Question 1

Most of the day-to-day power in monetary policy decisions lies with

Accepted Answer

A)  the President of the United States. 
B)  the Senate Banking Committee. 
C)  the chairman of the Board of Governors. 
D)  large commercial banks. 
A)  the President of the United States. 
B)  the Senate Banking Committee. 
C)  the chairman of the Board of Governors. 
D)  large commercial banks.

Question 2

Credit cards are

Accepted Answer

A)  not money because they are not a means of payment. 
B)  a part of M1 but not of M2. 
C)  money because they are used to purchase goods and services. 
D)  a part of M2 but not a part of M1. 
A)  not money because they are not a means of payment. 
B)  a part of M1 but not of M2. 
C)  money because they are used to purchase goods and services. 
D)  a part of M2 but not a part of M1.

Question 3

Barter eliminates the double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Accepted Answer

A)  The Federal Open Market Committee 
B)  The Federal Reserve Banks 
C)  The Board of Governors 
D)  The Federal Government 
A)  The Federal Open Market Committee 
B)  The Federal Reserve Banks 
C)  The Board of Governors 
D)  The Federal Government

Question 5

Which of the following is an asset of the Fed?

Accepted Answer

A)  mortgage-backed securities 
B)  currency 
C)  reserves of depository institutions 
D)  Both answers B and C are correct. 
A)  mortgage-backed securities 
B)  currency 
C)  reserves of depository institutions 
D)  Both answers B and C are correct.

Question 6

Federal Reserve policy tools include all of the following EXCEPT

Accepted Answer

A)  excess reserve ratios. 
B)  required reserve ratios. 
C)  last resort loans. 
D)  open market operations. 
A)  excess reserve ratios. 
B)  required reserve ratios. 
C)  last resort loans. 
D)  open market operations.

Question 7

Which of the following is part of M2?

Accepted Answer

A)  checks 
B)  credit cards 
C)  currency held inside a bank 
D)  none of these are part of M1 or M2 
A)  checks 
B)  credit cards 
C)  currency held inside a bank 
D)  none of these are part of M1 or M2

Question 8

How does a currency drain affect the money multiplier?

Accepted Answer

If the currency drain is zero so that al

Question 9

Commercial banks are able to create money by

Accepted Answer

A)  printing Federal Reserve Notes. 
B)  making loans. 
C)  making customers pay back their loans. 
D)  exchanging their reserves at the Fed for currency. 
A)  printing Federal Reserve Notes. 
B)  making loans. 
C)  making customers pay back their loans. 
D)  exchanging their reserves at the Fed for currency.

Question 10

The money aggregate M1 consists of

Accepted Answer

A)  currency and savings accounts. 
B)  currency and checking deposits, including traveler's checks. 
C)  only checking deposits and time deposits. 
D)  checking accounts, savings accounts and Treasury bills. 
A)  currency and savings accounts. 
B)  currency and checking deposits, including traveler's checks. 
C)  only checking deposits and time deposits. 
D)  checking accounts, savings accounts and Treasury bills.

Question 11

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in financial innovation such as the introduction of ATMs?

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 12

According to the quantity theory of money, in the long run an increase in the quantity of money creates an increase in the price level but does not increase real GDP.

Accepted Answer

A) True 
 B)False

Question 13

An argument in favor of 100 percent reserve banking is that

Accepted Answer

A)  a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else. 
B)  banks should be allowed to lend deposits in order to increase their profits and strengthen the banking system. 
C)  unregulated institutions would be riskier than regulated fractional-reserve banks. 
D)  it would limit the precision of the central bank's control over the quantity of money. 
A)  a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else. 
B)  banks should be allowed to lend deposits in order to increase their profits and strengthen the banking system. 
C)  unregulated institutions would be riskier than regulated fractional-reserve banks. 
D)  it would limit the precision of the central bank's control over the quantity of money.

Question 14

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is

Accepted Answer

A)  $6 million. 
B)  $9 million. 
C)  $3 million. 
D)  $27 million. 
A)  $6 million. 
B)  $9 million. 
C)  $3 million. 
D)  $27 million.

Question 15

When a bank has unplanned reserves

Accepted Answer

A)  it can create money. 
B)  it can make loans. 
C)  it has too many loans. 
D)  Both answers A and B are correct. 
A)  it can create money. 
B)  it can make loans. 
C)  it has too many loans. 
D)  Both answers A and B are correct.

Question 16

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

Accepted Answer

A)  the quantity of money by $1,600. 
B)  deposits by $1,600. 
C)  the quantity of money by $2,000. 
D)  deposits by $2,000. 
A)  the quantity of money by $1,600. 
B)  deposits by $1,600. 
C)  the quantity of money by $2,000. 
D)  deposits by $2,000.

Question 17

-The above figure has the demand for money curve. Suppose the Fed initially sets the quantity of money equal to $0.6 trillion. Draw the supply of money curve in the figure. What is the equilibrium interest rate? Now suppose the Fed increases the quantity of money to $0.9 trillion. Draw the new supply curve. What is the new equilibrium interest rate?

Accepted Answer

@#IMG-DLM& The initial supply of money curve is MS

Question 18

An increase in the opportunity cost of holding money creates a ________ the money demand curve and an increase in real GDP creates a ________ the money demand curve.

Accepted Answer

A)  leftward shift of; movement down along 
B)  rightward shift of; movement down along 
C)  movement up along; leftward shift of 
D)  movement up along; rightward shift of 
A)  leftward shift of; movement down along 
B)  rightward shift of; movement down along 
C)  movement up along; leftward shift of 
D)  movement up along; rightward shift of

Most of the day-to-day power in monetary policy decisions lies with

Credit cards are

Barter eliminates the double coincidence of wants.

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Which of the following is an asset of the Fed?

Federal Reserve policy tools include all of the following EXCEPT

Which of the following is part of M2?

How does a currency drain affect the money multiplier?

Commercial banks are able to create money by

The money aggregate M1 consists of

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in financial innovation such as the introduction of ATMs?

According to the quantity theory of money, in the long run an increase in the quantity of money creates an increase in the price level but does not increase real GDP.

An argument in favor of 100 percent reserve banking is that

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is

When a bank has unplanned reserves

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

An increase in the opportunity cost of holding money creates a the money demand curve and an increase in real GDP creates a the money demand curve.

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

Most of the day-to-day power in monetary policy decisions lies with

Credit cards are

Barter eliminates the double coincidence of wants.

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Which of the following is an asset of the Fed?

Federal Reserve policy tools include all of the following EXCEPT

Which of the following is part of M2?

How does a currency drain affect the money multiplier?

Commercial banks are able to create money by

The money aggregate M1 consists of

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in financial innovation such as the introduction of ATMs?

According to the quantity theory of money, in the long run an increase in the quantity of money creates an increase in the price level but does not increase real GDP.

An argument in favor of 100 percent reserve banking is that

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is

When a bank has unplanned reserves

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

An increase in the opportunity cost of holding money creates a ________ the money demand curve and an increase in real GDP creates a ________ the money demand curve.

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 financial innovation such as the introduction of ATMs?

An increase in the opportunity cost of holding money creates a the money demand curve and an increase in real GDP creates a the money demand curve.