Uncle Vanya is earning 2 percent,the interest rate on suitable securities is 5 percent,and the securities are a better risk than the estate,a potential buyer should require the price of the estate be ________ until the equivalent return on the estate is ________.

Investors may wish to hold bonds when interest rates are low with the hope of selling them when interest rates increase.

If people think interest rates are above their normal levels,they will want to hold bonds in anticipation of a capital gain when interest rates fall to their normal level.

The average monthly balance in Tony's bank account is $650.Tony spends the same amount of money each day during the month and at the end of the month his account balance is $0.Tony's monthly starting balance is

Refer to the information provided in Figure 11.2 below to answer the questions that follow. Figure 11.2 -Refer to Figure 11.2.Suppose that money demand is currently at Point B.A movement to Point D could be caused by

Government securities that mature in less than a year are called

Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1 -Refer to Figure 11.1.The movement from C to B could be cause by

Which of the following leads to an increase in the interest rate?

Refer to the information provided in Table 11.1 below to answer the questions that follow. Table 11.1 -Refer to Table 11.1.At a price of ________ the optimal number of switches is ________.

The two year interest rate is an average of the expected interest rate each of the two years.

The market-determined prices of existing bonds and interest rates are directly related.

When interest rates fall,bond values rise.

What is the most widely followed short-term interest rate?

If there is a surplus of money in the money market,the Fed can eliminate it by

Related to the Economics in Practice on p.531: The increase in the number of ATMs in Italy has had what impact on the market for cash?