Money Market Review

Question 1

If Money supply is greater than money demand then we have a

Answer 1

Surplus

Question 2

If we have a surplus of money (money supply > money demand) prices will adjust

Answer 2

Higher

Question 3

Why does the price level get higher when Money Supply> Money Demand?

Answer 3

People splurge to get rid of thier excess money which bids the prices of goods higher

Question 4

What determines velocity?

Answer 4

Nominal interest rates and the cost of banking

Question 5

What directly determines money demand?

Answer 5

Prices, velocity and real income

Question 6

What directly determines money supply?

Answer 6

Monetary base and the money multiplier

Question 7

What determines the money multiplier?

Answer 7

Preference for checking and reserves

Question 8

What would cause a surplus?

Answer 8

1. An increase in money supply

2. A decrease in money demand

Question 9

What would cause an increase in prices?

Answer 9

a money surplus

Question 10

What three things happen when there’s a surplus of money?

Answer 10

1. People splurge, trying to spend thier excess money. 2. Prices rise from the splurging, people spending more money than normal. 3. Prices rising means the valur of money is falling

Question 11

What three things happen if there is a shortage of money?

Answer 11

1. People hoard thier money, trying to aquire thier shortfall. 2. Prices fall from the hoardding, people are spending less than normal. 3. Prices falling means the value of money is rising.

Question 12

Money Supply

Answer 12

How much money has been made and is in circulation.

Question 13

Money demand

Answer 13

How much money people want to have and to hold.