24. An increase in the growth rate of the money supply is most likely to be followed by

A. A recession

B. A decline in the business cycle

C. Inflation

D. All of the above

25. A sharp decrease in the growth rate of the money supply is most likely to be followed by

A. A decline in economic activity

B. An upswing in the business cycle

C. Inflation

D. All of the above

26. The process of channeling funds from individuals with surplus funds to those desiring additional funds in which the security issued by the borrower is not purchased by the saver is known as

A. Theft

B. Redistribution

C. Barter

D. Financial intermediation

27. Banks are the most important part of the study of how money affects the economy since

A. Banks play a critical role in the creation of money

B. Banks have been important in the rapid pace of financial innovation

C. Both (a) and (b) are correct

D. Neither (a) nor (b) are correct.

28. Suppose that due to the fear that the United States is about to enter a long period of stagnant growth, stock prices fall by 50% on average. Predict what would happen to the spending by consumers.

A. Spending would probably increase

B. Spending would probably fall

C. Spending would probably be unaffected

D. The change in spending would be ambiguous

29. An increase in interest rates is likely to cause spending on houses to

A. Fall

B. Rise

C. Rise in the short run if interest rates are expected to fall in the future

D. Remain unchanged

30. Assume that the large budget deficits have significant impacts on the level of interest rates. In which market will budget deficits have their biggest Impacts directly?

A. The stock market

B. The bond market

C. The wheat market

D. The gold market

31. An increase in the value of the dollar relative to all foreign currencies means that the price of foreign goods purchased by Americans

A. Increase

B. Falls

C. Remains unchanged

D. There is not enough information to answer

32. If the price level is 100 in year 1 and 110 in year 2. Then the rate of inflation from year 1 to year 2 is

A. 10%

B. 9%

C. 11%

D. 110%