Question : 11) Refer to Figure 11.4. At an interest rate of : 1381166

11) Refer to Figure 11.4. At an interest rate of 3%, firms and households

A) are satisfied with the amount of money they are holding.

B) will attempt to increase their holdings of money by selling bonds.

C) will attempt to increase both their holdings of money and their holdings of bonds.

D) will attempt to reduce their holdings of money by buying bonds.

12) Refer to Figure 11.4. At an interest rate of 5%, firms and households

A) are satisfied with the amount of money they are holding.

B) will attempt to reduce their holdings of money by buying bonds.

C) will attempt to increase their holdings of money by selling bonds.

D) will attempt to increase both their holdings of money and their holdings of bonds.

13) What will happen to the equilibrium interest rate when both money supply and nominal aggregate output decrease?

A) The equilibrium interest rate increases.

B) The equilibrium interest rate decreases.

C) The equilibrium interest rate remains constant.

D) The impact on the equilibrium interest rate is ambiguous.

14) If the quantity of money demanded is greater than the quantity of money supplied, then the interest rate will

A) change in an uncertain direction.

B) rise.

C) remain constant.

D) fall.

15) A shortage of money in the money market causes

A) a decrease in the equilibrium interest rate.

B) an increase in the quantity demanded of money.

C) an increase in the equilibrium interest rate.

D) a decrease in the money supply.

16) A surplus of money in the money market causes

A) a decrease in the equilibrium interest rate.

B) a decrease in the money supply.

C) an increase in the demand for money.

D) a decrease in the quantity demanded of money.

Refer to the information provided in Figure 11.5 below to answer the questions that follow.

Figure 11.5

17) Refer to Figure 11.5.  Assume the interest rate equals 4% and the money supply decreases from to .  If the interest rate remains at 4%

A) money demand will increase.

B) money demand will decrease.

C) there will be an excess demand for money of $200 million.

D) there will be an excess supply of money of $200 million.

18) Refer to Figure 11.5. If the money supply decreases from to ,

A) money demand must increase for the money market to return to equilibrium.

B) the interest rate will fall to 4%.

C) the interest rate will increase to 6%.

D) the money market will return to equilibrium only if the money supply is decreased to its original level.

19) Refer to Figure 11.5. The money supply curve will shift from to if

A) the Fed increases the reserve requirement.

B) the Fed increases the discount rate.

C) the equilibrium level of output increases.

D) the Fed buys U.S. government securities in the open market.

20) Refer to Figure 11.5. The money supply curve will shift from to if

A) the Fed increases the reserve requirement.

B) the Fed decreases the discount rate.

C) the equilibrium level of output increases.

D) the Fed buys U.S. government securities in the open market.