171.IftheFederalReserveincreasesthemoneysupply,theninitiallypeoplewantto
a.sellbondssotheinterestraterises.
b.sellbondssotheinterestratefalls.
c.buybondssotheinterestraterises.
d.buybondssotheinterestratefalls.
172.IfmoneydemandshiftedtotherightandtheFederalReservedesiredtoreturntheinterestratetoitsoriginalvalue,itcould
a.buybondstoincreasethemoneysupply.
b.buybondstodecreasethemoneysupply.
c.sellbondstoincreasethemoneysupply.
d.sellbondstodecreasethemoneysupply.
173.TodecreasetheinterestratetheFederalReservecould
a.buybonds.Thefallintheinterestratewouldincreaseinvestmentspending.
b.buybonds.Thefallintheinterestratewoulddecreaseinvestmentspending.
c.sellbonds.Thefallintheinterestratewouldincreaseinvestmentspending
d.sellbonds.Thefallintheinterestratewoulddecreaseinvestmentspending.
174.Whichoftheeffectslistedbelowincreasesthequantityofgoodsandservicesdemandedwhenthepricelevelfallsanddecreasesthequantityofgoodsandservicesdemandedwhenthepricelevelrises?
a.thewealtheffect
b.theinterest-rateeffect
c.theexchange-rateeffect
d.Alloftheabovearecorrect.
175.Theexchange-rateeffectisbased,inpart,ontheideathat
a.adecreaseinthepricelevelreducestheinterestrate.
b.anincreaseinthepricelevelcausesinvestorstomovesomeoftheirfundsoverseas.
c.anincreaseinthepricelevelcausesdomesticgoodstobecomelessexpensiverelativetoforeigngoods.
d.adecreaseinthepricelevelreducesspendingonnetexports.
176.FortheU.S.economy,moneyholdingsarea
a.largepartofhouseholdwealth,andsotheinterest-rateeffectislarge.
b.largepartofhouseholdwealth,andsothewealtheffectislarge.
c.smallpartofhouseholdwealth,andsotheinterest-rateeffectissmall.
d.smallpartofhouseholdwealth,andsothewealtheffectissmall.
177.Whentheinterestrateisabovetheequilibriumlevel,
a.thequantityofmoneythatpeoplewanttoholdislessthanthequantityofmoneythattheFederalReservehassupplied.
b.peoplerespondbybuyinginterest-bearingbondsorbydepositingmoneyininterest-bearingbankaccounts.
c.bondissuersandbanksrespondbyloweringtheinterestratestheyoffer.
d.Alloftheabovearecorrect.
178.Whentheinterestrateisbelowtheequilibriumlevel,
a.thequantityofmoneythattheFederalReservehassuppliedexceedsthequantityofmoneythatpeoplewanttohold.
b.peoplerespondbysellinginterest-bearingbondsorbywithdrawingmoneyfrominterest-bearingbankaccounts.
c.bondissuersandbanksrespondbyloweringtheinterestratestheyoffer.
d.Alloftheabovearecorrect.
179.Charisseisoftheopinionthattheinterestratedependsontheeconomy’ssavingpropensitiesandinvestmentopportunities.MosteconomistswouldsaythatCharisse’sopinionis
a.Keynesianinnature,andthatherviewismorevalidforthelongrunthanfortheshortrun.
b.classicalinnature,andthatherviewismorevalidforthelongrunthanfortheshortrun.
c.Keynesianinnature,andthatherviewismorevalidfortheshortrunthanforthelongrun.
d.classicalinnature,andthatherviewismorevalidfortheshortrunthanforthelongrun.
180.Marcusisoftheopinionthatthetheoryofliquiditypreferenceexplainsthedeterminationoftheinterestrateverywell.MosteconomistswouldsaythatMarcus’sopinionis
a.Keynesianinnature,andthathisviewismorevalidforthelongrunthanfortheshortrun.
b.classicalinnature,andthathisviewismorevalidforthelongrunthanfortheshortrun.
c.Keynesianinnature,andthathisviewismorevalidfortheshortrunthanforthelongrun.
d.classicalinnature,andthathisviewismorevalidfortheshortrunthanforthelongrun.
Figure34-4.Onthefigure,MSrepresentsmoneysupplyandMDrepresentsmoneydemand.
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