ECO 4223 Exam 3 solution 2024
The quantity theory of money is a theory of how:
a. the money supply is determined
b. the real value of aggregate income is determined
c. interest rates are determined
d. the nominal value of aggregate income is determined - ANS the nominal value of
aggregate income is determined
The average number of times that a dollar is spent in buying the total amount of final
goods and services produced during a given time period is known as:
a. velocity
b. spending multiplier
c. gross national product
d. the money multiplier - ANS velocity
If the money supply is $500 and nominal income is $3,000 the velocity of money is:
a. 1/60
b. 60
c. 1/6
d. 6 - ANS 6
The equation of exchange states that the quantity of money multiplied by the number of
times this money is spent in a given year must equal:
a. velocity
b. real income
c. nominal income
d. real gross national product - ANS nominal income
Fisher's quantity theory of money suggests that the demand for money is purely a
function of ______, and _________ not effect on the demand for money.
a. government spending, interest rates have
b. income, interest rates have
c. interest rates, income has
d. expectations, income has - ANS income, interest rates have
Keynes hypothesized that the transactions component of money demand was primarily
determined by the level of:
a. income
b. velocity
c. stock market values
d. interest rates - ANS income
, Keynes argues that the transactions component of the demand for money was primarily
determined by the level of people's _______, which he believed were proportional to
______.
a. incomes, age
b. transactions, age
c. incomes; wealth
d. transactions, income - ANS transactions, income
Of the three motives for holding money suggested by Keynes, which did he believe to
be the most sensitive to interest rates?
a. transactions motive
b. precautionary motive
c. speculative motive
d. altruistic motive - ANS speculative
If people expect nominal interest rates to be higher in the future, the expected return to
bonds _______________, and the demand for money ________________.
a. rises; increases
b. rises, decreases
c. falls, increases
d. falls, decreases - ANS falls, increases
Keynes argued that when interest rates were low relative to some normal value, people
would expect bond prices to _______ so the quantity of money demanded would.
a. decreases, decreases
b. increase, increase
c. increase, decrease
d. decrease, increase - ANS decrease, increase
In the Baumol-Tobin analysis of transactions demand for money, either an increase in
_________ or a decrease in ___________ increases money demand.
a. interest rates, brokerage fees
b. interest rate, income
c. brokerage fees; income
d. income; interest rate - ANS income; interest rate
Keynes reasoned that consumer expenditure is most closely related to
a. disposable income
b. the levels of interest rates
c. the marginal tax rate
d. the price level - ANS disposable income
If the consumption function is C = 20 + 0.8YD, then an increase in disposable income
by $100 will result in an increase in consumer expenditure by:
a. 100
b. $80
The quantity theory of money is a theory of how:
a. the money supply is determined
b. the real value of aggregate income is determined
c. interest rates are determined
d. the nominal value of aggregate income is determined - ANS the nominal value of
aggregate income is determined
The average number of times that a dollar is spent in buying the total amount of final
goods and services produced during a given time period is known as:
a. velocity
b. spending multiplier
c. gross national product
d. the money multiplier - ANS velocity
If the money supply is $500 and nominal income is $3,000 the velocity of money is:
a. 1/60
b. 60
c. 1/6
d. 6 - ANS 6
The equation of exchange states that the quantity of money multiplied by the number of
times this money is spent in a given year must equal:
a. velocity
b. real income
c. nominal income
d. real gross national product - ANS nominal income
Fisher's quantity theory of money suggests that the demand for money is purely a
function of ______, and _________ not effect on the demand for money.
a. government spending, interest rates have
b. income, interest rates have
c. interest rates, income has
d. expectations, income has - ANS income, interest rates have
Keynes hypothesized that the transactions component of money demand was primarily
determined by the level of:
a. income
b. velocity
c. stock market values
d. interest rates - ANS income
, Keynes argues that the transactions component of the demand for money was primarily
determined by the level of people's _______, which he believed were proportional to
______.
a. incomes, age
b. transactions, age
c. incomes; wealth
d. transactions, income - ANS transactions, income
Of the three motives for holding money suggested by Keynes, which did he believe to
be the most sensitive to interest rates?
a. transactions motive
b. precautionary motive
c. speculative motive
d. altruistic motive - ANS speculative
If people expect nominal interest rates to be higher in the future, the expected return to
bonds _______________, and the demand for money ________________.
a. rises; increases
b. rises, decreases
c. falls, increases
d. falls, decreases - ANS falls, increases
Keynes argued that when interest rates were low relative to some normal value, people
would expect bond prices to _______ so the quantity of money demanded would.
a. decreases, decreases
b. increase, increase
c. increase, decrease
d. decrease, increase - ANS decrease, increase
In the Baumol-Tobin analysis of transactions demand for money, either an increase in
_________ or a decrease in ___________ increases money demand.
a. interest rates, brokerage fees
b. interest rate, income
c. brokerage fees; income
d. income; interest rate - ANS income; interest rate
Keynes reasoned that consumer expenditure is most closely related to
a. disposable income
b. the levels of interest rates
c. the marginal tax rate
d. the price level - ANS disposable income
If the consumption function is C = 20 + 0.8YD, then an increase in disposable income
by $100 will result in an increase in consumer expenditure by:
a. 100
b. $80
