Question: Which of the following cannot happen?
Answer Options:
A. The money supply curve shifts out but the total money demand curve remains constant.
B. The transactions demand for money curve shifts out but the total demand for money curve remains constant.
C. The money supply curve shifts out but the transaction demand for money curve remains constant.
D. The transaction demand for money curve shifts out but the asset demand for money curve remains constant.
Answer: B. The transactions demand for money curve shifts out but the total demand for money curve remains constant.
Question: When the price of a bond falls, this increases its
Answer Options:
A. Face value.
B. Dividend.
C. Effective interest rate.
D. Maturity.
Answer: C. Effective interest rate.
Question: The asset demand for the dollar
Answer Options:
A. Shifts back when interest rates increase.
B. Is vertical.
C. Flows from the dollar’s function as a store of value.
D. Flows from the dollar’s function as a standard of deferred payment.
Answer: C. Flows from the dollar’s function as a store of value.
Question: If U.S. interest rates are rising, which of the following would you expect to see occurring?
Answer Options:
A. Bond prices falling
B. The international value of the dollar falling
C. Bond prices rising
D. Foreign citizens purchasing fewer U.S. bonds.
Answer: A. Bond prices falling
Question: Which of the following events would be most likely to explain the shift we see in this graph?
(Graph shows the supply curve shifting to the right in the Market for the U.S. Dollar)
Answer Options:
A. U.S. interest rates rise in comparison to European interest rates.
B. The Fed sells government bonds.
C. U.S. goods become more popular in Europe.
D. European goods become more popular in the U.S.
Answer: D. European goods become more popular in the U.S.
Question: When the Fed buys government bonds from banks, which of the following would you expect to see happening?
Answer Options:
A. The supply curve shifts back in the bond market
B. The supply curve shifts back in the money market
C. The demand curve shifts out in the bond market
D. The demand curve shifts out in the money market
Answer: C. The demand curve shifts out in the bond market
Question: Which of the following pairs of graphs showing the money market and bond market go together?
Just mention what shifts would show it.
Answer Options:
(Answer options not provided.)
Answer: Money Market: Money supply curve shifts right.
Bond Market: Demand curve shifts right.
Question: The Federal Reserve most directly controls which of the following curves?
Answer Options:
A. The money supply curve
B. The asset demand for money curve
C. The total demand for money curve
D. The transactions demand for money curve
Answer: A. The money supply curve
Question: When the Fed buys bonds, which of the following would you expect to see happening?
Answer Options:
A. Interest rates increase and bond prices fall.
B. Bond prices rise and interest rates fall.
C. Bond prices rise and the value of the dollar rises against other currencies.
D. Interest rates increase and the value of the dollar rises against other currencies.
Answer: B. Bond prices rise and interest rates fall.