Question 1

List and discuss the four economic functions that depository institutions provide their customers.

Accepted Answer

Depository institutions create liquidity

Question 2

When the nominal interest rate rises, the quantity of money demanded decreases because

Accepted Answer

A)  people will buy fewer goods and hence hold less money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people shift funds from interest-bearing assets into money. 
D)  people shift funds from money holdings to interest-bearing assets. 
A)  people will buy fewer goods and hence hold less money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people shift funds from interest-bearing assets into money. 
D)  people shift funds from money holdings to interest-bearing assets.

Question 3

Reserve requirements are the

Accepted Answer

A)  minimum percentages of deposits that banks must hold as reserves. 
B)  minimum amount of an owner's financial resources that must be placed in a depository institution. 
C)  rules covering the types of deposits that banks may offer. 
D)  rules covering the types of assets that banks may purchase. 
A)  minimum percentages of deposits that banks must hold as reserves. 
B)  minimum amount of an owner's financial resources that must be placed in a depository institution. 
C)  rules covering the types of deposits that banks may offer. 
D)  rules covering the types of assets that banks may purchase.

Question 4

Which of the following is NOT part of the monetary base?

Accepted Answer

A)  currency 
B)  reserves of depository institutions 
C)  the public's checking deposits at commercial banks 
D)  commercial banks' reserves. 
A)  currency 
B)  reserves of depository institutions 
C)  the public's checking deposits at commercial banks 
D)  commercial banks' reserves.

Question 5

Members of the Federal Reserve System's Board of Governors

Accepted Answer

A)  are elected for life. 
B)  hold 14-year staggered terms. 
C)  are a special subcommittee of the Senate. 
D)  are elected at large by district banks. 
A)  are elected for life. 
B)  hold 14-year staggered terms. 
C)  are a special subcommittee of the Senate. 
D)  are elected at large by district banks.

Question 6

The monetary base is

Accepted Answer

A)  currency and reserves of depository institutions. 
B)  currency minus depository institutions' reserves. 
C)  depository institutions' reserves minus Federal Reserve notes. 
D)  the money borrowed by banks from other banks. 
A)  currency and reserves of depository institutions. 
B)  currency minus depository institutions' reserves. 
C)  depository institutions' reserves minus Federal Reserve notes. 
D)  the money borrowed by banks from other banks.

Question 7

Which of the following is NOT money?

Accepted Answer

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

Question 8

The commercial banks in Fundland have
Reserves $500 million
Loans $3,500 million
Deposits $4,000 million
Total assets $5,000 million
The banks hold no unplanned reserves.
a) Calculate the banks' desired reserve ratio.
b) An immigrant arrives in Fundland with $10 million, which she deposits in a bank. How much does the immigrant's bank lend initially?

Accepted Answer

a) With no unplanned reserves, the desir

Question 9

-The above table has the demand for money schedule.
a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate?
b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

Accepted Answer

a) The equilibrium interest rate is 4 pe

Question 10

University National Bank Balance Sheet
 
-The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all unplanned reserves were loaned out?

Accepted Answer

A)  $528 million 
B)  $352 million 
C)  $232 million 
D)  $0 
A)  $528 million 
B)  $352 million 
C)  $232 million 
D)  $0

Question 11

The quantity of real money demanded is

Accepted Answer

A)  negatively related to the price level. 
B)  positively related to the price level. 
C)  independent of the price level. 
D)  proportional to the price level 
A)  negatively related to the price level. 
B)  positively related to the price level. 
C)  independent of the price level. 
D)  proportional to the price level

Question 12

If the price level doubles, the

Accepted Answer

A)  nominal demand for money doubles. 
B)  nominal demand for money drops by half. 
C)  real demand for money drops by half. 
D)  real demand for money doubles. 
A)  nominal demand for money doubles. 
B)  nominal demand for money drops by half. 
C)  real demand for money drops by half. 
D)  real demand for money doubles.

Question 13

The Federal Open Market Committee

Accepted Answer

A)  meets weekly to set Fed policy. 
B)  has 7 voting members. 
C)  always includes the president of the Federal Reserve Bank of New York as a member. 
D)  does not include any members of the Board of Governors. 
A)  meets weekly to set Fed policy. 
B)  has 7 voting members. 
C)  always includes the president of the Federal Reserve Bank of New York as a member. 
D)  does not include any members of the Board of Governors.

Question 14

Which of the following is the central bank of the United States?

Accepted Answer

A)  Comptroller of the Currency 
B)  Treasury Department 
C)  Federal Reserve System 
D)  Office of the Budget 
A)  Comptroller of the Currency 
B)  Treasury Department 
C)  Federal Reserve System 
D)  Office of the Budget

Question 15

A bank creates money by

Accepted Answer

A)  lending its unplanned reserves. 
B)  purchasing currency from the Federal Reserve. 
C)  buying bonds from the Federal Reserve. 
D)  printing more checks. 
A)  lending its unplanned reserves. 
B)  purchasing currency from the Federal Reserve. 
C)  buying bonds from the Federal Reserve. 
D)  printing more checks.

Question 16

When money is accepted as payment in a market transaction, it is functioning as a

Accepted Answer

A)  store of value. 
B)  unit of accounting. 
C)  medium of exchange. 
D)  unit of investment. 
A)  store of value. 
B)  unit of accounting. 
C)  medium of exchange. 
D)  unit of investment.

Question 17

If an economy has no money, then all transactions must be conducted through the use of

Accepted Answer

A)  credit cards. 
B)  barter. 
C)  debit cards. 
D)  tobacco or wampum. 
A)  credit cards. 
B)  barter. 
C)  debit cards. 
D)  tobacco or wampum.

Question 18

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Accepted Answer

The statement is incorrect. Many of the

Question 19

Which Federal Reserve Bank president is always on the Federal Open Market Committee?

Accepted Answer

A)  New York 
B)  Chicago 
C)  St. Louis 
D)  Boston 
A)  New York 
B)  Chicago 
C)  St. Louis 
D)  Boston

Question 20

In the United States, the central bank is the

Accepted Answer

A)  Bank of America. 
B)  Federal Reserve System. 
C)  Federal Reserve Bank of New York. 
D)  Federal Reserve Bank of Washington D.C. 
A)  Bank of America. 
B)  Federal Reserve System. 
C)  Federal Reserve Bank of New York. 
D)  Federal Reserve Bank of Washington D.C.

List and discuss the four economic functions that depository institutions provide their customers.

When the nominal interest rate rises, the quantity of money demanded decreases because

Reserve requirements are the

Which of the following is NOT part of the monetary base?

Members of the Federal Reserve System's Board of Governors

The monetary base is

Which of the following is NOT money?

-The above table has the demand for money schedule. a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate? b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

University National Bank Balance Sheet -The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all unplanned reserves were loaned out?

The quantity of real money demanded is

If the price level doubles, the

The Federal Open Market Committee

Which of the following is the central bank of the United States?

A bank creates money by

When money is accepted as payment in a market transaction, it is functioning as a

If an economy has no money, then all transactions must be conducted through the use of

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Which Federal Reserve Bank president is always on the Federal Open Market Committee?

In the United States, the central bank is the

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

List and discuss the four economic functions that depository institutions provide their customers.

When the nominal interest rate rises, the quantity of money demanded decreases because

Reserve requirements are the

Which of the following is NOT part of the monetary base?

Members of the Federal Reserve System's Board of Governors

The monetary base is

Which of the following is NOT money?

-The above table has the demand for money schedule. a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate? b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

University National Bank Balance Sheet -The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all unplanned reserves were loaned out?

The quantity of real money demanded is

If the price level doubles, the

The Federal Open Market Committee

Which of the following is the central bank of the United States?

A bank creates money by

When money is accepted as payment in a market transaction, it is functioning as a

If an economy has no money, then all transactions must be conducted through the use of

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Which Federal Reserve Bank president is always on the Federal Open Market Committee?

In the United States, the central bank is the

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