the economics of money, banking, and financial markets

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Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 21 Quantity Theory, Inflation, and the Demand for Money

21.1 Quantity Theory of Money

1. 
   

   The quantity theory of money is a theory of how ____.
   A) the money supply is determined
   B) interest rates are determined
   C) the nominal value of aggregate income is determined
   D) the real value of aggregate income is determined
   Answer: C
   Diff: 1 Type: MC Page Ref: 525
   Skill: Recall
   Objective List: 21.1 Describe how the demand for money is determined

   
   


2. 
   

   Which events created the perfect storm for the Canadian economy in 2007-2008?
   A) An oil price shock and the global financial crisis.
   B) Housing prices had doubled in most major metropolitan areas.
   C) Prime mortgage interest rates were rising.
   D) All of the above.
   Answer: A
   Diff: 1 Type: MC Page Ref: 523
   Skill: Recall
   Objective List: 21.1 Describe how the demand for money is determined

   
   


3. 
   

   Inflation increased from ____ in 2007 to ____ by the middle of 2008.
   A) 1 percent; over 3 percent
   B) 1.5 percent; nearly 3 percent
   C) 2.6 percent; over 5 percent
   D) 3 percent; almost 7 percent
   Answer: C
   Diff: 1 Type: MC Page Ref: 523
   Skill: Recall
   Objective List: 21.1 Describe how the demand for money is determined

   
   


4. 
   

   The effect of money on the economy is called ____.
   A) monetary supply
   B) monetary policy
   C) fiscal policy
   D) monetary demand
   Answer: B
   Diff: 1 Type: MC Page Ref: 525
   Skill: Recall
   Objective List: 2.1 Summarize the basic function performed by financial markets