The money supply would tend to fall if:

The money supply would tend to fall if:
 a. banks decide to keep more excess reserves and people convert more of their demand deposits to currency.
  b. banks decide to keep more excess reserves and people deposit currency in their demand deposit accounts.
  c. banks decide to keep fewer excess reserves and people deposit currency in their demand deposit accounts.
  d. banks decide to keep fewer excess reserves and people convert more of their demand deposits to currency.

Question 2

Which of the following schools of thought reject the simple fixed-price model in favor of a model in which the aggregate supply curve is relatively flat at low levels of real GDP and slopes upward as real GDP approaches its potential level?
 a. The new Keynesian
  b. The monetarist
  c. The traditional classical
  d. The new classical
  e. The Marxist

Question 3

A jeweler cut prices in his store by 20. As a result:
 a. Its total revenue would fall by 20 if the elasticity of demand was zero.
 b. Its total revenue would fall, but by less than 20 if the elasticity of demand is greater than zero but less than one.
  c. Its total revenue would rise if the elasticity of demand is greater than one.
 d. All of the above would be true.

Question 4

Which of the following combinations would have an indeterminate effect on the size of the money supply?
 a. an increase in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
  b. an increase in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves
  c. a decrease in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
  d. none of the above

Question 5

The flat region of the aggregate supply curve reflects the Keynesian belief that:
 a. both inflation and unemployment does not exist.
  b. high growth rate of money supply poses problems in the economy.
  c. unemployment is usually experienced amidst high real GDP.
  d. government intervention in the economy aggravates the problems of inflation and unemployment.
  e. inflation is not a problem when unemployment is high.

Question 6

A jeweler cut prices in his store by 20 and the dollar value of his sales fell by 20. This is indicative of:
 a. elastic demand.
 b. inelastic demand.
 c. perfectly elastic demand.
 d. perfectly inelastic demand.

Question 7

Which of the following changes would clearly decrease the supply of money in the banking system?
 a. an increase in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
  b. an increase in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves
  c. a decrease in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
  d. a decrease in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves

Question 8

Traditional Keynesians argued that when wages are rigid, changes in output result in:
 a. small changes in goods market prices and a flat aggregate supply curve.
  b. large changes in goods market prices and a flat aggregate supply curve.
  c. large changes in goods market prices and a steep aggregate supply curve.
  d. small changes in goods market prices and a steep aggregate demand curve.
  e. small changes in goods market prices and a horizontal aggregate demand curve.

Question 9

A price cut will increase the total revenue a firm receives if the demand for its product is:
 a. elastic.
 b. inelastic.
 c. unit elastic.
 d. unit inelastic.

Question 10

Which of the following changes would clearly increase the supply of money in the banking system?
 a. an increase in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
  b. an increase in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves
  c. a decrease in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
  d. a decrease in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves

Question 11

If the traditional Keynesian views turn out to be accurate, an increase in government spending would:
 a. increase the price level.
  b. decrease the level of investment.
  c. increase the equilibrium level of real GDP.
  d. decrease the level of consumption.
  e. decrease the money supply.