Question 1

A decrease in the quantity of reserves held by commercial banks could be the result of

Accepted Answer

A)  a decision by U.S. households to hold less currency. 
B)  the sale of government securities by the Federal Reserve. 
C)  a decrease in the government's budget deficit. 
D)  an increase in the exchange rate. 
A)  a decision by U.S. households to hold less currency. 
B)  the sale of government securities by the Federal Reserve. 
C)  a decrease in the government's budget deficit. 
D)  an increase in the exchange rate.

Question 2

Suppose the money growth rate is 3 percent, the velocity of circulation is constant, and real GDP is growing at 2 percent. What is the inflation rate?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  3 percent 
D)  6 percent 
A)  1 percent 
B)  5 percent 
C)  3 percent 
D)  6 percent

Question 3

If the Federal Reserve purchases government securities,

Accepted Answer

A)  banks' reserves will increase. 
B)  the federal funds rate will rise. 
C)  the discount rate will be forced higher. 
D)  None of the above answers is correct because none of the mentioned effects occur. 
A)  banks' reserves will increase. 
B)  the federal funds rate will rise. 
C)  the discount rate will be forced higher. 
D)  None of the above answers is correct because none of the mentioned effects occur.

Question 4

In the money market, if the interest rate exceeds the equilibrium interest rate, there is a surplus of money. How is the surplus eliminated?

Accepted Answer

A)  People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. 
B)  Banks will lend out the surplus, lowering interest rates. 
C)  The Federal Reserve will destroy currency, reducing the quantity of money. 
D)  The high interest rate increases the demand for money, eliminating the surplus. 
A)  People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. 
B)  Banks will lend out the surplus, lowering interest rates. 
C)  The Federal Reserve will destroy currency, reducing the quantity of money. 
D)  The high interest rate increases the demand for money, eliminating the surplus.

Question 5

Which of the following is a tool that is used by the Fed to control the quantity of money?

Accepted Answer

A)  open market operations 
B)  excess reserves 
C)  government expenditure multiplier 
D)  real interest rate 
A)  open market operations 
B)  excess reserves 
C)  government expenditure multiplier 
D)  real interest rate

Question 6

The definition of M2 includes

Accepted Answer

A)  M1. 
B)  savings deposits. 
C)  time deposits. 
D)  all of the above. 
A)  M1. 
B)  savings deposits. 
C)  time deposits. 
D)  all of the above.

Question 7

The table below shows data for Brazil.   Assuming the velocity of circulation did not change,

Accepted Answer

A)  the growth rate of money increased between 2006 and 2007. 
B)  the money growth rate was -0.4 percent in 2006. 
C)  the growth rate of nominal GDP was 1.7 percent in 2006. 
D)  the demand for money curve shifted leftward in 2006. 
A)  the growth rate of money increased between 2006 and 2007. 
B)  the money growth rate was -0.4 percent in 2006. 
C)  the growth rate of nominal GDP was 1.7 percent in 2006. 
D)  the demand for money curve shifted leftward in 2006.

Question 8

In an open market purchase, the Fed ________ government securities, which ________ bank reserves.

Accepted Answer

A)  buys; increases 
B)  buys; decreases 
C)  sells; increases 
D)  sells; decreases 
A)  buys; increases 
B)  buys; decreases 
C)  sells; increases 
D)  sells; decreases

Question 9

In October of 2015, the interest rate on money market accounts was about 0.2 percent. In 2007, the interest rate on money market accounts was about 4.0 percent. What has been the impact on money demand from this fall in the interest rate?

Accepted Answer

A)  the money demand curve shifted to the right 
B)  the money demand curve shifted to the left 
C)  the quantity of money demanded increased 
D)  the quantity of money demanded decreased 
A)  the money demand curve shifted to the right 
B)  the money demand curve shifted to the left 
C)  the quantity of money demanded increased 
D)  the quantity of money demanded decreased

Question 10

The opportunity cost of holding money is the

Accepted Answer

A)  nominal interest rate on assets other than money. 
B)  price of goods and services. 
C)  level of wage and rental income. 
D)  ease with which an asset can be converted into a means of payment. 
A)  nominal interest rate on assets other than money. 
B)  price of goods and services. 
C)  level of wage and rental income. 
D)  ease with which an asset can be converted into a means of payment.

Question 11

Monetary policy is conducted

Accepted Answer

A)  only by the Federal Reserve. 
B)  by the Federal Reserve and the President of the United States. 
C)  by the Federal Reserve, the President of the United States, and Congress. 
D)  by the Federal Reserve with veto power residing with the President of the United States. 
A)  only by the Federal Reserve. 
B)  by the Federal Reserve and the President of the United States. 
C)  by the Federal Reserve, the President of the United States, and Congress. 
D)  by the Federal Reserve with veto power residing with the President of the United States.

Question 12

An increase in currency held outside the banks is

Accepted Answer

A)  a currency drain. 
B)  income. 
C)  a currency surplus. 
D)  wealth. 
A)  a currency drain. 
B)  income. 
C)  a currency surplus. 
D)  wealth.

Question 13

M1 is a measure of

Accepted Answer

A)  money and includes both currency and checking deposits. 
B)  liquidity and in which the most liquid asset is money. 
C)  money and includes both savings deposits and currency. 
D)  money and includes both savings deposits and money market mutual funds. 
A)  money and includes both currency and checking deposits. 
B)  liquidity and in which the most liquid asset is money. 
C)  money and includes both savings deposits and currency. 
D)  money and includes both savings deposits and money market mutual funds.

Question 14

-In the figure above, a decrease in the monetary base would create a change such as a

Accepted Answer

A)  movement from point a to point b along the supply of money curve MS0. 
B)  movement from point b to point a along the supply of money curve MS0. 
C)  shift from the supply of money curve MS0 to the supply of money curve MS1. 
D)  shift from the supply of money curve MS1 to the supply of money curve MS0. 
A)  movement from point a to point b along the supply of money curve MS0. 
B)  movement from point b to point a along the supply of money curve MS0. 
C)  shift from the supply of money curve MS0 to the supply of money curve MS1. 
D)  shift from the supply of money curve MS1 to the supply of money curve MS0.

Question 15

The FOMC is the agency that insures deposits up to $250,000.

Accepted Answer

A) True 
 B)False

Question 16

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Accepted Answer

Reserves include the bank's de

Question 17

Which of the following is considered a depository institution?
I. the U.S. Treasury
II. a commercial bank like Citibank
III. a credit union for federal government employees

Accepted Answer

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

Question 18

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

Accepted Answer

A)  zero, because Bank A has no unplanned reserves 
B)  $200 
C)  $800 
D)  $400 
A)  zero, because Bank A has no unplanned reserves 
B)  $200 
C)  $800 
D)  $400

Question 19

Which of the following is NOT included in M1?

Accepted Answer

A)  currency 
B)  checking deposits owned by individuals 
C)  saving deposits 
D)  traveler's checks 
A)  currency 
B)  checking deposits owned by individuals 
C)  saving deposits 
D)  traveler's checks

Question 20

The discount rate is the interest rate

Accepted Answer

A)  that banks charge their best customers. 
B)  that the Fed charges on its last resort loans. 
C)  that banks charge each other. 
D)  that bank insurers pay on insured deposits. 
A)  that banks charge their best customers. 
B)  that the Fed charges on its last resort loans. 
C)  that banks charge each other. 
D)  that bank insurers pay on insured deposits.

A decrease in the quantity of reserves held by commercial banks could be the result of

Suppose the money growth rate is 3 percent, the velocity of circulation is constant, and real GDP is growing at 2 percent. What is the inflation rate?

If the Federal Reserve purchases government securities,

In the money market, if the interest rate exceeds the equilibrium interest rate, there is a surplus of money. How is the surplus eliminated?

Which of the following is a tool that is used by the Fed to control the quantity of money?

The definition of M2 includes

The table below shows data for Brazil. Assuming the velocity of circulation did not change,

In an open market purchase, the Fed government securities, which bank reserves.

In October of 2015, the interest rate on money market accounts was about 0.2 percent. In 2007, the interest rate on money market accounts was about 4.0 percent. What has been the impact on money demand from this fall in the interest rate?

The opportunity cost of holding money is the

Monetary policy is conducted

An increase in currency held outside the banks is

M1 is a measure of

-In the figure above, a decrease in the monetary base would create a change such as a

The FOMC is the agency that insures deposits up to $250,000.

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Which of the following is considered a depository institution? I. the U.S. Treasury II. a commercial bank like Citibank III. a credit union for federal government employees

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

Which of the following is NOT included in M1?

The discount rate is the interest rate

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

A decrease in the quantity of reserves held by commercial banks could be the result of

Suppose the money growth rate is 3 percent, the velocity of circulation is constant, and real GDP is growing at 2 percent. What is the inflation rate?

If the Federal Reserve purchases government securities,

In the money market, if the interest rate exceeds the equilibrium interest rate, there is a surplus of money. How is the surplus eliminated?

Which of the following is a tool that is used by the Fed to control the quantity of money?

The definition of M2 includes

The table below shows data for Brazil. Assuming the velocity of circulation did not change,

In an open market purchase, the Fed ________ government securities, which ________ bank reserves.

In October of 2015, the interest rate on money market accounts was about 0.2 percent. In 2007, the interest rate on money market accounts was about 4.0 percent. What has been the impact on money demand from this fall in the interest rate?

The opportunity cost of holding money is the

Monetary policy is conducted

An increase in currency held outside the banks is

M1 is a measure of

-In the figure above, a decrease in the monetary base would create a change such as a

The FOMC is the agency that insures deposits up to $250,000.

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Which of the following is considered a depository institution? I. the U.S. Treasury II. a commercial bank like Citibank III. a credit union for federal government employees

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

Which of the following is NOT included in M1?

The discount rate is the interest rate

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 an open market purchase, the Fed government securities, which bank reserves.