* not completed

. The precautionary demand for money is:

An idle balance correct incorrect

An active balance correct incorrect

Directly related to interest rates correct incorrect

Inversely related to income correct incorrect

* not completed

. The liquidity trap occurs when the demand for money:

Is perfectly interest elastic correct incorrect

Is perfectly interest inelastic correct incorrect

Means that an increase in money supply leads to a fall in the interest rate correct incorrect

Means that an increase in the money supply leads to an increase in the interest rate correct incorrect

* not completed

. A fall in interest rates is likely to:

Increase aggregate demand correct incorrect

Increase savings correct incorrect

Decrease consumption correct incorrect

Decrease exports correct incorrect

* not completed

. According to the Fisher equation of exchange, an increase in the money supply is most likely to lead to inflation if:

The velocity of circulation decreases correct incorrect

The number of transactions decreases correct incorrect

There is deflation correct incorrect

The velocity of circulation and the number of transactions is constant correct incorrect

* not completed

. A reduction in the money supply is likely to:

Reduce the interest rate correct incorrect

Increase the interest rate correct incorrect

Increase inflation correct incorrect

Decrease deflation correct incorrect

* not completed

. To reduce the supply of money the government could:

Reduce interest rates correct incorrect

Buy back government bonds correct incorrect

Sell government bonds correct incorrect

Encourage banks to lend correct incorrect

* not completed

. The speculative demand for money occurs when:

Individuals hold money just in case an emergency happens correct incorrect

Individuals hold money to buy things correct incorrect

Individuals hold money, rather than other assets, because they are worried about the price of the other assets falling correct incorrect

Individuals hold money to shop correct incorrect

* not completed

. An outward shift in the demand for money, other things being equal, should lead to:

A lower interest rate but the same quantity of money correct incorrect

A higher interest rate but the same quantity of money correct incorrect

A higher quantity of money but lower interest rates correct incorrect

A higher quantity of money but the same interest rate correct incorrect

* not completed

. The Base Rate in the UK is determined by:

The government correct incorrect

The electorate correct incorrect

The Monetary Policy Committee correct incorrect

The Federal Reserve Board correct incorrect

* not completed

. Open Market Operations occur when the government:

Reduces spending correct incorrect

Buys and sells bonds and securities correct incorrect

Increases taxation correct incorrect

Increases the exchange rate correct incorrect