1 . The velocity of money is: the rate at which new dollars can be printed.
the number of times per year a dollar is used to pay wages.
the same as the inflation rate.
the number of times per year a dollar is used to buy goods and services produced in
the US.
2 . Velocity is calculated as: Real GDP/M
M/Real GDP
M/Nominal GDP
Nominal GDP/M
3 . Historically, velocity: declines at a constant rate.
increases and decreases.
grows at a constant rate.
is constant.
4 . According to Keynes, which is not a motive behind the demand for money? Budget Deficit/Surplus Motive.
Speculative Motive.
Transaction Motive.
Precautionary Motive.
5 . The inventory approach to the transaction demand suggests that the transactions component of the demand for money is: negatively related to real income.
negatively related to nominal income.
negatively related to real wealth.
negatively related to interest rates.
6 . Which of the following does not influence the Friedman demand for money? Permanent income.
Budget deficits/surpluses.
The return on stocks relative to the return on money.
The return on bonds relative to the return on money.
7 . A difference between Keynesian and Friedman money demand relationships is: Keynesian money demand depends on interest rates but interest rates have little effect
with Friedman money demand. Friedman money demand depends on permanent income but income has little effect
with Keynesian money demand. Keynesian money demand depends on income but permanent income has little effect
with Friedman money demand. Friedman money demand depends on interest rates but interest rates have little effect
with Keynesian money demand.
8 . The more sensitive money demand is to interest rates, the more likely velocity will be constant.
more velocity will fluctuate.
more likely velocity will fall.
more likely velocity will rise.
9 . Velocity will be unpredictable if money demand is unstable.
money demand is independent of short-term interest rates.
money demand is independent of long-term interest rates.
money demand changes with permanent income.
10 Historically, M2 velocity has no relationship with the M2 opportunity costs. . varies with exchange rates.
is more stable than M1 velocity.
is constant.
11 According to the quantity theory of money, what happens if the money supply doubles? Aggregate output doubles. . The price level doubles.
Velocity doubles.
Velocity is halved.
12 Keynes's speculative motive for holding money is based on money's function as a: store of value. . unit of account.
medium of exchange.
source of income.
13 The Baumol-Tobin model of model demand Demonstrated that the transactions component of money demand is not related to . interest rates. Demonstrated that the transactions component of money demand is negatively related
to interest rates. Demonstrated that the transactions component of money demand is negatively related
to income. Demonstrated that the transactions component of money demand is positively related
to interest rates.
14 According to the empirical evidence on interest rates and money demand, The demand for money is sensitive to interest rates, but a liquidity trap does not exist. . The demand for money is extremely sensitive to interest rates.
A liquidity trap has been a problem in the United States, as changes in the money
supply do not affect interest rates. The demand for money is not affected by interest rates, so the quantity theory is
correct.
15 In the recent past, the money demand function in the U.S. Has been very unstable, resulting in the use of rigid money supply targets in monetary . policy. Has been quite stable, making a monetary target the operating target of choice.
Has been quite stable, ensuring that the velocity of money remains stable.
Has been unstable, limiting the usefulness of monetary targets to the Fed.