A one percentage point change in the required reserve ratio would change the money supply by less than one percent, other things being equal.
a. True
b. False
Indicate whether the statement is true or false
Question 2If a bond pays a fixed return of 500 a year and the current interest rate has risen from 5 percent to 10 percent, then the bond price must have:
a. risen from 25 to 50.
b. fallen from 50 to 25.
c. risen from 5,000 to 10,000.
d. fallen from 10,000 to 5,000.
e. risen from 1,000 to 5,000.
Question 3An increase in demand for a product and a reduction in the costs of production would:
a. increase the equilibrium quantity and increase the equilibrium price.
b. increase the equilibrium quantity and decrease the equilibrium price.
c. increase the equilibrium quantity and cause an indeterminate change in the equilibrium price.
d. decrease the equilibrium quantity and cause an indeterminate change in the equilibrium price.
Question 4The Open Market Committee oversees the money supply through the Fed's sale and purchase of government securities.
a. True
b. False
Indicate whether the statement is true or false
Question 5Suppose a bond sells for 2,000 and pays 200 per year in interest. What will happen to the current interest rate if the price of the bond changes to 1,800?
a. It decreases by 10 percentage points.
b. It increases by 10 percentage points.
c. It remains unchanged.
d. It increases by 1 percentage point.
e. It decreases by 1 percentage point.
Question 6Which of the following is likely to result in a smaller equilibrium quantity exchanged?
a. An increase in both demand and supply.
b. A decrease in both demand and supply.
c. An increase in demand and a decrease in supply.
d. A decrease in demand and an increase in supply.
Question 7Open market operations directly change the rate of interest at which banks can borrow funds from the Fed.
a. True
b. False
Indicate whether the statement is true or false
Question 8A change in the interest rate does not affect the quantity of money supplied. This means that:
a. the money supply curve is negatively sloped.
b. the money supply curve is vertical.
c. the money supply curve is horizontal.
d. the money supply curve is a 45 degree line drawn from the origin.
e. the money supply curve is kinked.
Question 9Which of the following is likely to result in a larger equilibrium quantity exchanged?
a. An increase in both demand and supply.
b. A decrease in both demand and supply.
c. An increase in demand and a decrease in supply.
d. A decrease in demand and an increase in supply.
Question 10If the Fed paid a lower interest rate to banks on their reserves at the Fed, the money supply would tend to rise.
a. True
b. False
Indicate whether the statement is true or false
Question 11A leftward shift in the money demand function would result from:
a. a decrease in the money supply.
b. a decrease in the price level.
c. an increase in real income.
d. a decrease in the interest rate.
e. an increase in the interest rate
Question 12Which of the following is likely to result in a lower equilibrium price?
a. An increase in both demand and supply.
b. A decrease in both demand and supply.
c. An increase in demand and a decrease in supply.
d. A decrease in demand and an increase in supply.
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