1. Conventionally, money supply is increased by open market operations. However, the question is how effective monetary policy is, so that the increase in money supply also leads to an increase in aggregate output. Which of the following situations/scenarios makes monetary policy more effective?
   1. When autonomous government spending is strongly reduced at the same time (policy mix)
   2. When the economy is in a liquidity trap
   3. When the central bank announces an increase of interest rates in the following year at the same time
   4. When the demand for money is less sensitive to changes in the interest rate
2. Based on the ISLM model, which development can explain the abandonment of monetary targeting by many central banks towards the end of the 20^th century?
   1. Aggregate demand became highly unstable in an increasingly globalized society with large trade volumes
   2. Aggregate demand became very stable in decreasingly specialized economies of a global society
   3. Money demand became highly unstable with the proliferation of new financial instruments
   4. Aggregate demand became highly unstable with the widespread expansion of the size of balance sheets of global business corporations and financial institutions
3. Holding all other variables constant, which of the changes below does not shift the curve to the right?
   1. A decrease in business optimism
   2. A decrease in income taxes
   3. An increase of money supply
   4. An increase in government spending
4. Based on the AD-AS analysis, which of the following events would put upward pressure on prices and inflation rates?
   1. The loss of consumer confidence following a financial crisis
   2. A drop in oil prices due to increased oil supply
   3. A sharp decrease of interest rates as an outcome of a money supply change
   4. A sudden increase in the productivity of workers
5. In the long-run, the ISLM model predicts monetary neutrality, i.e., an increase in money supply does neither change interest rates nor aggregate output. Why?
   1. Aggregate demand is fixed in the long-run
   2. Aggregate demand is not fixed in the long-run
   3. Price level is fixed in the long-run
   4. Price level is not fixed in the long-run
6. With respect to the transmission mechanism of monetary policy, which of the following statements related to the traditional interest-rate channel is wrong?
   1. A commitment to future contractionary monetary policy can lower the expected inflation
   2. Lowering real interest rates increases the expected net profitability of investments
   3. A decrease in the expected inflation lowers real interest rates
   4. An increase in the expected net profitability of investments increases the aggregate demand
7. With respect to the transmission mechanism of monetary policy, which of the following statements related to asset price channels and Tobin's is correct?
   1. Monetary expansion tends to reduce the demand for stocks
   2. A reduced stock demand increases stock prices
   3. Stock prices that are high relative to the replacement costs of capital imply a high
   4. A highimplies relatively high costs of investment, so that the aggregate demand is reduced
8. The bursting of the house price bubble at the onset of the global financial crisis (as started in 2007) had strong implications for the global economy. Which of the following statements is wrong?
   1. The decreasing house prices increased the real value of collateral, which reduced the burden of debt contracts for house owners and lead to excessive spending as a consequence
   2. With a decreasing probability of house owners to meet their debt obligations, their creditors were facing decreasing asset values and decreasing solvency
   3. The interconnectedness of financial institutions meant that the decrease in net worth of financial institutions with "bad loans" on their balance sheets lead to a decrease in net worth of other financial institutions, a contagion effect
   4. Weaker balance sheets and loss of confidence lead to a freeze in the credit markets, which contributed to the slowdown of the real economy
9. With respect to the transmission mechanism of monetary policy, which of the following statements is correct?
   1. Expansionary monetary policy leads to falling interest rates, resulting in an increase of aggregate output via increasing investments
   2. Expansionary monetary policy leads to falling domestic real interest rates, resulting in an increase of aggregate output via a denomination of the domestic currency and hence a decrease in net exports
   3. Expansionary monetary policy leads to increasing deposits, resulting in an increase of aggregate output via a decreasing quantity of bank loans/investments
   4. Expansionary monetary policy leads to increasing stock prices, resulting in an increase of aggregate output via decreasing net worth of firms
10. What is the common interpretation of Friedman's statement "inflation is always and everywhere a monetary phenomenon"?
    1. Any increase in price levels can be traced back to a monetary policy decision
    2. Inflation is the only concern of monetary policy makers, or at least, should be the only concern
    3. High inflation rates only have nominal implications, they do not burden the real economy
    4. Prolonged periods of rapid increases in the price level must be blamed on monetary policy that is not sufficiently tight
11. Inflation can be the result of monetary policy decisions, which can be illustrated using the model. Consider an economy that is initially at its natural rate of output. Which of the following scenarios describes a monetary policy decision that guarantees an increase in price level?
    1. An autonomous decrease in the money supply
    2. The absence of a money supply decrease in response to an autonomous decrease in the money demand
    3. An increase in the money supply in response to an autonomous increase in money demand
    4. An increase in government spending
12. The new Keynesian model takes public expectations about a certain policy and its influence on the response to that policy (rational expectations) into account. In this regard, it differs significantly compared to the classical macro model by Keynes. Which of the following statements about the new Keynesian model is correct?
    1. Wages and prices are assumed to be fully flexible
    2. Expansionary monetary policy has a bigger effect on aggregate output when the policy is anticipated compared to an unanticipated policy
    3. In the short-rum, an anticipated, autonomous increase in money supply shifts the curve to the right, but the anticipation causes thecurve to shift to the left to the same extent, i.e., back to the natural output
    4. It concludes that expansionary policy that is intended to decrease unemployment below its natural level is less effective, when it is anticipated