Question :
21) Refer to Figure 11.5. If the money supply increases : 1381167
21) Refer to Figure 11.5. If the money supply increases from to ,
A) money demand must decrease for the money market to return to equilibrium.
B) the interest rate will decrease to 4%.
C) the interest rate will increase to 8%.
D) the money market will return to equilibrium only if the money supply is increased to its original level.
22) Refer to Figure 11.5. The money supply curve will shift from to , if
A) the Fed increases the discount rate.
B) the price level increases.
C) the equilibrium level of output decreases.
D) the Fed buys U.S. government securities in the open market.
23) If there is a surplus of money in the money market, the Fed can eliminate it by
A) increasing money demand.
B) decreasing money demand.
C) increasing money supply.
D) decreasing money supply.
24) A shortage of money in the money market can be eliminated through
A) an increase in nominal aggregate output.
B) an increase in the price level.
C) a decrease in interest rates.
D) an increase in money supply.
25) When the Fed sells government securities, ceteris paribus, the money supply shifts to the ________ and the equilibrium interest rate ________.
A) left; rises
B) right; rises
C) right; falls
D) left; falls
26) Decreasing the required reserve ratio shifts the money supply curve to the ________ and ________ the equilibrium interest rate.
A) left; increases
B) right; increases
C) left; decreases
D) right; decreases
27) An increase in the level of nominal aggregate output and the purchase of government securities by the Fed will have what effect on the equilibrium interest rate?
A) no effect on the interest rate
B) a decrease in the interest rate
C) an increase in the interest rate
D) an indeterminate effect on the interest rate
28) Which of the following pairs of events will definitely lead to an increase in the equilibrium interest rate?
A) the sale of government securities by the Federal Reserve and an increase in nominal aggregate output
B) a decrease in the discount rate and an increase in the level of nominal aggregate output
C) the purchase of government securities by the Federal Reserve and a decrease in nominal aggregate output
D) an increase in the required reserve ratio and a decrease in the level of nominal aggregate output
29) Which of the following pairs of events will definitely lead to a decrease in the equilibrium interest rate?
A) the purchase of government securities by the Federal Reserve and a increase in the level of nominal aggregate output
B) an increase in the discount rate and an increase in the price level
C) a decrease in the required reserve ratio and a decrease in the level of nominal aggregate output
D) the sale of government securities by the Federal Reserve and a decrease in the price level
30) An increase in the discount rate and an increase in the level of nominal aggregate output will have what effect on the equilibrium interest rate?
A) an increase in the interest rate
B) a decrease in the interest rate
C) no effect on the interest rate
D) an indeterminate effect on the interest rate
