Question 1

Comparing M1 and M2 we know that

Accepted Answer

A)  M1 is larger because it contains currency. 
B)  M2 is approximately equal to M1. 
C)  M2 is larger because it contains M1 and other assets. 
D)  M2 is larger because it contains more liquid assets than does M1. 
A)  M1 is larger because it contains currency. 
B)  M2 is approximately equal to M1. 
C)  M2 is larger because it contains M1 and other assets. 
D)  M2 is larger because it contains more liquid assets than does M1.

Question 2

Which of the following is NOT included in M1?

Accepted Answer

A)  currency held outside banks 
B)  time deposits 
C)  traveler's checks 
D)  checking deposits 
A)  currency held outside banks 
B)  time deposits 
C)  traveler's checks 
D)  checking deposits

Question 3

Which of the following is TRUE regarding money market mutual funds?
I. Money market mutual funds buy highly liquid assets like Treasury bills.
II. Shareholders can obtain loans from money market mutual funds.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 4

In September 2017, Regions Bank had its desired reserve ratio when it held $3 million in reserves against M1 deposits and made $83 million in loans. Between September 2017 and September 2018, deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2018, it will

Accepted Answer

A)  increase its reserves. 
B)  definitely make more loans. 
C)  cannot make more loans. 
D)  decrease its reserves. 
A)  increase its reserves. 
B)  definitely make more loans. 
C)  cannot make more loans. 
D)  decrease its reserves.

Question 5

Which of the following counts as part of money?

Accepted Answer

A)  $10,000 in gold bars 
B)  $10,000 in government bonds 
C)  $10,000 in a checking account 
D)  $10,000 in corporate bonds 
A)  $10,000 in gold bars 
B)  $10,000 in government bonds 
C)  $10,000 in a checking account 
D)  $10,000 in corporate bonds

Question 6

Which of the following is an example of money functioning as a store of value?

Accepted Answer

A)  Comcast charging $99 for internet, phone and cable service. 
B)  McDonalds charging 99 cents for a burger. 
C)  Your saving your spare change in a jar in order to afford an end-of-term party. 
D)  Amazon.com charging $9.95 for shipping. 
A)  Comcast charging $99 for internet, phone and cable service. 
B)  McDonalds charging 99 cents for a burger. 
C)  Your saving your spare change in a jar in order to afford an end-of-term party. 
D)  Amazon.com charging $9.95 for shipping.

Question 7

________ in the desired reserve ratio will ________ the money multiplier.

Accepted Answer

A)  An increase; have no effect on 
B)  An increase; decrease 
C)  A decrease; decrease 
D)  A decrease; will have no effect on 
A)  An increase; have no effect on 
B)  An increase; decrease 
C)  A decrease; decrease 
D)  A decrease; will have no effect on

Question 8

The monetary base consists of

Accepted Answer

A)  the quantity of money. 
B)  currency and reserves of depository institutions. 
C)  demand deposits and vault cash. 
D)  government securities held by the Fed. 
A)  the quantity of money. 
B)  currency and reserves of depository institutions. 
C)  demand deposits and vault cash. 
D)  government securities held by the Fed.

Question 9

A unit of account

Accepted Answer

A)  is a type of accounting of how many currency units there are in an economy. 
B)  is an accounting of the total units of goods and services produced in an economy. 
C)  is an agreed measure for stating the prices of goods and services in an economy. 
D)  is a type of value stored within all assets. 
A)  is a type of accounting of how many currency units there are in an economy. 
B)  is an accounting of the total units of goods and services produced in an economy. 
C)  is an agreed measure for stating the prices of goods and services in an economy. 
D)  is a type of value stored within all assets.

Question 10

Describe how actual reserves are calculated and explain the difference between desired reserves and unplanned reserves. How do reserves affect the amount of loans a bank can make?

Accepted Answer

Actual reserves are equal to the bank's

Question 11

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 ________ and the quantity of M2 ________.

Accepted Answer

A)  decreases; decreases 
B)  increases; decreases 
C)  decreases; does not change 
D)  decreases; increases 
A)  decreases; decreases 
B)  increases; decreases 
C)  decreases; does not change 
D)  decreases; increases

Question 12

Depository institution create liquidity when they

Accepted Answer

A)  buy assets that are liquid. 
B)  borrow short and lend long. 
C)  have liabilities that are illiquid. 
D)  borrow long and lend short. 
A)  buy assets that are liquid. 
B)  borrow short and lend long. 
C)  have liabilities that are illiquid. 
D)  borrow long and lend short.

Question 13

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

Accepted Answer

A)  $534.75 in reserves. 
B)  $17.25 billion in unplanned reserves. 
C)  $1,725 billion in currency. 
D)  $17.25 billion in reserves. 
A)  $534.75 in reserves. 
B)  $17.25 billion in unplanned reserves. 
C)  $1,725 billion in currency. 
D)  $17.25 billion in reserves.

Question 14

The data show that money growth and inflation are

Accepted Answer

A)  positively correlated. 
B)  negatively correlated. 
C)  not correlated. 
D)  independent phenomena. 
A)  positively correlated. 
B)  negatively correlated. 
C)  not correlated. 
D)  independent phenomena.

Question 15

The Federal Open Market Committee

Accepted Answer

A)  consists of the Fed chairman and the 12 regional bank presidents. 
B)  is the main policy-making organ of the Federal Reserve. 
C)  is headed by the president of the New York Federal Reserve Bank. 
D)  meets every week to review the state of the economy. 
A)  consists of the Fed chairman and the 12 regional bank presidents. 
B)  is the main policy-making organ of the Federal Reserve. 
C)  is headed by the president of the New York Federal Reserve Bank. 
D)  meets every week to review the state of the economy.

Question 16

The money multiplier determines how much

Accepted Answer

A)  real GDP will be expanded given an increase in autonomous investment. 
B)  the monetary base will be expanded given a change in the quantity of money. 
C)  the quantity of money will be expanded given a change in the monetary base. 
D)  money demand will expand given a change in the quantity of money. 
A)  real GDP will be expanded given an increase in autonomous investment. 
B)  the monetary base will be expanded given a change in the quantity of money. 
C)  the quantity of money will be expanded given a change in the monetary base. 
D)  money demand will expand given a change in the quantity of money.

Question 17

The largest component of M2 is

Accepted Answer

A)  savings deposits. 
B)  currency. 
C)  money market mutual funds. 
D)  travelers checks. 
A)  savings deposits. 
B)  currency. 
C)  money market mutual funds. 
D)  travelers checks.

Question 18

Which of the following is NOT a monetary policy tool of the Federal Reserve?

Accepted Answer

A)  changes in required reserves 
B)  last resort loans 
C)  deposit insurance 
D)  open market operations 
A)  changes in required reserves 
B)  last resort loans 
C)  deposit insurance 
D)  open market operations

Question 19

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Accepted Answer

A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  none of the above 
A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  none of the above

Question 20

Checks and credit cards are NOT considered money because they

Accepted Answer

A)  are issued by banks, not the Federal Reserve. 
B)  are not the means of payment. 
C)  typically require an identification requirement, such as your driver's license. 
D)  are not backed by all commercial banks. 
A)  are issued by banks, not the Federal Reserve. 
B)  are not the means of payment. 
C)  typically require an identification requirement, such as your driver's license. 
D)  are not backed by all commercial banks.

Comparing M1 and M2 we know that

Which of the following is NOT included in M1?

Which of the following is TRUE regarding money market mutual funds? I. Money market mutual funds buy highly liquid assets like Treasury bills. II. Shareholders can obtain loans from money market mutual funds.

Which of the following counts as part of money?

Which of the following is an example of money functioning as a store of value?

in the desired reserve ratio will the money multiplier.

The monetary base consists of

A unit of account

Describe how actual reserves are calculated and explain the difference between desired reserves and unplanned reserves. How do reserves affect the amount of loans a bank can make?

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 and the quantity of M2 .

Depository institution create liquidity when they

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

The data show that money growth and inflation are

The Federal Open Market Committee

The money multiplier determines how much

The largest component of M2 is

Which of the following is NOT a monetary policy tool of the Federal Reserve?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Checks and credit cards are NOT considered money because they

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

Comparing M1 and M2 we know that

Which of the following is NOT included in M1?

Which of the following is TRUE regarding money market mutual funds? I. Money market mutual funds buy highly liquid assets like Treasury bills. II. Shareholders can obtain loans from money market mutual funds.

Which of the following counts as part of money?

Which of the following is an example of money functioning as a store of value?

________ in the desired reserve ratio will ________ the money multiplier.

The monetary base consists of

A unit of account

Describe how actual reserves are calculated and explain the difference between desired reserves and unplanned reserves. How do reserves affect the amount of loans a bank can make?

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 ________ and the quantity of M2 ________.

Depository institution create liquidity when they

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

The data show that money growth and inflation are

The Federal Open Market Committee

The money multiplier determines how much

The largest component of M2 is

Which of the following is NOT a monetary policy tool of the Federal Reserve?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Checks and credit cards are NOT considered money because they

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

in the desired reserve ratio will the money multiplier.

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 and the quantity of M2 .