AP®︎ Macroeconomics: Topic 4.5 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Topic 4.5 of AP Macroeconomics – The Money Market.
Questions List
Topic 4.5
Question 1 Easy
This question tests the following: MKT-3.A
What is the relationship between nominal interest rates and the quantity of money demanded?
What You’re Being Tested On:
Explore the learning objectives taken directly from the College Board’s AP® Macroeconomics Curriculum. Ensure you’re prepared for the exact topics covered on the AP® exam, in-class tests, and quizzes, and gain confidence in your mastery of the material.
Topic 4.5: The Money Market
Learning Objective: MKT-3.A
a. Define (using graphs as appropriate) the money market, money demand, and money supply. b. Explain (using graphs as appropriate) the relationship between the nominal interest rate and the quantity of money demanded (supplied).
Essential Knowledge: MKT-3.A.1
The demand for money shows the inverse relationship between the nominal interest rate and the quantity of money people want to hold.
Essential Knowledge: MKT-3.A.2
Given a monetary base determined by a country’s central bank, money supply is independent of the nominal interest rate.
Learning Objective: MKT-3.B
Define (using graphs as appropriate) equilibrium in the money market.
Essential Knowledge: MKT-3.B.1
In the money market, equilibrium is achieved when the nominal interest rate is such that the quantities demanded and supplied of money are equal.
Learning Objective: MKT-3.C
Explain (using graphs as appropriate) how nominal interest rates adjust to restore equilibrium in the money market.
Essential Knowledge: MKT-3.C.1
Disequilibrium nominal interest rates create surpluses and shortages in the money market. Market forces drive nominal interest rates toward equilibrium.
Learning Objective: MKT-3.D
a. Explain (using graphs as appropriate) the determinants of demand and supply in the money market. b. Explain (using graphs as appropriate) how changes in demand and supply in the money market affect the equilibrium nominal interest rate.
Essential Knowledge: MKT-3.D.1
Factors that shift the demand for money, such as changes in the price level, and supply of money, such as monetary policy, change the equilibrium nominal interest rate.
