Question

Question 11

The asset demand (D_a) for money

Group of answer choices

includes coins, paper currency and government bonds

is typically high if interest rates are relatively high

is the demand for money as a medium of exchange

is the demand for money in case of an emergency

is the demand of money as a store of wealth

Question 12

The asset demand for money

Group of answer choices

is unrelated to both the rate of interest and real income

varies inversely with nominal income

varies inversely with the rate of interest

varies inversely with real income

Question 13

If the quantity of money demanded exceeds the quantity supplied

Group of answer choices

the money demand curve will shift to the right

the interest rate will rise

the money supply curve will shift to the left

the interest rate will fall

Question 14

“Bond markets hate good news" because if as a result, inflation becomes a major concern (note: the list below is in the imprecise language of most of the media) (HINT: Bond Prices = 1/R)

Group of answer choices

the Fed might raise "interest rates" which will lower bond prices

the Fed might lower “interest rates" which will raise bond prices

none are correct; bond markets actually like good news, because robust economic growth results in an increase in the demand for bonds, driving up bond prices

the Fed might lower "interest rates" which will lower bond prices

the Fed might raise "interest rates" which will raise bond prices

Question 15

An increase in the money supply is likely to decrease

Group of answer choices

prices

money demand

interest rates

nominal income

Question 16

Commercial banks create money by

Group of answer choices

making loans

buying government securities

selling government securities

charging interest

getting bailed-out by the federal government

Answer 1

(11) The asset demand (Da) for money is the demand of money as a store of wealth.

Answer: Option (D)

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(12) The asset demand for money varies inversely with the rate of interest rate.

Answer: Option (C)

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(13) If the quantity of money demanded exceeds the quantity supplied, then there is excess of money demand which leads to increase the interest rate to the equilibrium interest rate.

Answer: Option (B)

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(14) If inflation is the major problem, then Fed would decrease the money supply. A decrease in money supply will increase the interest rate. An increase in interest rate will decrease the bond price.

Answer: Option (A)

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(15) An increase in money supply will shift the money supply curve to the right. As a result, the interest rate in money market decrease.

Answer: Option (C)

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(16) Commercial bank creates money by making loans through money multiplier process.

Answer: Option (A)