Question 1

The quantity theory of money states that in the long run

Accepted Answer

A)  the price level will not consistently rise, it will fluctuate. 
B)  an increase in the quantity of money results in an equal percentage increase in the price level. 
C)  a rise in the price level rises causes the quantity of money to increase. 
D)  an increase in the quantity of money increases real GDP by a smaller percentage. 
A)  the price level will not consistently rise, it will fluctuate. 
B)  an increase in the quantity of money results in an equal percentage increase in the price level. 
C)  a rise in the price level rises causes the quantity of money to increase. 
D)  an increase in the quantity of money increases real GDP by a smaller percentage.

Question 2

"If the currency drain increases, the monetary base decreases." Explain whether the previous statement is correct or incorrect.

Accepted Answer

The statement is false. If the

Question 3

When the Fed lowers the federal funds rate, it can lead to

Accepted Answer

A)  the Fed selling government securities. 
B)  an increase in lending by banks. 
C)  a decrease in demand deposits. 
D)  a decrease in the quantity of money. 
A)  the Fed selling government securities. 
B)  an increase in lending by banks. 
C)  a decrease in demand deposits. 
D)  a decrease in the quantity of money.

Question 4

The main policy-making organ of the Federal Reserve System is

Accepted Answer

A)  the Board of Governors. 
B)  the Federal Reserve branch banks. 
C)  the Federal Reserve chairman and the Federal Reserve branch bank presidents. 
D)  the Federal Open Market Committee. 
A)  the Board of Governors. 
B)  the Federal Reserve branch banks. 
C)  the Federal Reserve chairman and the Federal Reserve branch bank presidents. 
D)  the Federal Open Market Committee.

Question 5

The required reserve ratio ranges from

Accepted Answer

A)  0 to 3 percent. 
B)  0 to 7 percent. 
C)  3 to 30 percent. 
D)  0 to 10 percent. 
A)  0 to 3 percent. 
B)  0 to 7 percent. 
C)  3 to 30 percent. 
D)  0 to 10 percent.

Question 6

The desired reserve ratio helps determine the amount of money banks can create.

Accepted Answer

A) True 
 B)False

Question 7

Federal Reserve policy tools include all of the following EXCEPT

Accepted Answer

A)  desired reserve ratios. 
B)  required reserve ratios. 
C)  the discount rate. 
D)  open market operations. 
A)  desired reserve ratios. 
B)  required reserve ratios. 
C)  the discount rate. 
D)  open market operations.

Question 8

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

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 9

Are the members of the Board of Governors of the Federal Reserve System elected officials?

Accepted Answer

No, the members are not electe

Question 10

A bank can only make a loan if it has

Accepted Answer

A)  unplanned reserves. 
B)  a creditworthy customer willing to pay a high interest rate. 
C)  permission from the Federal Reserve. 
D)  reserves equal to its deposits. 
A)  unplanned reserves. 
B)  a creditworthy customer willing to pay a high interest rate. 
C)  permission from the Federal Reserve. 
D)  reserves equal to its deposits.

Question 11

In the economy of Briskland, the commercial banks have deposits of $500 billion. Their reserves are $50 billion, 80 percent of which is in deposits with the Central Bank. There is $20 billion in Central Bank notes outside the banks, and there are no coins.
a) What is the monetary base?
b) If all the deposits are money, what is the total quantity of money?
c) What is the banks' reserve ratio?
d) What is the currency drain as a percentage of the quantity of deposits?

Accepted Answer

a) The monetary base is the sum of Centr

Question 12

When price levels rise, the quantity of nominal money demanded will ________ and the quantity of real money demanded will ________.

Accepted Answer

A)  increase; stay the same 
B)  increase; increase 
C)  increase; decrease 
D)  decrease; increase 
A)  increase; stay the same 
B)  increase; increase 
C)  increase; decrease 
D)  decrease; increase

Question 13

Liquidity is the same as

Accepted Answer

A)  easy conversion of money to an asset, allowing for loss of value. 
B)  diversification of an investor's store of value. 
C)  easy conversion of an asset to a means of payment, allowing for loss of value. 
D)  easy conversion of an asset to a means of payment, with little or no loss of value. 
A)  easy conversion of money to an asset, allowing for loss of value. 
B)  diversification of an investor's store of value. 
C)  easy conversion of an asset to a means of payment, allowing for loss of value. 
D)  easy conversion of an asset to a means of payment, with little or no loss of value.

Question 14

If V = 5, P = $3, and Y = 50, then the quantity of money equals

Accepted Answer

A)  $10. 
B)  $30. 
C)  $150. 
D)  $300. 
A)  $10. 
B)  $30. 
C)  $150. 
D)  $300.

Question 15

Barter is

Accepted Answer

A)  another type of money. 
B)  printing too much money. 
C)  the exchange of goods and services directly for other goods and services. 
D)  the exchange of goods and services for any type of money. 
A)  another type of money. 
B)  printing too much money. 
C)  the exchange of goods and services directly for other goods and services. 
D)  the exchange of goods and services for any type of money.

Question 16

Are credit cards or debit cards money? Explain your answer.

Accepted Answer

Neither credit cards nor debit cards are

Question 17

When the Fed conducts an open market operation by purchasing securities from a bank,

Accepted Answer

A)  public holdings of securities increase. 
B)  the bank's deposits increase but its reserves do not change. 
C)  the bank's deposits increase but its reserves decrease. 
D)  the bank's reserves increase. 
A)  public holdings of securities increase. 
B)  the bank's deposits increase but its reserves do not change. 
C)  the bank's deposits increase but its reserves decrease. 
D)  the bank's reserves increase.

Question 18

Read the following statements and determine if they are true or false.
I. According to the quantity theory of money, an increase in the growth rate of the quantity of money increases inflation in the long run.
II. Historical and international data show that there is no correlation between inflation and money
Growth.

Accepted Answer

A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false. 
D)  I is false and II is true. 
A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false. 
D)  I is false and II is true.

Question 19

The president of which Federal Reserve Bank is always a voting member of the FOMC?

Accepted Answer

The president of the New York Federal Re

Question 20

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Accepted Answer

A)  increases the quantity of money by $35 billion. 
B)  increases the quantity of money by $2.86 billion. 
C)  increases the quantity of money by $3.5 billion. 
D)  increases the quantity of money by $10 billion. 
A)  increases the quantity of money by $35 billion. 
B)  increases the quantity of money by $2.86 billion. 
C)  increases the quantity of money by $3.5 billion. 
D)  increases the quantity of money by $10 billion.

The quantity theory of money states that in the long run

"If the currency drain increases, the monetary base decreases." Explain whether the previous statement is correct or incorrect.

When the Fed lowers the federal funds rate, it can lead to

The main policy-making organ of the Federal Reserve System is

The required reserve ratio ranges from

The desired reserve ratio helps determine the amount of money banks can create.

Federal Reserve policy tools include all of the following EXCEPT

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

Are the members of the Board of Governors of the Federal Reserve System elected officials?

A bank can only make a loan if it has

When price levels rise, the quantity of nominal money demanded will and the quantity of real money demanded will .

Liquidity is the same as

If V = 5, P = $3, and Y = 50, then the quantity of money equals

Barter is

Are credit cards or debit cards money? Explain your answer.

When the Fed conducts an open market operation by purchasing securities from a bank,

The president of which Federal Reserve Bank is always a voting member of the FOMC?

If the money multiplier is 3.5, a $10 billion increase in the monetary base

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

The quantity theory of money states that in the long run

"If the currency drain increases, the monetary base decreases." Explain whether the previous statement is correct or incorrect.

When the Fed lowers the federal funds rate, it can lead to

The main policy-making organ of the Federal Reserve System is

The required reserve ratio ranges from

The desired reserve ratio helps determine the amount of money banks can create.

Federal Reserve policy tools include all of the following EXCEPT

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

Are the members of the Board of Governors of the Federal Reserve System elected officials?

A bank can only make a loan if it has

When price levels rise, the quantity of nominal money demanded will ________ and the quantity of real money demanded will ________.

Liquidity is the same as

If V = 5, P = $3, and Y = 50, then the quantity of money equals

Barter is

Are credit cards or debit cards money? Explain your answer.

When the Fed conducts an open market operation by purchasing securities from a bank,

The president of which Federal Reserve Bank is always a voting member of the FOMC?

If the money multiplier is 3.5, a $10 billion increase in the monetary base

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 real GDP?

When price levels rise, the quantity of nominal money demanded will and the quantity of real money demanded will .