. According to the Tobin money demand model, a decrease in a person's income causes:

a.his desired money holdings to rise

b.him to hold more short term bonds

c.him to hold more long term bonds

d.his desired money holdings to fall

. Consider these points from a PPF:

Wheat1007065590

Corn0303132100

The opportunity cost of thirty one units of corn is equal to:

a.forty one units of wheat

b.one hundredunits of wheat

c.zero units of wheat

d.thirty five units of wheat

. A new government study concludes that grapes contain special nutrients that will increase the human lifespan. This will cause the:

a.equilibrium quantity of grapes to rise and the equilibrium price of grapes to fall

b.the supply and demand curves for grapes to both shift to the left

c.supply curve of grapes to shift leftward and the equilibrium price of grapes torise

d.demand curve for grapes to shift rightward and the equilibrium price of grapes to rise

. The reserves that commercial banks hold at the Federal Reserve are:

a.liabilities of the Federal Government

b.assets of commercial banks and liabilities of the Federal Reserve

c.assets of the Federal Reserve and liabilities of commercial banks

d.assets of the Federal Government

. Suppose that the Federal Reserve conducts an open market purchase of government debt. This will:

a.lower the money supply and raise interest rates

b.lower the money supply and lower interest rates

c.raise the money supply and lower interest rates

d.raise the money supply and raise interest rates

. In the U.S. taxes on capital gains are typically far lower than taxes on labor income.For example, suppose that you own 100 shares of a

company.Over the course of a year (the stock must be held for this period of time in order to get the preferred rate) the value of this portfolio

rises from $1,000 to $1,500.The gain in value of $500 is taxed at about 15%.By contrast, a dollar of wage income is typically taxed at a much

higher rate.

Now suppose that the governmentraisesthe tax on capital gains.Based on the Tobin money demand model it follows that:

a.desired money holdings will rise

b.desired money holdings will remain constant

c.the amount of goods consumed each day will fall

d.desired money holdings will fall

. Consider the Tobin money demand model.An increase in the transactions costs associated with buying and selling bonds will:

a.will have no impact on desired money holdings

b.will cause desired bond holdings to rise

c.cause desired money holdings to fall

d.cause desired money holdings to rise

. The world's leading currencies such as the dollar and euro are:

a.partially backed by gold

b.liquid only if they are backed by a precious metal

c.fully backed by gold

d.not backed by any precious metal

. The interest rate that banks payeach otherto borrow reserves is called:

a.the federal funds rate

b.the discount rate

c.the real exchange rate

d.the prime rate

. According to the Tobin money demand model, a decrease in a person's income causes:

a.his desired money holdings to rise

b.him to hold more short term bonds

c.him to hold more long term bonds

d.his desired money holdings to fall

. You can unambiguously predict anincreasein equilibriumpriceif:

a.demand decreases and supply increases

b.demand and supply both decrease

c.demand increases and supply decreases

d.demand and supply both increase

. Consider the money multiplier process.In this discussion it is assumed that:

a.the public keeps all of its liquid assets in the form of demand deposits

b.there are no reserve requirements

c.banks keep excess reserves

d.the public keeps all of its liquid assets in the form of cash

. Suppose that the the Federal Reserve conducts an open market sale of government debt.This will cause:

a.bond prices to fall and interest rates to rise

b.bond prices to rise and interest rates to rise

c.bond prices to fall and interest rates to rise

d.bond prices to fall and interest rates to fall

. Consider the Tobin money demand model.It implies that a rise in income will cause the public to hold:

a.more gold in their portfolios

b.less liquid portfolios

c.more liquid portfolios

d.less gold in their portfolios

. If the Federal Reserve raises the discount rate:

a.the Federal Reserve will conduct open market purchases of government debt

b.the required reserve ratio will fall

c.banks will find it more costly to borrow reserves from the Fed so the money supply will fall

d.banks will find it cheaper to borrow reserves from the Fed so the money supply will rise

. The reserves that commercial banks hold at the Federal Reserve are:

a.liabilities of the Federal Government

b.assets of commercial banks and liabilities of the Federal Reserve

c.assets of the Federal Reserve and liabilities of commercial banks

d.assets of the Federal Government

. Suppose that the Federal Reserve conducts an open market purchase of government debt. This will:

a.lower the money supply and raise interest rates

b.lower the money supply and lower interest rates

c.raise the money supply and lower interest rates

d.raise the money supply and raise interest rates