Question : 71) Refer to Figure 28-3. The increase in the money : 1384459

71) Refer to Figure 28-3. The increase in the money supply from MS0 to MS1 shifts the monetary equilibrium from E0 to E1. The result is

A) a decrease in the interest rate and an increase in desired investment.

B) an increase in the interest rate and a decrease in desired investment.

C) sustained monetary disequilibrium.

D) a shift of the investment demand curve to the right.

E) a shift of the investment demand curve to the left.

72) Refer to Figure 28-3. This figure illustrates

A) only the first step of the monetary transmission mechanism.

B) the entire monetary transmission mechanism.

C) the first two steps of the monetary transmission mechanism.

D) the effect of a change in the money supply on money demand.

E) the ultimate effect of a change in the money supply on real GDP.

73) Refer to Figure 28-3. The increase in desired investment expenditure, as shown by the movement from point A to point B, occurs because of

A) a fiscal policy designed to encourage investment.

B) an increase in the money supply.

C) a change in sales, which increases inventory investment.

D) an improvement in business confidence.

E) a tax-rate induced change in desired investment.

74) Refer to Figure 28-3. Part (i) of the figure shows the money market and the effect of an increase in the supply of money. The corresponding sequence of events in the bond market is as follows: The ________ of money at leads firms and households to ________ bonds, which leads to a(n) ________ in the price of bonds and a decrease in the interest rate.

A) excess demand; buy; increase

B) excess demand; sell; decrease

C) excess supply; buy; decrease

D) excess supply; sell; decrease

E) excess supply; buy; increase

75) The monetary transmission mechanism can be set in motion when a rise in the price level causes

A) an increased demand for money balances, leading people to sell bonds, which in turn raises the interest rate.

B) an increased demand for money balances, leading people to sell bonds, which in turn decreases the interest rate.

C) an increased demand for money balances, leading people to buy bonds, which in turn decreases the interest rate.

D) a decreased demand for money balances, leading people to buy bonds, which in turn decreases the interest rate.

E) a decreased demand for money balances, leading people to sell bonds, which in turn raises the interest rate.

76) The monetary transmission mechanism describes the process by which changes in

A) personal consumption affect real GDP.

B) business investment influence real GDP.

C) monetary equilibrium influence real GDP through changes in desired investment.

D) monetary equilibrium influence the interest rate.

E) interest rate affect the demand for money.

77) Which one of the following statements best describes the monetary transmission mechanism?

A) An increase in personal consumption leads to an upward shift in the AE curve and thereby increases real GDP.

B) An increase in government spending causes the AE curve to shift upwards, leading to a higher GDP.

C) A decrease in imports causes the AE curve to shift upwards, leading to a higher interest rate.

D) An increase in the money supply leads to a lower interest rate, higher investment, an upward shift in the AE curve and a higher GDP.

E) A decrease in the money supply leads to a lower interest rate, higher investment, an upward shift in the AE curve and a higher GDP.

78) Consider monetary equilibrium and the monetary transmission mechanism. An exogenous fall in the price level will lead to

A) an excess demand for money resulting in a rise in the rate of interest, which shifts the AE function downward and decreases the equilibrium level of income.

B) an excess supply of money resulting in a fall in the rate of interest, which shifts the AE function upward and increases the equilibrium level of income.

C) people being able to buy more with their increased wealth, which will shift the AE function downward and decrease the equilibrium level of income.

D) a movement to the right along the AE function.

E) a movement to the left along the AE function.

79) An increase in the money supply sets the monetary transmission mechanism in motion which results in

A) a rise in the rate of interest, a rise in the level of desired investment, a downward shift in the AE curve, and a leftward shift in the AD curve.

B) a fall in the rate of interest, a fall in the level of desired investment, a downward shift in the AE curve, and a leftward shift in the AD curve.

C) a fall in the rate of interest, a rise in the level of desired investment, an upward shift in the AE curve, and a rightward shift in the AD curve.

D) a rise in the rate of interest, a fall in the level of desired investment, an upward shift in the AE curve, and a rightward shift in the AD curve.

E) a rise in the rate of interest, a fall in the level of desired investment, a downward shift in the AE curve, and a leftward shift in the AD curve.

80) A decrease in the money supply sets the monetary transmission mechanism in motion which results in

A) a rise in the rate of interest, a rise in the level of desired investment, a downward shift in the AE curve, and a leftward shift in the AD curve.

B) a fall in the rate of interest, a fall in the level of desired investment, a downward shift in the AE curve, and a leftward shift in the AD curve.

C) a fall in the rate of interest, a rise in the level of desired investment, an upward shift in the AE curve, and a rightward shift in the AD curve.

D) a rise in the rate of interest, a fall in the level of desired investment, an upward shift in the AE curve, and a rightward shift in the AD curve.

E) a rise in the rate of interest, a fall in the level of desired investment, a downward shift in the AE curve, and a leftward shift in the AD curve.