Question 1

The monetary base is $1,000 billion and the money multiplier is 5.5. What is the size of the money supply?

Accepted Answer

Monetary base x money multiplier = $1,000 billion x 5.5 = $5,500 billion.

Question 2

The function of money that enables individuals to exchange goods and services in a common unit of account is called:

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  measure of power. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  measure of power. A

Question 3

If banks operated under a 100 percent reserve system, commercial banks would not be able to create any further money.

Accepted Answer

A) True 
 B)False  True

Question 4

An increase in the discount rate will result in:

Accepted Answer

A)  increase in bank reserves and a decrease in the federal funds rate. 
B)  increase in bank reserves and an increase in the federal funds rate. 
C)  decrease in bank reserves and a decrease in the federal funds rate. 
D)  decrease in bank reserves and an increase in the federal funds rate. 
A)  increase in bank reserves and a decrease in the federal funds rate. 
B)  increase in bank reserves and an increase in the federal funds rate. 
C)  decrease in bank reserves and a decrease in the federal funds rate. 
D)  decrease in bank reserves and an increase in the federal funds rate.

Question 5

In the money market, a decrease in money demand will:

Accepted Answer

A)  result in a rightward shift in the money demand curve increasing interest rates. 
B)  result in a rightward shift in the money demand curve decreasing interest rates. 
C)  result in a leftward shift in the money demand curve increasing interest rates. 
D)  result in a leftward shift in the money demand curve decreasing interest rates. 
A)  result in a rightward shift in the money demand curve increasing interest rates. 
B)  result in a rightward shift in the money demand curve decreasing interest rates. 
C)  result in a leftward shift in the money demand curve increasing interest rates. 
D)  result in a leftward shift in the money demand curve decreasing interest rates.

Question 6

What are the three monetary policy tools of the Fed? Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy.

Accepted Answer

Open market operations, the discount rat

Question 7

A decrease in the reserve requirement would:

Accepted Answer

A)  decrease excess reserves and reflect an expansionary monetary policy. 
B)  decrease excess reserves and reflect a contractionary monetary policy. 
C)  increase excess reserves and reflect an expansionary monetary policy. 
D)  increase excess reserves and reflect a contractionary monetary policy. 
A)  decrease excess reserves and reflect an expansionary monetary policy. 
B)  decrease excess reserves and reflect a contractionary monetary policy. 
C)  increase excess reserves and reflect an expansionary monetary policy. 
D)  increase excess reserves and reflect a contractionary monetary policy.

Question 8

Open market sale of government securities by the Fed decreases the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 9

The simple deposit multiplier is:

Accepted Answer

A)  1/excess reserves. 
B)  1/reserve requirement. 
C)  1/deposit requirement. 
D)  none of the above. 
A)  1/excess reserves. 
B)  1/reserve requirement. 
C)  1/deposit requirement. 
D)  none of the above.

Question 10

Credit cards do not fulfill the three functions of money.

Accepted Answer

A) True 
 B)False

Question 11

The fraction of deposits banks are required to keep as reserves is called the:

Accepted Answer

A)  deposit requirement. 
B)  reserve requirement. 
C)  excess reserve requirement. 
D)  none of the above. 
A)  deposit requirement. 
B)  reserve requirement. 
C)  excess reserve requirement. 
D)  none of the above.

Question 12

The discount rate is influenced by Fed actions whereas the Fed sets the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 13

The reserve requirement is 0.20. What is the simple deposit multiplier?

Accepted Answer

A)  1 
B)  5 
C)  0.10 
D)  100 
A)  1 
B)  5 
C)  0.10 
D)  100

Question 14

A goal of expansionary monetary policy is to:

Accepted Answer

A)  decrease the rate of growth of real GDP. 
B)  increase the rate of growth of real GDP. 
C)  increase inflation. 
D)  none of the above. 
A)  decrease the rate of growth of real GDP. 
B)  increase the rate of growth of real GDP. 
C)  increase inflation. 
D)  none of the above.

Question 15

In the context of the money market, graphically illustrate and explain the impact of a contractionary monetary policy on interest rates.

Accepted Answer

A decrease in the nominal money supply w

Question 16

Describe the fractional reserve banking system.

Accepted Answer

Banks hold a portion of deposits in requ

Question 17

Open market purchases and sales are conducted at the:

Accepted Answer

A)  Federal Reserve Bank of Kansas City. 
B)  Federal Reserve Bank of New York. 
C)  Federal Reserve Bank of Chicago. 
D)  Federal Reserve Bank of St. Louis. 
A)  Federal Reserve Bank of Kansas City. 
B)  Federal Reserve Bank of New York. 
C)  Federal Reserve Bank of Chicago. 
D)  Federal Reserve Bank of St. Louis.

Question 18

The quantity of money demanded is positively related to the interest rate.

Accepted Answer

A) True 
 B)False

Question 19

Money serves all of the following functions except:

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  measure of power. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  measure of power.

Question 20

An increase in the reserve requirement would:

Accepted Answer

A)  decrease excess reserves and reflect an expansionary monetary policy. 
B)  decrease excess reserves and reflect a contractionary monetary policy. 
C)  increase excess reserves and reflect an expansionary monetary policy. 
D)  increase excess reserves and reflect a contractionary monetary policy. 
A)  decrease excess reserves and reflect an expansionary monetary policy. 
B)  decrease excess reserves and reflect a contractionary monetary policy. 
C)  increase excess reserves and reflect an expansionary monetary policy. 
D)  increase excess reserves and reflect a contractionary monetary policy.

The monetary base is $1,000 billion and the money multiplier is 5.5. What is the size of the money supply?

The function of money that enables individuals to exchange goods and services in a common unit of account is called:

If banks operated under a 100 percent reserve system, commercial banks would not be able to create any further money.

An increase in the discount rate will result in:

In the money market, a decrease in money demand will:

What are the three monetary policy tools of the Fed? Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy.

A decrease in the reserve requirement would:

Open market sale of government securities by the Fed decreases the federal funds rate.

The simple deposit multiplier is:

Credit cards do not fulfill the three functions of money.

The fraction of deposits banks are required to keep as reserves is called the:

The discount rate is influenced by Fed actions whereas the Fed sets the federal funds rate.

The reserve requirement is 0.20. What is the simple deposit multiplier?

A goal of expansionary monetary policy is to:

In the context of the money market, graphically illustrate and explain the impact of a contractionary monetary policy on interest rates.

Describe the fractional reserve banking system.

Open market purchases and sales are conducted at the:

The quantity of money demanded is positively related to the interest rate.

Money serves all of the following functions except:

An increase in the reserve requirement would:

Managers and Economics

Demand, Supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters

Exam 13: The Role of Money in the Macro Economy

The monetary base is $1,000 billion and the money multiplier is 5.5. What is the size of the money supply?

The function of money that enables individuals to exchange goods and services in a common unit of account is called:

If banks operated under a 100 percent reserve system, commercial banks would not be able to create any further money.

An increase in the discount rate will result in:

In the money market, a decrease in money demand will:

What are the three monetary policy tools of the Fed? Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy.

A decrease in the reserve requirement would:

Open market sale of government securities by the Fed decreases the federal funds rate.

The simple deposit multiplier is:

Credit cards do not fulfill the three functions of money.

The fraction of deposits banks are required to keep as reserves is called the:

The discount rate is influenced by Fed actions whereas the Fed sets the federal funds rate.

The reserve requirement is 0.20. What is the simple deposit multiplier?

A goal of expansionary monetary policy is to:

In the context of the money market, graphically illustrate and explain the impact of a contractionary monetary policy on interest rates.

Describe the fractional reserve banking system.

Open market purchases and sales are conducted at the:

The quantity of money demanded is positively related to the interest rate.

Money serves all of the following functions except:

An increase in the reserve requirement would:

Managers and Economics

Demand, Supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters