Tackle the Test: Multiple-Choice Questions

1. Question

   A change in which of the following will shift the money demand curve?

   
   

   
   

   1. the aggregate price level

      
      
   
   

   2. real GDP

      
      
   
   

   3. the interest rate

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   A change in which of the following will shift the money demand curve?

2. Question

   Which of the following will decrease the demand for money?

   A.

   an increase in the interest rate

   B.

   inflation

   C.

   an increase in real GDP

   D.

   an increase in the availability of ATMs

   E.

   the adoption of Regulation Q

   Which of the following will decrease the demand for money?

3. Question

   What will happen to the money supply and the equilibrium interest rate if the Federal Reserve sells Treasury securities?
   Money supplyEquilibrium interest rate

   A.

   increaseincrease

   B.

   decreaseincrease

   C.

   increasedecrease

   D.

   decreasedecrease

   E.

   decreaseno change

   What will happen to the money supply and the equilibrium interest rate if the Federal Reserve sells Treasury securities?

4. Question

   Which of the following is true regarding short-term and long-term interest rates?

   A.

   Short-term interest rates are always above long-term interest rates.

   B.

   Short-term interest rates are always below long-term interest rates.

   C.

   Short-term interest rates are always equal to long-term interest rates.

   D.

   Short-term interest rates are more important for determining the demand for money.

   E.

   Long-term interest rates are more important for determining the demand for money.

   Which of the following is true regarding shor

5. Question

   The quantity of money demanded rises (that is, there is a movement along the money demand curve) when

   A.

   the aggregate price level increases.

   B.

   the aggregate price level falls.

   C.

   real GDP increases.

   D.

   new technology makes banking easier.

   E.

   short-term interest rates fall.

   The quantity of money demanded rises (that is, there is a movement along the money demand curve) when