Question 1

If the Fed sells securities to commercial banks, there is no money multiplier effect.

Accepted Answer

A) True 
 B)False

Question 2

Credit cards are

Accepted Answer

A)  money but are not a large part of the money supply. 
B)  not money under any circumstance. 
C)  money and are the largest part of the money supply. 
D)  not money because they are not made of paper. 
A)  money but are not a large part of the money supply. 
B)  not money under any circumstance. 
C)  money and are the largest part of the money supply. 
D)  not money because they are not made of paper.

Question 3

Suppose that M = 300, P = 150, and Y = 6. Then the velocity of circulation equals

Accepted Answer

A)  0.02. 
B)  0.50. 
C)  2.00. 
D)  3.00. 
A)  0.02. 
B)  0.50. 
C)  2.00. 
D)  3.00.

Question 4

The equation of exchange states that the quantity of money

Accepted Answer

A)  multiplied by the velocity of circulation equals nominal GDP. 
B)  divided by the price level equals real GDP. 
C)  multiplied by nominal GDP equals the price level. 
D)  divided by nominal GDP equals real GDP. 
A)  multiplied by the velocity of circulation equals nominal GDP. 
B)  divided by the price level equals real GDP. 
C)  multiplied by nominal GDP equals the price level. 
D)  divided by nominal GDP equals real GDP.

Question 5

A bank's reserves include

Accepted Answer

A)  the cash in its vault plus the value of its depositors' accounts. 
B)  the cash in its vault plus its deposits held at a Federal Reserve bank. 
C)  the cash in its vault plus any gold held for the bank at Fort Knox. 
D)  its common stock holdings, the cash in its vault, and any deposits at a Federal Reserve bank. 
A)  the cash in its vault plus the value of its depositors' accounts. 
B)  the cash in its vault plus its deposits held at a Federal Reserve bank. 
C)  the cash in its vault plus any gold held for the bank at Fort Knox. 
D)  its common stock holdings, the cash in its vault, and any deposits at a Federal Reserve bank.

Question 6

A decrease in the nominal interest rate ________ the opportunity cost of holding money.

Accepted Answer

A)  increases 
B)  decreases 
C)  can increase or decrease 
D)  None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money. 
A)  increases 
B)  decreases 
C)  can increase or decrease 
D)  None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money.

Question 7

-The table shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, the maximum additional amount that Ralph's Bank can loan is equal to

Accepted Answer

A)  $50. 
B)  $500. 
C)  $450. 
D)  $2,500. 
A)  $50. 
B)  $500. 
C)  $450. 
D)  $2,500.

Question 8

The equation of exchange states that the price level is equal to

Accepted Answer

A)  the quantity of money. 
B)  the velocity of circulation multiplied by the quantity of money divided by real GDP. 
C)  real GDP multiplied by the velocity of circulation divided by nominal GDP. 
D)  the velocity of circulation. 
A)  the quantity of money. 
B)  the velocity of circulation multiplied by the quantity of money divided by real GDP. 
C)  real GDP multiplied by the velocity of circulation divided by nominal GDP. 
D)  the velocity of circulation.

Question 9

The opportunity cost of holding money is the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 10

The Federal Open Market Committee (FOMC)

Accepted Answer

A)  consists of the 12 districts of the Federal Reserve. 
B)  is the 7-member group that oversees the Federal Reserve. 
C)  is the 12-member monetary policy committee of the Federal Reserve. 
D)  is the 50-member organization of state banking regulators of the Federal Reserve. 
A)  consists of the 12 districts of the Federal Reserve. 
B)  is the 7-member group that oversees the Federal Reserve. 
C)  is the 12-member monetary policy committee of the Federal Reserve. 
D)  is the 50-member organization of state banking regulators of the Federal Reserve.

Question 11

Which of the following is money?

Accepted Answer

A)  checking deposits 
B)  checks in the checkbook 
C)  credit cards 
D)  All of the above are money. 
A)  checking deposits 
B)  checks in the checkbook 
C)  credit cards 
D)  All of the above are money.

Question 12

Money market mutual funds

Accepted Answer

A)  are provided by the Federal Reserve as liquidity for private banks. 
B)  have no restrictions on shareholder withdrawals. 
C)  do not provide any checking services to their owners. 
D)  allow shareholders to write check on their funds. 
A)  are provided by the Federal Reserve as liquidity for private banks. 
B)  have no restrictions on shareholder withdrawals. 
C)  do not provide any checking services to their owners. 
D)  allow shareholders to write check on their funds.

Question 13

An increase in the nominal interest rate creates a ________ the money demand curve, and an increase in real GDP creates a ________ the money demand curve.

Accepted Answer

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

Question 14

An open market sale of securities by the Fed

Accepted Answer

A)  decreases banks' reserves and increases banks' securities. 
B)  increases banks' reserves and decreases banks' securities. 
C)  increases banks' total assets. 
D)  involves a bank selling government securities to the Fed. 
A)  decreases banks' reserves and increases banks' securities. 
B)  increases banks' reserves and decreases banks' securities. 
C)  increases banks' total assets. 
D)  involves a bank selling government securities to the Fed.

Question 15

Commercial banks do NOT

Accepted Answer

A)  buy U.S. government Treasury bills. 
B)  accept deposits from their customers. 
C)  make loans to creditworthy individuals and businesses. 
D)  determine what assets are money. 
A)  buy U.S. government Treasury bills. 
B)  accept deposits from their customers. 
C)  make loans to creditworthy individuals and businesses. 
D)  determine what assets are money.

Question 16

Discuss the quantity theory of money. Be sure to mention the velocity of circulation and the equation of exchange.

Accepted Answer

The quantity theory of money is the prop

Question 17

According to the quantity theory of money, in the long run

Accepted Answer

A)  an increase in the quantity of money creates an increase the price level but no increase in real GDP. 
B)  the quantity of money in the economy will always be just the right amount. 
C)  an increase in the quantity of money creates an increase in the price level and in real GDP. 
D)  None of the above answers are correct. 
A)  an increase in the quantity of money creates an increase the price level but no increase in real GDP. 
B)  the quantity of money in the economy will always be just the right amount. 
C)  an increase in the quantity of money creates an increase in the price level and in real GDP. 
D)  None of the above answers are correct.

Question 18

If real GDP decreases, the demand for money curve will shift

Accepted Answer

A)  leftward and the interest rate will rise. 
B)  leftward and the interest rate will fall. 
C)  rightward and the interest rate will rise. 
D)  rightward and the interest rate will fall. 
A)  leftward and the interest rate will rise. 
B)  leftward and the interest rate will fall. 
C)  rightward and the interest rate will rise. 
D)  rightward and the interest rate will fall.

Question 19

If a savings and loan "pools risk," which of the following must it do?

Accepted Answer

A)  take funds in from a large number of lenders 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  lend money to a large number of firms 
D)  Both answers A and C are correct. 
A)  take funds in from a large number of lenders 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  lend money to a large number of firms 
D)  Both answers A and C are correct.

Question 20

Credit cards were introduced in 1959. In 2014, the U.S. credit card balance was $880 billion. Which of the following is TRUE?

Accepted Answer

A)  The $880 billion balance is part of M2 but not part of M1. 
B)  The $880 billion balance is part of both M1 and M2. 
C)  Only that portion of the $800 billion actually charged in 2014 is counted in M1 and M2. 
D)  No part of the $880 billion balance is counted in M1 and M2. 
A)  The $880 billion balance is part of M2 but not part of M1. 
B)  The $880 billion balance is part of both M1 and M2. 
C)  Only that portion of the $800 billion actually charged in 2014 is counted in M1 and M2. 
D)  No part of the $880 billion balance is counted in M1 and M2.

If the Fed sells securities to commercial banks, there is no money multiplier effect.

Credit cards are

Suppose that M = 300, P = 150, and Y = 6. Then the velocity of circulation equals

The equation of exchange states that the quantity of money

A bank's reserves include

A decrease in the nominal interest rate ________ the opportunity cost of holding money.

-The table shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, the maximum additional amount that Ralph's Bank can loan is equal to

The equation of exchange states that the price level is equal to

The opportunity cost of holding money is the nominal interest rate.

The Federal Open Market Committee (FOMC)

Which of the following is money?

Money market mutual funds

An increase in the nominal interest rate creates a the money demand curve, and an increase in real GDP creates a the money demand curve.

An open market sale of securities by the Fed

Commercial banks do NOT

Discuss the quantity theory of money. Be sure to mention the velocity of circulation and the equation of exchange.

According to the quantity theory of money, in the long run

If real GDP decreases, the demand for money curve will shift

If a savings and loan "pools risk," which of the following must it do?

Credit cards were introduced in 1959. In 2014, the U.S. credit card balance was $880 billion. Which of the following is TRUE?

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

If the Fed sells securities to commercial banks, there is no money multiplier effect.

Credit cards are

Suppose that M = 300, P = 150, and Y = 6. Then the velocity of circulation equals

The equation of exchange states that the quantity of money

A bank's reserves include

A decrease in the nominal interest rate ________ the opportunity cost of holding money.

-The table shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, the maximum additional amount that Ralph's Bank can loan is equal to

The equation of exchange states that the price level is equal to

The opportunity cost of holding money is the nominal interest rate.

The Federal Open Market Committee (FOMC)

Which of the following is money?

Money market mutual funds

An increase in the nominal interest rate creates a ________ the money demand curve, and an increase in real GDP creates a ________ the money demand curve.

An open market sale of securities by the Fed

Commercial banks do NOT

Discuss the quantity theory of money. Be sure to mention the velocity of circulation and the equation of exchange.

According to the quantity theory of money, in the long run

If real GDP decreases, the demand for money curve will shift

If a savings and loan "pools risk," which of the following must it do?

Credit cards were introduced in 1959. In 2014, the U.S. credit card balance was $880 billion. Which of the following is TRUE?

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

An increase in the nominal interest rate creates a the money demand curve, and an increase in real GDP creates a the money demand curve.