Question 1

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in the use of credit cards?

Accepted Answer

A)  The demand for money curve would shift rightward to MD2. 
B)  The demand for money curve would shift leftward to MD0. 
C)  There would be a movement upward along the demand for money curve MD1. 
D)  There would be a movement downward along the demand for money curve MD1. 
A)  The demand for money curve would shift rightward to MD2. 
B)  The demand for money curve would shift leftward to MD0. 
C)  There would be a movement upward along the demand for money curve MD1. 
D)  There would be a movement downward along the demand for money curve MD1.

Question 2

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is NOT an economic benefit of depository institutions?

Accepted Answer

A)  They borrow long and lend short. 
B)  They create liquidity. 
C)  They pool risk. 
D)  They reduce the cost of monitoring borrowers. 
A)  They borrow long and lend short. 
B)  They create liquidity. 
C)  They pool risk. 
D)  They reduce the cost of monitoring borrowers.

Question 4

Why is the nominal interest rate the opportunity cost of holding money?

Accepted Answer

The nominal interest rate is the opportu

Question 5

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

Accepted Answer

A)  checking deposits 
B)  traveler's checks 
C)  time deposits 
D)  shares of the stocks of large companies 
A)  checking deposits 
B)  traveler's checks 
C)  time deposits 
D)  shares of the stocks of large companies

Question 6

The main policy designer of the Federal Reserve system is the

Accepted Answer

A)  12 district banks. 
B)  President and Congress. 
C)  Federal Open Market Committee. 
D)  Council of Economic Advisors. 
A)  12 district banks. 
B)  President and Congress. 
C)  Federal Open Market Committee. 
D)  Council of Economic Advisors.

Question 7

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

Accepted Answer

An increase in the interest ra

Question 8

Which of the following is true regarding the required reserve ratio?

Accepted Answer

A)  The ratio determines the legally required amount of reserves a bank must hold. 
B)  The ratio determines the amount of excess reserves a bank must hold. 
C)  The ratio is only enforced against banks that are operating in a risky manner. 
D)  None of the above answers is correct. 
A)  The ratio determines the legally required amount of reserves a bank must hold. 
B)  The ratio determines the amount of excess reserves a bank must hold. 
C)  The ratio is only enforced against banks that are operating in a risky manner. 
D)  None of the above answers is correct.

Question 9

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Accepted Answer

A) True 
 B)False

Question 10

Using a credit card can best be likened to

Accepted Answer

A)  taking out a loan. 
B)  a barter exchange. 
C)  using currency only as a means of payment. 
D)  using any other form of money as a means of payment. 
A)  taking out a loan. 
B)  a barter exchange. 
C)  using currency only as a means of payment. 
D)  using any other form of money as a means of payment.

Question 11

Depository institutions are good at minimizing

Accepted Answer

A)  the costs of monitoring borrowers. 
B)  risky borrowers. 
C)  liquidity. 
D)  all of the above. 
A)  the costs of monitoring borrowers. 
B)  risky borrowers. 
C)  liquidity. 
D)  all of the above.

Question 12

What factors affect the demand for money?

Accepted Answer

Four factors influence the demand for mo

Question 13

The quantity theory of money is the idea that in the long run

Accepted Answer

A)  the quantity of money is determined by banks. 
B)  the quantity of money serves as a good indicator of how well money functions as a store of value. 
C)  the quantity of money determines real GDP. 
D)  an increase in the growth rate of the quantity of money leads to an equal increase in the inflation rate. 
A)  the quantity of money is determined by banks. 
B)  the quantity of money serves as a good indicator of how well money functions as a store of value. 
C)  the quantity of money determines real GDP. 
D)  an increase in the growth rate of the quantity of money leads to an equal increase in the inflation rate.

Question 14

Checks ________ money and checking deposits ________ money.

Accepted Answer

A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not 
A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not

Question 15

Financial innovations can have the effect of

Accepted Answer

A)  only decreasing the demand for money. 
B)  only increasing the demand for money. 
C)  either increasing or decreasing the demand for money depending on what the innovation is. 
D)  increasing the Fed's monetary policy. 
A)  only decreasing the demand for money. 
B)  only increasing the demand for money. 
C)  either increasing or decreasing the demand for money depending on what the innovation is. 
D)  increasing the Fed's monetary policy.

Question 16

When a depository institution pools risk, it

Accepted Answer

A)  buys short and lends long. 
B)  borrows reserves from the Federal Reserve. 
C)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
D)  makes loans to just one firm. 
A)  buys short and lends long. 
B)  borrows reserves from the Federal Reserve. 
C)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
D)  makes loans to just one firm.

Question 17

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Accepted Answer

A)  medium of exchange. 
B)  standard of deferred payment. 
C)  store of value. 
D)  unit of account. 
A)  medium of exchange. 
B)  standard of deferred payment. 
C)  store of value. 
D)  unit of account.

Question 18

M1 is usually larger than M2.

Accepted Answer

A) True 
 B)False

Question 19

Are checks money?

Accepted Answer

Checks are instructions to transfer fund

Question 20

Which of the following decreases the demand for nominal money?

Accepted Answer

A)  a decrease in the nominal interest rate 
B)  an increase in real GDP 
C)  an increase in the quantity of money 
D)  a decrease in the price level 
A)  a decrease in the nominal interest rate 
B)  an increase in real GDP 
C)  an increase in the quantity of money 
D)  a decrease in the price level

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in the use of credit cards?

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a medium of exchange.

Which of the following is NOT an economic benefit of depository institutions?

Why is the nominal interest rate the opportunity cost of holding money?

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

The main policy designer of the Federal Reserve system is the

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

Which of the following is true regarding the required reserve ratio?

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Using a credit card can best be likened to

Depository institutions are good at minimizing

What factors affect the demand for money?

The quantity theory of money is the idea that in the long run

Checks money and checking deposits money.

Financial innovations can have the effect of

When a depository institution pools risk, it

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

M1 is usually larger than M2.

Are checks money?

Which of the following decreases the demand for nominal money?

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

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in the use of credit cards?

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a medium of exchange.

Which of the following is NOT an economic benefit of depository institutions?

Why is the nominal interest rate the opportunity cost of holding money?

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

The main policy designer of the Federal Reserve system is the

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

Which of the following is true regarding the required reserve ratio?

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Using a credit card can best be likened to

Depository institutions are good at minimizing

What factors affect the demand for money?

The quantity theory of money is the idea that in the long run

Checks ________ money and checking deposits ________ money.

Financial innovations can have the effect of

When a depository institution pools risk, it

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

M1 is usually larger than M2.

Are checks money?

Which of the following decreases the demand for nominal money?

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 above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in the use of credit cards?

Checks money and checking deposits money.