Question : 81) Consider monetary equilibrium and the monetary transmission mechanism. An : 1384460

 

81) Consider monetary equilibrium and the monetary transmission mechanism. An exogenous rise in the price level, with no change in the supply of money, will

A) increase the demand for money and increase desired aggregate expenditure.

B) increase the demand for money and decrease desired aggregate expenditure.

C) decrease the demand for money and increase aggregate demand.

D) decrease the demand for money and decrease aggregate demand.

E) decrease aggregate demand but not affect the demand for money.

82) Consider monetary equilibrium and the monetary transmission mechanism. An exogenous decrease in the price level, with no change in the supply of money, will

A) increase the demand for money and increase aggregate expenditure.

B) increase the demand for money and decrease aggregate expenditure.

C) decrease the demand for money and increase real GDP along the aggregate demand curve.

D) decrease the demand for money and decrease real GDP along the aggregate demand curve.

E) decrease the demand for money and leave aggregate demand unchanged.

83) Consider the monetary transmission mechanism. A disturbance to monetary equilibrium which changes the interest rate will affect aggregate demand through

A) a shift of the investment demand function and a movement along the aggregate expenditure curve.

B) a movement along the investment demand function and a shift of the aggregate expenditure curve.

C) a shift of both the investment demand function and the aggregate expenditure curve.

D) movements along the investment demand function and the aggregate expenditure curve.

E) a movement along the aggregate expenditure curve.

84) A decrease in the money supply is most likely to

A) raise interest rates, investment, and aggregate expenditures.

B) raise interest rates, lower investment, and lower aggregate expenditures.

C) lower interest rates, raise investment, and raise aggregate expenditures.

D) lower interest rates, investment, and aggregate expenditures.

E) raise interest rates and investment, and lower aggregate expenditures.

85) If the Bank of Canada were to increase the money supply, other things being equal, we would expect the aggregate expenditure curve to shift

A) upward and the aggregate demand curve to shift to the right.

B) upward and the aggregate demand curve to shift to the left.

C) downward and the aggregate demand curve to shift to the right.

D) downward and the aggregate demand curve to shift to the left.

E) downward but the aggregate demand curve will remain unchanged.

86) If the Bank of Canada were to reduce the money supply, other things being equal, we would expect the aggregate expenditure curve to shift

A) upward and the aggregate demand curve to shift to the right.

B) upward and the aggregate demand curve to shift to the left.

C) downward and the aggregate demand curve to shift to the right.

D) downward and the aggregate demand curve to shift to the left.

E) downward but the aggregate demand curve will remain unchanged.

87) If real GDP is greater than potential GDP, the output gap could be eliminated by

1) an increase in government purchases;

2) an upward shift in the AE curve;

3) a reduction in the money supply.

A) 1 only

B) 2 only

C) 3 only

D) 1 or 2

E) 1 or 2 or 3

88) Which of the following explanations for the negative slope of the AD curve is correct? A fall in the price level, with an unchanged money supply, causes the transactions demand for money to

A) decrease, shifting the MD curve downward, lowering the interest rate and increasing desired investment, causing the AE curve to shift upward.

B) decrease, shifting the MD curve upward, raising the interest rate and increasing desired investment, causing the AE curve to shift upward.

C) increase, shifting the MD curve upward, raising the interest rate and decreasing desired investment, causing the AE curve to shift upward.

D) increase, shifting the MD curve downward, lowering the interest rate and decreasing desired investment, causing the AE curve to shift downward.

E) increase, shifting the MD curve upward, raising the interest rate and decreasing desired investment, causing the AE curve to shift downward.

89) The monetary transmission mechanism in an OPEN economy is more complicated than it is in a closed economy because the effects of domestic monetary contraction or expansion are

A) strengthened because domestic interest rates must be equal to those in the rest of the world.

B) weakened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world.

C) strengthened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world.

D) strengthened because changes in the domestic money supply cause changes in the exchange rate, which then reinforce the changes in desired investment.

E) weakened because changes in the domestic money supply cause changes in the exchange rate which then offset the changes in desired investment.

90) Consider the monetary transmission mechanism in an open economy. Other things being equal, an increase in the domestic money supply leads to

A) an appreciation of the domestic currency, thereby inhibiting net exports and raising aggregate demand.

B) a depreciation of the domestic currency, thereby inhibiting net exports and raising aggregate demand.

C) a depreciation of the domestic currency, thereby stimulating net exports and raising aggregate demand.

D) an appreciation of the domestic currency, thereby stimulating net exports and raising aggregate demand.

E) an appreciation of the domestic currency, thereby stimulating net exports and reducing aggregate demand.

 

 

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