Question : 31) The money demand curve has a negative slope because A) : 1244866

31) The money demand curve has a negative slope because

A) lower interest rates cause households and firms to switch from money to financial assets.

B) lower interest rates cause households and firms to switch from financial assets to money.

C) lower interest rates cause households and firms to switch from money to stocks.

D) lower interest rates cause households and firms to switch from money to bonds.

32) An increase in real GDP

A) increases the buying and selling of goods and increases the demand for money as a medium of exchange.

B) increases the buying and selling of goods and decreases the demand for money as a medium of exchange.

C) decreases the buying and selling of goods and increases the demand for money as a medium of exchange.

D) decreases the buying and selling of goods and decreases the demand for money as a medium of exchange.

33) Increases in the price level

A) increase the opportunity cost of holding money.

B) decrease the opportunity cost of holding money.

C) increase the quantity of money needed for buying and selling.

D) decrease the quantity of money needed for buying and selling.

Figure 17-4

34) Refer to Figure 17-4. In the figure above, a movement from point A to point B would be caused by

A) a decrease in real GDP.

B) an increase in the price level.

C) a decrease in the price level.

D) an increase in the interest rate.

35) The money supply curve is vertical if

A) banks and the Fed jointly determine the money supply.

B) the Fed is able to completely determine the money supply.

C) banks and households determine the money supply.

D) households and the Fed jointly determine the money supply.

36) Suppose the Fed increases the money supply. Which of the following is true?

A) At the original interest rate, the quantity of money demanded is equal to the quantity of money supplied.

B) At the original interest rate, the quantity of money demanded is less than the quantity of money supplied.

C) At the original interest rate, the quantity of money demanded is greater than the quantity of money supplied.

D) The interest rate must rise for the money market to clear.

37) When the price of a financial asset ________ its interest rate will ________.

A) rises; rise

B) falls; fall

C) falls; rise

D) rises; remain the same

38) Suppose the Fed decreases the money supply. In response households and firms will ________ short term assets and this will drive ________ interest rates.

A) buy; up

B) buy; down

C) sell; up

D) sell; down

39) If the Fed buys Treasury bills, this will shift the

A) money supply curve to the right.

B) money supply curve to the left.

C) money demand curve to the right.

D) money demand curve to the left.

40) An increase in the money supply will

A) increase the interest rate.

B) decrease the interest rate.

C) have no affect on the interest rate.

D) decrease the equilibrium quantity of money in the economy.

Figure 17-5