hich one of the following statements is false? DA The price-level effect of the growth of money supply leads to lower interest rates. OB. Liquidity preference model suggests that higher GDP growth leads to higher nominal interest rates. OC. The liquidity effect of the growth of money supply leads to lower interest rates. OD. Liquidity preference model suggests that when the bond markets is in excess supply, the money market is in excess demand.

hich one of the following statements is false? DA The price-level effect of the growth of money supply leads to lower interest rates. OB. Liquidity preference model suggests that higher GDP growth leads to higher nominal interest rates. OC. The liquidity effect of the growth of money supply leads to lower interest rates. OD. Liquidity preference model suggests that when the bond markets is in excess supply, the money market is in excess demand.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 4TY

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Which one of the following statements is false? O A. Liquidity preference model suggests that when the bond markets is in excess supply, the money market is in excess demand. O B. The liquidity effect of the growth of money supply leads to lower interest rates. OC. The price-level effect of the growth of money supply leads to lower interest rates. O D. Liquidity preference model suggests that higher GDP growth leads to higher nominal interest rates.
Which one of the following statements is false? O A Liquidity preference model suggests that higher GDP growth leads to higher nominal interest rates. O B. The price-level effect of the growth of money supply leads to lower interest rates. OC. The liquidity effect of the growth of money supply leads to lower interest rates OD. Liquidity preference model suggests that when the bond markets is in excess supply, the money market is in excess demand
Monetary policy becomes more effective as Select one: O a. the income tax increases O b. the interest sensitivity of investment increases O c. the marginal propensity to save increases O d. the interest sensitivity of money demand increases
What will happen to the equilibrium interest rate if an expansionary monetary policy is implemented? O a. It will increase O b. It will decrease c. It will remain at point A O d. It will be the same
Which set of actions could the central bank use to increase the money supply? Select one: O a. an open market purchase and a tax cut O b. a discount rate cut and an open market sale O c.a reduction in the required reserve ratio and an open market purchase O d. a reduction in the required reserve ratio and an open market sale
Consider a central bank that chooses to implement its monetary policy by expanding the money supply by a fixed percentage amount in every year. One important disadvantage with this approach to monetary policy is that it may.. Oa. Create a recessionary output gap. O b. Be destabilising if the demand for money is unstable. O c. Be inconsistent with the Bank of Canada Act. O d. Lead to sustained inflation. O e. Lead to stable growth of national income.
According to the monetary transmission process, what will be the effect of a decrease in the money supply? O a. A decrease in the interest rate, an increase in investment spending, and an increase in GDP. O b. An increase in the interest rate, an increase in investment spending, and an increase in GDP. O c. A decrease in the interest rate, a decrease in investment spending, and a decrease in GDP. O d. An increase in the interest rate, a decrease in investment spending, and a decrease in GDP. O e. An increase in the interest rate, an increase in investment spending, and a decrease in GDP.
According to the liquidity preference theory, if the money supply increases, then, ceteris paribus, bond prices... O a. Stay the same. O b. Rise as the interest rate rises. Rise as the interest rate falls. O c. O d. Fall as the interest rate rises. O e. Fall as the interest rate falls.
An increase in the money demand, with money supply held constant, means that we will observe O a. A higher level of GDP O b. A rise in the price of bonds O c. A rise in interest rates O d. All of the answers are correct
Suppose you read in the Wall Street Journal that the Fed was "increasing its target interest rate." It follows that the rate in question is the and one way in which Fed could achieve its new, higher target rate is by Select one: O a. Federal Funds Rate; conducting an open market sale O b. Federal Funds Rate; conducting an open market purchase O c. Prime Rate; conducting an open market sale d. Prime Rate; conducting an open market purchase
If money supply increases 10%, and we assume a constant money velocity: O We should have a price increase of 10% in the short-run, and an output increase of 10% in the long-run. O We don't have enough data to answer. O Price and output increase by 10% in the long-run. O Price and output increase by 5% in the long-run. O We should have an output increase of 10% in the short-run, and a price increase of 10% in the long-run.
All of the following shift the demand for money curve EXCEPT O a. an improvement in financial technology. O b. a rise in the nominal interest rate. a decrease in real GDP. O d. an increase in the price level. O e. an increase in real GDP.