Question 1

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  record keeping device. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  record keeping device.

Question 2

The Board of Governors of the Federal Reserve System is

Accepted Answer

A)  appointed by the Congress. 
B)  elected by the public. 
C)  appointed by the President of the United States and confirmed by the U.S. Senate. 
D)  elected by members of the American Banking Association. 
A)  appointed by the Congress. 
B)  elected by the public. 
C)  appointed by the President of the United States and confirmed by the U.S. Senate. 
D)  elected by members of the American Banking Association.

Question 3

During periods of inflation, which function of money is most severely affected?

Accepted Answer

A)  medium of exchange 
B)  unit of account 
C)  means of payment 
D)  store of value 
A)  medium of exchange 
B)  unit of account 
C)  means of payment 
D)  store of value

Question 4

Suppose you cash in a Certificate of Deposit (a small time deposit) to acquire the traveler's checks you'll need for your vacation. What happens to M1 and M2?

Accepted Answer

A)  M1 and M2 both increase. 
B)  M1 stays the same and M2 increases. 
C)  M1 increases and M2 decreases. 
D)  M1 increases and M2 stays the same. 
A)  M1 and M2 both increase. 
B)  M1 stays the same and M2 increases. 
C)  M1 increases and M2 decreases. 
D)  M1 increases and M2 stays the same.

Question 5

A money market mutual fund is

Accepted Answer

A)  essentially the same as a checking account. 
B)  a time deposit of $100,000 or less. 
C)  a time deposit of more than $100,000. 
D)  a depository institution that sells shares and buys securities such as U.S. Treasury bills. 
A)  essentially the same as a checking account. 
B)  a time deposit of $100,000 or less. 
C)  a time deposit of more than $100,000. 
D)  a depository institution that sells shares and buys securities such as U.S. Treasury bills.

Question 6

Which of the following is NOT included in the M2 definition of money?

Accepted Answer

A)  currency held by banks 
B)  money market mutual fund balances 
C)  savings deposits 
D)  checkable deposits 
A)  currency held by banks 
B)  money market mutual fund balances 
C)  savings deposits 
D)  checkable deposits

Question 7

Traveler's checks are included in M1 but not in M2.

Accepted Answer

A) True 
 B)False

Question 8

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Accepted Answer

A)  open market operations. 
B)  changing the required reserve ratio. 
C)  changing discount rates. 
D)  increasing the number of commercial banks. 
A)  open market operations. 
B)  changing the required reserve ratio. 
C)  changing discount rates. 
D)  increasing the number of commercial banks.

Question 9

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Accepted Answer

The Federal Reserve, or Fed, is the U.S.

Question 10

The required reserve ratio

Accepted Answer

A)  is the amount of money that banks require borrowers to reserve in their accounts. 
B)  is the fraction of a bank's total deposits that is required to be held in reserves. 
C)  increases when withdrawals from a bank are made. 
D)  is higher for banks that make riskier loans. 
A)  is the amount of money that banks require borrowers to reserve in their accounts. 
B)  is the fraction of a bank's total deposits that is required to be held in reserves. 
C)  increases when withdrawals from a bank are made. 
D)  is higher for banks that make riskier loans.

Question 11

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Accepted Answer

A)  $0. 
B)  $20. 
C)  $80. 
D)  $120. 
A)  $0. 
B)  $20. 
C)  $80. 
D)  $120.

Question 12

Suppose the money market has an equilibrium interest rate of 5 percent. If the actual interest rate is 3 percent, which of the following occurs to bring the money market back to equilibrium?

Accepted Answer

A)  People buy bonds, the price of bonds rises and the interest rate rises. 
B)  People buy bonds, the price of bonds falls and the interest rate rises. 
C)  People sell bonds, the price of bonds rises and the interest rate rises. 
D)  People sell bonds, the price of bonds falls and the interest rate rises. 
A)  People buy bonds, the price of bonds rises and the interest rate rises. 
B)  People buy bonds, the price of bonds falls and the interest rate rises. 
C)  People sell bonds, the price of bonds rises and the interest rate rises. 
D)  People sell bonds, the price of bonds falls and the interest rate rises.

Question 13

If there is an excess quantity of money, people will buy bonds.

Accepted Answer

A) True 
 B)False

Question 14

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Accepted Answer

A) True 
 B)False

Question 15

The larger the public's currency drain from the banking system, the

Accepted Answer

A)  smaller is the monetary base. 
B)  smaller is the money multiplier. 
C)  larger is the monetary base. 
D)  larger is the money multiplier. 
A)  smaller is the monetary base. 
B)  smaller is the money multiplier. 
C)  larger is the monetary base. 
D)  larger is the money multiplier.

Question 16

According to the quantity theory of money, money growth and inflation are

Accepted Answer

A)  positively correlated. 
B)  negatively correlated. 
C)  independent, that is, not correlated. 
D)  positively correlated if the inflation rate is positive and negatively correlated if the inflation rate is negative. 
A)  positively correlated. 
B)  negatively correlated. 
C)  independent, that is, not correlated. 
D)  positively correlated if the inflation rate is positive and negatively correlated if the inflation rate is negative.

Question 17

In the United States today, money consists of

Accepted Answer

A)  currency only. 
B)  deposits at banks only. 
C)  coins only. 
D)  currency and deposits at banks. 
A)  currency only. 
B)  deposits at banks only. 
C)  coins only. 
D)  currency and deposits at banks.

Question 18

The commercial banks in Lendland have
Reserves $400 million
Loans $3,600 million
Deposits $4,000 million
Total assets $4,600 million
The banks hold no unplanned reserves.
a) Calculate the banks' reserve ratio.
b) An immigrant arrives in Lendland with $5 million, which he deposits in a bank. How much does the immigrant's bank lend initially?

Accepted Answer

a) With no unplanned reserves, the desir

Question 19

M1 includes all the following items EXCEPT

Accepted Answer

A)  checking deposits owned by individuals and businesses. 
B)  traveler's checks. 
C)  deposits in money market mutual funds. 
D)  currency owned by individuals and businesses. 
A)  checking deposits owned by individuals and businesses. 
B)  traveler's checks. 
C)  deposits in money market mutual funds. 
D)  currency owned by individuals and businesses.

Question 20

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.

Accepted Answer

A) True 
 B)False

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

The Board of Governors of the Federal Reserve System is

During periods of inflation, which function of money is most severely affected?

Suppose you cash in a Certificate of Deposit (a small time deposit) to acquire the traveler's checks you'll need for your vacation. What happens to M1 and M2?

A money market mutual fund is

Which of the following is NOT included in the M2 definition of money?

Traveler's checks are included in M1 but not in M2.

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

The required reserve ratio

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Suppose the money market has an equilibrium interest rate of 5 percent. If the actual interest rate is 3 percent, which of the following occurs to bring the money market back to equilibrium?

If there is an excess quantity of money, people will buy bonds.

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

The larger the public's currency drain from the banking system, the

According to the quantity theory of money, money growth and inflation are

In the United States today, money consists of

M1 includes all the following items EXCEPT

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.

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

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

The Board of Governors of the Federal Reserve System is

During periods of inflation, which function of money is most severely affected?

Suppose you cash in a Certificate of Deposit (a small time deposit) to acquire the traveler's checks you'll need for your vacation. What happens to M1 and M2?

A money market mutual fund is

Which of the following is NOT included in the M2 definition of money?

Traveler's checks are included in M1 but not in M2.

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

The required reserve ratio

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Suppose the money market has an equilibrium interest rate of 5 percent. If the actual interest rate is 3 percent, which of the following occurs to bring the money market back to equilibrium?

If there is an excess quantity of money, people will buy bonds.

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

The larger the public's currency drain from the banking system, the

According to the quantity theory of money, money growth and inflation are

In the United States today, money consists of

M1 includes all the following items EXCEPT

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.

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