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Money & Interest-Rate Relationships Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. How does the demand curve for money shift?

Question 2 2. What happens when there is an increase in the demand for money when the supply of money is unchanged?

Question 3 3.

When looking at the demand curve for money, which of the following completes this sentence?

When interest rates are 20%, the demand for money is _____.

Question 4 4. Which of these is TRUE regarding money demand and price level?

Question 5 5. As the price level decreases, how is the value of money impacted?

Page 2

Question 6 6. Why does the Federal Reserve require commercial banks to maintain reserves with them?

Question 7 7. The Federal Reserve achieves its monetary goals by doing which of the following?

Question 8 8. Which of the following is FALSE regarding the Federal Reserve?

Question 9 9. Which of the following is an inaccurate description of The Federal Reserve?

Question 10 10. What are some of the objectives of the Fed?

Page 3

Question 11 11. What will happen if the Federal Reserve sells a significant amount of government securities in the open market?

Question 12 12. The purchases and sales of government securities in the open market by the Federal Reserve are referred to as which of the following?

Question 13 13. When the reserve ratio is 20%, the Fed buys $500,000 worth of government bonds in the open market. What is the maximum amount that the money supply could increase?

Question 14 14. What will the purchase of government bonds from the public in the open market by the central bank do?

Question 15 15. Assume that the Federal Reserve increases the monetary base by $1 billion when the reserve requirement is 10 percent. The money supply will increase by:

Page 4

Question 16 16. If the Federal Reserve suddenly decreases the growth rate of the money supply from 6% to 4% per year, what is likely to happen to aggregate demand and real Gross Domestic Product in the short-run?

Question 17 17. How does an increase in the money supply impact economic output within the US economy?

Question 18 18. If all other factors remain equal, what would happen to interest rates when the amount of money circulating in the economy is increased?

Question 19 19. The Fed's monetary policy has the greatest positive effect on real Gross Domestic Product under what set of conditions?

Question 20 20. How would economists graphically illustrate a decrease in the money supply?

Money & Interest-Rate Relationships Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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