Effects of Money Supply on Interest Rates and Currency Values
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Chapter 15
Which one of the following statements is the MOST accurate?
D) A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.
If there is initially an
B) excess supply of money, the interest rate will fall, and if there is initially an excess demand, it will rise.
Which one of the following statements is the MOST accurate?
D) An increase in the money supply lowers the interest rate while a fall in the money supply raises the interest rate, given the price level and output.
An increase in
E) real output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply.
The aggregate real money demand schedule L(R,Y)
D) slopes downward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy.
For a given level of
E) real GNP, changes in interest rates cause movements along the L(R,Y) schedule.
The money supply schedule is
E) vertical because Ms is set by the central bank while P is taken as given.
If individuals are holding more money than they desire
B) they will attempt to reduce their liquidity by using money to purchase interest-bearing assets.
If there is an excess supply of money
A) the interest rate falls.
A reduction in a country's money supply causes.
B) its currency to appreciate in the foreign exchange market.
An increase in a country's money supply causes
B) its currency to depreciate in the foreign exchange market while a reduction in the money supply causes its currency to appreciate.
Which one of the following statements is the MOST accurate?
E) Given PUS and YUS, when the money supply rises, the dollar interest rate declines and the dollar depreciates against the euro.
Given PUS and YUS
D) An increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium.
A permanent increase in a country's money supply.
C) causes a proportional increase in its price level.
A change in the level of the supply of money
E) has no effect on the long-run values of the interest rate and real output.
Changes in the money supply growth rate
D) need not be neutral in the long run.
A sustained change in the monetary growth rate will
E) eventually affect equilibrium real money balances by raising the money interest rate.
Using year-by-year data from 1987-2007 shows that
A) there is a strong positive relation between average Latin American money-supply growth and inflation.