Question : 51) Suppose that at a given interest rate and money : 1384457

51) Suppose that at a given interest rate and money supply, all firms and households simultaneously try to add to their money balances. They do this by trying to ________, which causes an excess ________, which causes a(n) ________, and finally a(n) ________ in the interest rate.

A) sell bonds; supply of bonds; increase in the price of bonds; decrease

B) buy bonds; supply of bonds; decrease in the price of bonds; increase

C) sell bonds; demand for bonds; increase in the price of bonds; decrease

D) buy bonds; demand for bonds; increase in the price of bonds; decrease

E) sell bonds; supply of bonds; decrease in the price of bonds; increase

52) Suppose that at a given interest rate and money supply, all firms and households simultaneously try to reduce their money balances. They do this by trying to ________, which causes an excess ________, which causes a(n) ________, and finally a(n) ________ in the interest rate.

A) sell bonds; supply of bonds; increase in the price of bonds; decrease

B) buy bonds; supply of bonds; decrease in the price of bonds; increase

C) sell bonds; demand for bonds; increase in the price of bonds; decrease

D) buy bonds; demand for bonds; increase in the price of bonds; decrease

E) sell bonds; supply of bonds; decrease in the price of bonds; increase

53) When there is an excess demand for money balances, monetary equilibrium is established by a process that involves

1) movement down the money demand function;

2) interest rates falling;

3) the price of bonds falling.

A) 1 only

B) 2 only

C) 3 only

D) 1 and 2

E) 2 and 3

54) Consider a money market in which there is an excess supply of money at the prevailing interest rate. The likely response is:

A) the corresponding excess supply for bonds will cause the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply.

B) the corresponding excess demand for bonds will cause the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply.

C) the money supply curve will shift to the left until the demand for money equals the supply.

D) the money supply curve will shift to the right until the demand for money equals the supply.

E) the money demand curve will shift to the right, causing the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply.

55) Consider a money market in which there is an excess demand for money at the prevailing interest rate. The likely response is:

A) the corresponding excess demand of bonds will cause the price of bonds to decrease and the interest rate to rise, until the demand for money equals the supply.

B) the money supply curve will shift to the left until the demand for money equals the supply.

C) the money supply curve will shift to the right until the demand for money equals the supply.

D) the money demand curve will shift to the right, causing the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply.

E) the corresponding excess supply of bonds will cause the price of bonds to decrease and the interest rate to rise, until the demand for money equals the supply.

56) When there is an excess supply of money, monetary equilibrium is restored through

A) interest rates rising.

B) individuals attempting to sell bonds.

C) the price of bonds falling.

D) the price of bonds increasing.

E) the price level falling.

57) Monetary equilibrium occurs when the

A) growth in the money supply is zero.

B) existing supply of money is willingly held by households and firms in the economy at the current rate of interest.

C) nominal rate of interest equals the real rate of interest.

D) the money supply is growing at a constant rate.

E) supply and demand for all goods in the economy are equal at the current rate of interest.

58) If the economy is currently in monetary equilibrium, an increase in the money supply will

A) not change the equilibrium conditions.

B) cause a reduction in the demand for money, leading to a higher rate of interest.

C) cause an excess demand for money and a decrease in the rate of interest.

D) cause an increase in the demand for money, leading to a lower rate of interest.

E) lead to a movement down the money demand curve to a lower rate of interest.

59) Refer to Figure 28-2. Starting at equilibrium E0, an increase in real GDP will lead to a

A) shift of the MS curve to the left and an increase in the interest rate.

B) shift of the MS curve to the right and a fall in the interest rate.

C) downward movement along the MD curve and a lower interest rate.

D) shift of the MD curve to the left and a fall in the interest rate.

E) shift of the MD curve to the right and an increase in the interest rate.

60) Refer to Figure 28-2. Starting at equilibrium E0, an increase in the supply of money will result in the

A) shift of the MS curve to the left and an increase in the interest rate.

B) shift of the MS curve to the right and a fall in the interest rate.

C) downward movement along the MD curve and a higher interest rate.

D) shift of the MD curve to the left and a fall in the interest rate.

E) upward movement along the curve and a lower interest rate.