Question 1

-Based on the data in the table above, what is the value of M1?

Accepted Answer

A)  $2,950 billion 
B)  $1,361 billion 
C)  $752 billion 
D)  $609 billion 
A)  $2,950 billion 
B)  $1,361 billion 
C)  $752 billion 
D)  $609 billion

Question 2

-The table above shows information on the quantity of money and the money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that

Accepted Answer

A)  the money market is in equilibrium. 
B)  people buy bonds and the interest rate falls. 
C)  people sell bonds and the interest rate falls. 
D)  bond prices fall and so the interest rate falls. 
A)  the money market is in equilibrium. 
B)  people buy bonds and the interest rate falls. 
C)  people sell bonds and the interest rate falls. 
D)  bond prices fall and so the interest rate falls.

Question 3

The fraction of deposits that banks are required to keep is known as the

Accepted Answer

A)  discount rate. 
B)  required reserve ratio. 
C)  deposit multiplier. 
D)  money multiplier. 
A)  discount rate. 
B)  required reserve ratio. 
C)  deposit multiplier. 
D)  money multiplier.

Question 4

If a customer deposits $10,000 in currency into a checking account, the bank's total reserves

Accepted Answer

A)  increase. 
B)  do not change. 
C)  are greater than 100 percent. 
D)  decrease. 
A)  increase. 
B)  do not change. 
C)  are greater than 100 percent. 
D)  decrease.

Question 5

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

Accepted Answer

The bank can make new loans equal to the

Question 6

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its unplanned reserves?

Accepted Answer

The bank has no unplanned rese

Question 7

-In the above figure, if the interest rate is 8 percent

Accepted Answer

A)  people sell bonds so as to convert them into money. 
B)  people buy bonds and the interest rate falls. 
C)  the Fed increases the quantity of money. 
D)  people buy stocks, because stocks are more liquid than currency. 
A)  people sell bonds so as to convert them into money. 
B)  people buy bonds and the interest rate falls. 
C)  the Fed increases the quantity of money. 
D)  people buy stocks, because stocks are more liquid than currency.

Question 8

The opportunity cost of holding money increases when

Accepted Answer

A)  the purchasing power of money rises. 
B)  the nominal interest rate rises. 
C)  the price level falls. 
D)  consumers' real incomes increase. 
A)  the purchasing power of money rises. 
B)  the nominal interest rate rises. 
C)  the price level falls. 
D)  consumers' real incomes increase.

Question 9

A bank has no unplanned reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Accepted Answer

A)  $20,000 
B)  $80,000 
C)  $120,000 
D)  $180,000 
A)  $20,000 
B)  $80,000 
C)  $120,000 
D)  $180,000

Question 10

Required reserves for a commercial bank

Accepted Answer

A)  are the minimum reserves that a bank must hold to back its deposits. 
B)  are the reserves that a bank plans to hold in the bank's vault. 
C)  are only the money used by the bank tellers. 
D)  consist only of the bank's deposits at the Fed. 
A)  are the minimum reserves that a bank must hold to back its deposits. 
B)  are the reserves that a bank plans to hold in the bank's vault. 
C)  are only the money used by the bank tellers. 
D)  consist only of the bank's deposits at the Fed.

Question 11

The main policy-making organ of the Federal Reserve System is the

Accepted Answer

A)  Board of Governors. 
B)  Federal Reserve Bank presidents. 
C)  Federal Open Market Committee. 
D)  Joint Congressional Committee on Monetary Policy. 
A)  Board of Governors. 
B)  Federal Reserve Bank presidents. 
C)  Federal Open Market Committee. 
D)  Joint Congressional Committee on Monetary Policy.

Question 12

Liquidity can

Accepted Answer

A)  not be created. 
B)  be created by borrowing short and lending long. 
C)  only be created by the government. 
D)  be created by borrowing long and lending short. 
A)  not be created. 
B)  be created by borrowing short and lending long. 
C)  only be created by the government. 
D)  be created by borrowing long and lending short.

Question 13

What is the discount rate?

Accepted Answer

The discount rate is the inter

Question 14

An individual wanting the most liquid asset possible will hold

Accepted Answer

A)  currency. 
B)  a savings account. 
C)  gold. 
D)  U.S. government bonds. 
A)  currency. 
B)  a savings account. 
C)  gold. 
D)  U.S. government bonds.

Question 15

The quantity theory of money states that

Accepted Answer

A)  inflation increases when the money growth rate increases. 
B)  as the price level increases, the demand for money increases. 
C)  as the interest rate rises, the demand for money decreases. 
D)  changes in the quantity of money are determined by the commercial banks and not the Federal Reserve. 
A)  inflation increases when the money growth rate increases. 
B)  as the price level increases, the demand for money increases. 
C)  as the interest rate rises, the demand for money decreases. 
D)  changes in the quantity of money are determined by the commercial banks and not the Federal Reserve.

Question 16

Define money and list its functions.

Accepted Answer

Money is any commodity or toke

Question 17

If nominal GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

Accepted Answer

A)  is $2 trillion. 
B)  is $20 trillion. 
C)  is $5 trillion. 
D)  cannot be determined from the information given. 
A)  is $2 trillion. 
B)  is $20 trillion. 
C)  is $5 trillion. 
D)  cannot be determined from the information given.

Question 18

The table below shows the data (in millions) for Wells Fargo Bank in September 2017 and September 2018. Suppose that the desired reserve ratio is 3 percent.   The data show that Wells Fargo

Accepted Answer

A)  the desired reserve ratio did not change. 
B)  had fewer unplanned reserves in 2017. 
C)  the reserve ratio increased as loans increased. 
D)  had fewer unplanned reserves in 2018. 
A)  the desired reserve ratio did not change. 
B)  had fewer unplanned reserves in 2017. 
C)  the reserve ratio increased as loans increased. 
D)  had fewer unplanned reserves in 2018.

Question 19

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?

Accepted Answer

A)  Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million. 
B)  Securities increase by $100 million and reserves of Bank A increase by $100 million. 
C)  Securities increase by $100 million and reserves of Bank A decrease by $100 million. 
D)  Securities decrease by $100 million and reserves of Bank A increase by $100 million. 
A)  Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million. 
B)  Securities increase by $100 million and reserves of Bank A increase by $100 million. 
C)  Securities increase by $100 million and reserves of Bank A decrease by $100 million. 
D)  Securities decrease by $100 million and reserves of Bank A increase by $100 million.

Question 20

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent.
a) How much does the bank have in unplanned reserves?
b) What can the bank do with its unplanned reserves? Name two options.

Accepted Answer

a) The unplanned reserves are $30, equal

-Based on the data in the table above, what is the value of M1?

-The table above shows information on the quantity of money and the money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that

The fraction of deposits that banks are required to keep is known as the

If a customer deposits $10,000 in currency into a checking account, the bank's total reserves

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its unplanned reserves?

-In the above figure, if the interest rate is 8 percent

The opportunity cost of holding money increases when

A bank has no unplanned reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Required reserves for a commercial bank

The main policy-making organ of the Federal Reserve System is the

Liquidity can

What is the discount rate?

An individual wanting the most liquid asset possible will hold

The quantity theory of money states that

Define money and list its functions.

If nominal GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

The table below shows the data (in millions) for Wells Fargo Bank in September 2017 and September 2018. Suppose that the desired reserve ratio is 3 percent. The data show that Wells Fargo

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent. a) How much does the bank have in unplanned reserves? b) What can the bank do with its unplanned reserves? Name two options.

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

-Based on the data in the table above, what is the value of M1?

-The table above shows information on the quantity of money and the money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that

The fraction of deposits that banks are required to keep is known as the

If a customer deposits $10,000 in currency into a checking account, the bank's total reserves

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its unplanned reserves?

-In the above figure, if the interest rate is 8 percent

The opportunity cost of holding money increases when

A bank has no unplanned reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Required reserves for a commercial bank

The main policy-making organ of the Federal Reserve System is the

Liquidity can

What is the discount rate?

An individual wanting the most liquid asset possible will hold

The quantity theory of money states that

Define money and list its functions.

If nominal GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

The table below shows the data (in millions) for Wells Fargo Bank in September 2017 and September 2018. Suppose that the desired reserve ratio is 3 percent. The data show that Wells Fargo

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent. a) How much does the bank have in unplanned reserves? b) What can the bank do with its unplanned reserves? Name two options.

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