Money, Interest Rates And Output

1.How does a decrease in interest rates affect the monetary base, consumer credit availability, and the cost of consumer credit?

2.Which variable do central banks typically set directly, and which variable adjusts as a consequence?

money demand, interest ratesinterest rates, equilibrium money supplymoney demand, equilibrium money supplyinterest rates, money demandmoney supply, interest rates

3.What is it called when the central bank purchases financial assets in the open market to expand the monetary base?

Lender of last resort functionFinancial intermediation processOpen market operationsRegulation of financial institutions

4.M4 is considered a monetary aggregate and encompasses deposits held at both and __?

restricted, banks, building societiesbroad, banks, insurance firmsrestricted, banks, insurance firmsbroad, banks, building societiescomprehensive, banks, credit unions

5.Assuming all other factors remain constant, what happens to the quantity of real money holdings when interest rates increase?

6.Holding money aside to be prepared for unexpected opportunities is an example of which type of money demand?

Demand for money as an assetMoney held for everyday transactionsDemand related to currency tokensPrecautionary demand for moneySpeculative demand for money

7.What happens to the money multiplier when banks and private businesses choose to keep less cash on hand?

8.How do banks effectively generate new money?

By physically producing currency notesBy distributing debit cards to customersBy processing cheque paymentsBy loaning a portion of their deposited funds

9.What are the three primary functions of money?

Promissory note, protection against inflation, and value reservoirMeans of trade, inflation protection, and value reservoirMeans of trade, measurement unit, and promissory noteMeans of trade, measurement unit, and value reservoirMeans of trade, measurement unit, and value reservoir

10.What does each point on the LM curve signify in terms of market equilibrium?

Equilibrium in the money market at a fixed money supply levelEquilibrium in the money market across varying interest rates and output levelsEquilibrium in the goods market given a specific government expenditureEquilibrium in the goods market at a particular interest rate

11.Which curve represents the positive correlation between the equilibrium levels of aggregate output and the interest rate within the money market?

12.What does each point on the IS curve signify in terms of market equilibrium?

Equilibrium in the goods market at a specific interest rateBalance in the goods market based on a fixed government expenditureEquilibrium in the money market given a set money supplyBalance in the money market at a particular aggregate output level

13.Government expenditure is believed to decrease investment primarily by causing a rise in which of the following?

14.What term describes the concept that increased government expenditure leads to a decrease in private sector investment?

budgetary restraintinvestment declinecrowding-outThatcherism impact

15.What is likely to happen if the central bank maintains a steady interest rate while the economy is functioning on the steep segment of the aggregate supply curve?

16.What happens when the investment demand curve is perfectly vertical?

Neither monetary nor fiscal policies have any impactMonetary policy works but fiscal policy does notMonetary policy fails to work, while fiscal policy remains effectiveBoth monetary and fiscal policies produce desired effects

17.Which of the following actions represents an expansionary monetary policy?

Lowering the tax rate on bank earnings.Raising the mandatory reserve requirement for banks.Increasing the interest rate charged on loans from the central bank.The central bank purchasing government bonds through open market operations.

18.In which market is the interest rate primarily established?

19.In which market is the equilibrium aggregate output level established?

20.What does the concept of money demand imply regarding the relationship between interest rates and the amount of money people want to hold?

There is a direct correlation between interest rates and the quantity of money demanded.There is an inverse correlation between the price level and the quantity of money demanded.There is a negative correlation between aggregate output and the quantity of money demanded.There is an inverse relationship between interest rates and the quantity of money demanded.