Choose the correct answer for each of the following questions:
1. In the short run an expansionary monetary policy affects
A. The interest rate.
B. Real output.
C. The price level.
D. All of the above.
2. In the long run an expansionary monetary policy affects the
A. Output level.
B. Price level.
C. Income level.
D. GDP level.
3. In the long run money is neutral since
A. Output changes.
B. Income changes.
C. GDP changes.
D. Output doesn’t change.
4. When the money supply curve shifts to the right
A. Interest rate rises.
B. Interest rate increases.
C. Interest rate trends up.
D. Interest rate falls.
5. When the money supply curve shift to the left this is
A. An expansionary monetary policy.
B. A loose monetary policy.
C. A liberal monetary policy.
D. A restrictive monetary policy.
6. The money multiplier is defined as
A. 1/ required reserve ratio.
B. 1/total reserve ratio.
C. 1/excess reserve ratio.
D. 1/required reserves.
7. If the required reserve ratio is 30% then the money multiplier is
A. (2.)
B. (1.)
C. (3.)
D. (4.)
8. Given a required reserve ratio of 0.20 and an increase in total reserves of $200, total deposits will
A. Decrease by $1000.
B. Increase by $2000.
C. Decrease by $2000.
D. Increase by $1000.
9. In the money market bond prices and interest rates are
A. Directly related.
B. Positively related.
C. Inversely related.
D. Not inversely related.
10. In the balance of payment account a trade deficit will show in the
A. Capital account.
B. Current account.
C. Financial account.
D. Money account.