Question 1

Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank

Accepted Answer

A)  immediately after the deposit, unplanned reserves increase by $880. 
B)  the bank can make loans of $1,000. 
C)  the bank's desired reserves rise by $1,000. 
D)  immediately after the deposit, excess reserves increase by $880. 
A)  immediately after the deposit, unplanned reserves increase by $880. 
B)  the bank can make loans of $1,000. 
C)  the bank's desired reserves rise by $1,000. 
D)  immediately after the deposit, excess reserves increase by $880.

Question 2

Looking at historical evidence for the United States and other countries, which of the following are TRUE?
I. There is a correlation between the growth rate of the quantity theory of money and the growth rate of real GDP.
II. There is a correlation between the growth rate of the quantity theory of money and the inflation rate.

Accepted Answer

A)  Only I is true. 
B)  Only II is true. 
C)  Both I and II are true. 
D)  Neither I nor II is true. 
A)  Only I is true. 
B)  Only II is true. 
C)  Both I and II are true. 
D)  Neither I nor II is true.

Question 3

Credit cards are not part of the nation's money supply.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a liability of the Federal Reserve?

Accepted Answer

A)  currency 
B)  mortgage-backed securities 
C)  U.S. government securities 
D)  U.S. coins 
A)  currency 
B)  mortgage-backed securities 
C)  U.S. government securities 
D)  U.S. coins

Question 5

The main policy-making body of the Federal Reserve System is the Federal Open Market committee.

Accepted Answer

A) True 
 B)False

Question 6

Explain the process by which the banking system creates money.

Accepted Answer

When a bank gains reserves above the amo

Question 7

Currency held outside the banking system is included

Accepted Answer

A)  in M1 but not M2. 
B)  in M2 but not M1. 
C)  in both M1 and M2. 
D)  in neither M1 nor M2. 
A)  in M1 but not M2. 
B)  in M2 but not M1. 
C)  in both M1 and M2. 
D)  in neither M1 nor M2.

Question 8

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

Accepted Answer

A)  increase by $8 million. 
B)  increase by $500,000. 
C)  decrease by $8 million. 
D)  decrease by $500,000. 
A)  increase by $8 million. 
B)  increase by $500,000. 
C)  decrease by $8 million. 
D)  decrease by $500,000.

Question 9

Suppose that a bank begins with $500 million in deposits and $100 million in reserves and is just meeting its desired reserve ratio. Now suppose a decrease in the required reserve ratio lowers the desired reserve ratio to 10 percent. After the fall in the desired reserve ratio but before the bank makes any changes, the bank's unplanned reserves are

Accepted Answer

A)  0. 
B)  $400 million. 
C)  $450 million. 
D)  $50 million. 
A)  0. 
B)  $400 million. 
C)  $450 million. 
D)  $50 million.

Question 10

________ in the currency drain ________ the money multiplier.

Accepted Answer

A)  A decrease; does not change 
B)  An increase; increases 
C)  A decrease; decreases 
D)  An increase; decreases 
A)  A decrease; does not change 
B)  An increase; increases 
C)  A decrease; decreases 
D)  An increase; decreases

Question 11

When real GDP increases, people demand

Accepted Answer

A)  the same quantity of real money. 
B)  less real money. 
C)  more real money. 
D)  more money in nominal terms but less in real terms. 
A)  the same quantity of real money. 
B)  less real money. 
C)  more real money. 
D)  more money in nominal terms but less in real terms.

Question 12

The Board of Governors of the Federal Reserve System does NOT

Accepted Answer

A)  consist of seven members with fourteen-year terms. 
B)  include the presidents of the twelve Federal Reserve Banks. 
C)  utilize a system of rotations so that a position comes open every two years. 
D)  consist of members whose appointments have been approved by the Senate. 
A)  consist of seven members with fourteen-year terms. 
B)  include the presidents of the twelve Federal Reserve Banks. 
C)  utilize a system of rotations so that a position comes open every two years. 
D)  consist of members whose appointments have been approved by the Senate.

Question 13

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

Accepted Answer

A)  The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. 
B)  The University National Bank has $10 million more in securities. 
C)  The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. 
D)  The University National Bank has $10 million less in excess reserves. 
A)  The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. 
B)  The University National Bank has $10 million more in securities. 
C)  The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. 
D)  The University National Bank has $10 million less in excess reserves.

Question 14

The monetary base does NOT include

Accepted Answer

A)  currency. 
B)  reserves of depository institutions. 
C)  checking accounts at commercial banks. 
D)  commercial banks' reserves. 
A)  currency. 
B)  reserves of depository institutions. 
C)  checking accounts at commercial banks. 
D)  commercial banks' reserves.

Question 15

The demand for money curve is the relationship between ________ and ________, other things remaining the same.

Accepted Answer

A)  the quantity of nominal money demanded; the real interest rate 
B)  the quantity of real money demanded; the real interest rate 
C)  the quantity of nominal money demanded; the nominal interest rate 
D)  the quantity of real money demanded; the nominal interest rate 
A)  the quantity of nominal money demanded; the real interest rate 
B)  the quantity of real money demanded; the real interest rate 
C)  the quantity of nominal money demanded; the nominal interest rate 
D)  the quantity of real money demanded; the nominal interest rate

Question 16

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of unplanned reserves for this bank? Show your work.

Accepted Answer

Unplanned reserves equal the actual rese

Question 17

Liquidity

Accepted Answer

A)  is the property of money being instantly convertible into assets. 
B)  increases when a consumer has more credit cards. 
C)  is how quickly an asset loses its worth. 
D)  is the property of assets being instantly convertible into money. 
A)  is the property of money being instantly convertible into assets. 
B)  increases when a consumer has more credit cards. 
C)  is how quickly an asset loses its worth. 
D)  is the property of assets being instantly convertible into money.

Question 18

Matthew purchases a candy bar with his allowance. This purchase represents using money as

Accepted Answer

A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  a measure to express prices of goods and services. 
A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  a measure to express prices of goods and services.

Question 19

The quantity of money that people choose to hold depends on which of the following?
I. The price level
II. Financial innovation
III. The exchange rate

Accepted Answer

A)  I 
B)  I and II 
C)  I and III 
D)  I, II, and III 
A)  I 
B)  I and II 
C)  I and III 
D)  I, II, and III

Question 20

The Board of Governors of the Federal Reserve System consists of

Accepted Answer

A)  7 members appointed by Congress and 7 appointed by the President. 
B)  the presidents of each regional Federal Reserve bank. 
C)  12 members appointed by Congress. 
D)  7 members appointed by the President of the United States. 
A)  7 members appointed by Congress and 7 appointed by the President. 
B)  the presidents of each regional Federal Reserve bank. 
C)  12 members appointed by Congress. 
D)  7 members appointed by the President of the United States.

Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank

Credit cards are not part of the nation's money supply.

Which of the following is a liability of the Federal Reserve?

The main policy-making body of the Federal Reserve System is the Federal Open Market committee.

Explain the process by which the banking system creates money.

Currency held outside the banking system is included

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

in the currency drain the money multiplier.

When real GDP increases, people demand

The Board of Governors of the Federal Reserve System does NOT

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

The monetary base does NOT include

The demand for money curve is the relationship between and , other things remaining the same.

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of unplanned reserves for this bank? Show your work.

Liquidity

Matthew purchases a candy bar with his allowance. This purchase represents using money as

The quantity of money that people choose to hold depends on which of the following? I. The price level II. Financial innovation III. The exchange rate

The Board of Governors of the Federal Reserve System consists of

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

Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank

Credit cards are not part of the nation's money supply.

Which of the following is a liability of the Federal Reserve?

The main policy-making body of the Federal Reserve System is the Federal Open Market committee.

Explain the process by which the banking system creates money.

Currency held outside the banking system is included

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

________ in the currency drain ________ the money multiplier.

When real GDP increases, people demand

The Board of Governors of the Federal Reserve System does NOT

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

The monetary base does NOT include

The demand for money curve is the relationship between ________ and ________, other things remaining the same.

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of unplanned reserves for this bank? Show your work.

Liquidity

Matthew purchases a candy bar with his allowance. This purchase represents using money as

The quantity of money that people choose to hold depends on which of the following? I. The price level II. Financial innovation III. The exchange rate

The Board of Governors of the Federal Reserve System consists of

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 currency drain the money multiplier.

The demand for money curve is the relationship between and , other things remaining the same.