SOLVED

11) In the “cost of capital channel” of monetary policy, a lower interest rate __________ spending. A) raises consumption B) raises investment C) lowers consumption D) lowers investment 12) As part of the “wealth channel of monetary policy,” a higher money supply __________ interest rates and thus __________ bond prices. A) raises; raises B) raises; lowers C) lowers; raises D) lowers; lowers 13) As part of the “wealth channel of monetary policy,” a higher money supply __________ bond prices and thus __________ spending. A) raises; raises consumption B) raises; raises investment C) lowers; lowers consumption D) lowers; lowers investment 14) As part of the “wealth channel of monetary policy,” a lower money supply __________ interest rates and thus __________ bond prices. A) raises; raises B) raises; lowers C) lowers; raises D) lowers; lowers 15) As part of the “wealth channel of monetary policy,” a lower money supply __________ bond prices and thus __________ spending. A) raises; raises consumption B) raises; raises investment C) lowers; lowers consumption D) lowers; lowers investment 16) As part of the “exchange rate channel of monetary policy,” a higher money supply causes a __________ interest rate and thus __________ of the domestic currency. A) higher; appreciation B) higher; depreciation C) lower; appreciation D) lower; depreciation 17) As part of the “exchange rate effect of monetary policy,” a lower money supply causes a __________ interest rate and thus __________ of the domestic currency. A) higher; appreciation B) higher; depreciation C) lower; appreciation D) lower; depreciation 18) As part of the “exchange rate effect of monetary policy,” a higher money supply causes __________ of the domestic currency and thus __________ net exports. A) appreciation; rising B) appreciation; falling C) depreciation; rising D) depreciation; falling 19) As part of the “exchange rate effect of monetary policy,” a lower money supply causes __________ of the domestic currency and thus __________ net exports. A) appreciation; rising B) appreciation; falling C) depreciation; rising D) depreciation; falling 20) If the interest rate fell below the equilibrium rate, people would attempt to __________ bonds. Bond prices would __________ and the interest rate would __________. A) sell; rise; fall B) buy; rise; fall C) sell; fall; rise D) buy; fall; rise 21) If the interest rate rose above the equilibrium rate, people would attempt to __________ bonds. Bond prices would __________ and the interest rate would __________. A) sell; rise; fall B) buy; rise; fall C) sell; fall; rise D) buy; rise; rise 22) If an individual earns $1,500 a month and spends it evenly throughout the month, transaction balances will average A) $50 per month. B) $750 per month. C) $1500 per month. D) $3000 per month.