Question 1

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. B

Question 2

The definition of M2 includes

Accepted Answer

A)  M1. 
B)  savings deposits. 
C)  time deposits. 
D)  all of the above 
A)  M1. 
B)  savings deposits. 
C)  time deposits. 
D)  all of the above D

Question 3

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. A

Question 4

Which of the following is the most liquid asset?

Accepted Answer

A)  money 
B)  land 
C)  a government bond 
D)  a share of stock 
A)  money 
B)  land 
C)  a government bond 
D)  a share of stock

Question 5

When the Fed sells one million dollars in securities to a commercial bank,

Accepted Answer

A)  the Fed's total assets increase by one million dollars. 
B)  the commercial bank's total assets decrease by one million dollars. 
C)  there is no change in the total assets of the Fed or the commercial bank. 
D)  None of the above answers is correct. 
A)  the Fed's total assets increase by one million dollars. 
B)  the commercial bank's total assets decrease by one million dollars. 
C)  there is no change in the total assets of the Fed or the commercial bank. 
D)  None of the above answers is correct.

Question 6

The equation of exchange becomes the same as the quantity theory of money by assuming that the velocity of circulation ________ when the quantity of money changes and potential GDP ________ when the quantity of money changes.

Accepted Answer

A)  changes; changes 
B)  changes; does not change 
C)  does not change; changes 
D)  does not change; does not change 
A)  changes; changes 
B)  changes; does not change 
C)  does not change; changes 
D)  does not change; does not change

Question 7

Which of the following is a primary function of money?

Accepted Answer

A)  to serve as a unit of account 
B)  to serve as an encouragement to work 
C)  to reduce the burden of excessive imports 
D)  to raise funds for the government 
A)  to serve as a unit of account 
B)  to serve as an encouragement to work 
C)  to reduce the burden of excessive imports 
D)  to raise funds for the government

Question 8

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 9

Checks are

Accepted Answer

A)  the largest component of the money supply. 
B)  not money. 
C)  only part of M2 but not part of M1. 
D)  part of M1 but not part of M2. 
A)  the largest component of the money supply. 
B)  not money. 
C)  only part of M2 but not part of M1. 
D)  part of M1 but not part of M2.

Question 10

How are the nominal and real demands for money related to changes in the price level?

Accepted Answer

When the price level rises the nominal d

Question 11

Explain which of the following count as money.
a) a check in Ann's checkbook
b) currency in Ann's bank
c) currency in Ann's purse
d) Ann's checking deposit

Accepted Answer

Only parts (c),currency in Ann's purse,a

Question 12

Give an example of how money functions as a unit of account.

Accepted Answer

Money functions as a unit of a

Question 13

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 14

If real GDP is $10 trillion and the velocity of circulation is 2,the quantity of money

Accepted Answer

A)  is $2 trillion. 
B)  is $5 trillion. 
C)  is $20 trillion. 
D)  cannot be determined from the information given. 
A)  is $2 trillion. 
B)  is $5 trillion. 
C)  is $20 trillion. 
D)  cannot be determined from the information given.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The quantity theory asserts that real GDP is

Accepted Answer

A)  not influenced by the quantity of money. 
B)  never different from potential GDP. 
C)  equal to nominal GDP multiplied by the quantity of money. 
D)  equal to nominal GDP divided by the quantity of money. 
A)  not influenced by the quantity of money. 
B)  never different from potential GDP. 
C)  equal to nominal GDP multiplied by the quantity of money. 
D)  equal to nominal GDP divided by the quantity of money.

Question 17

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

Accepted Answer

A)  the quantity of money. 
B)  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)  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 18

According to the quantity theory of money,a 25 percent change in M,the quantity of money,leads to a 25 percent change in

Accepted Answer

A)  V, the velocity of circulation. 
B)  P, the price level. 
C)  Y, real GDP. 
D)  R, the interest rate. 
A)  V, the velocity of circulation. 
B)  P, the price level. 
C)  Y, real GDP. 
D)  R, the interest rate.

Question 19

The U.S.historical evidence

Accepted Answer

A)  generally supports the quantity theory of money in the long run. 
B)  does not support the quantity theory of money. 
C)  demonstrates that there is no correlation between the money growth rate and inflation. 
D)  shows that a higher inflation rate causes an increase in the money growth rate. 
A)  generally supports the quantity theory of money in the long run. 
B)  does not support the quantity theory of money. 
C)  demonstrates that there is no correlation between the money growth rate and inflation. 
D)  shows that a higher inflation rate causes an increase in the money growth rate.

Question 20

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

Accepted Answer

A)  Chemical Bank's deposits of reserves at the Fed 
B)  First Bank's required reserves held at the Federal Reserve 
C)  Federal Reserve notes 
D)  U.S. government securities owned by the Fed 
A)  Chemical Bank's deposits of reserves at the Fed 
B)  First Bank's required reserves held at the Federal Reserve 
C)  Federal Reserve notes 
D)  U.S. government securities owned by the Fed

Members of the Federal Reserve System's Board of Governors

The definition of M2 includes

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

Which of the following is the most liquid asset?

When the Fed sells one million dollars in securities to a commercial bank,

The equation of exchange becomes the same as the quantity theory of money by assuming that the velocity of circulation when the quantity of money changes and potential GDP when the quantity of money changes.

Which of the following is a primary function of money?

Federal Reserve policy tools include all of the following EXCEPT

Checks are

How are the nominal and real demands for money related to changes in the price level?

Explain which of the following count as money. a) a check in Ann's checkbook b) currency in Ann's bank c) currency in Ann's purse d) Ann's checking deposit

Give an example of how money functions as a unit of account.

The quantity theory of money states that in the long run

If real GDP is $10 trillion and the velocity of circulation is 2,the quantity of money

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

The quantity theory asserts that real GDP is

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

According to the quantity theory of money,a 25 percent change in M,the quantity of money,leads to a 25 percent change in

The U.S.historical evidence

Which of the following is NOT a part of 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

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 8: Money, The Price Level, and Inflation

Members of the Federal Reserve System's Board of Governors

The definition of M2 includes

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

Which of the following is the most liquid asset?

When the Fed sells one million dollars in securities to a commercial bank,

The equation of exchange becomes the same as the quantity theory of money by assuming that the velocity of circulation ________ when the quantity of money changes and potential GDP ________ when the quantity of money changes.

Which of the following is a primary function of money?

Federal Reserve policy tools include all of the following EXCEPT

Checks are

How are the nominal and real demands for money related to changes in the price level?

Explain which of the following count as money. a) a check in Ann's checkbook b) currency in Ann's bank c) currency in Ann's purse d) Ann's checking deposit

Give an example of how money functions as a unit of account.

The quantity theory of money states that in the long run

If real GDP is $10 trillion and the velocity of circulation is 2,the quantity of money

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

The quantity theory asserts that real GDP is

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

According to the quantity theory of money,a 25 percent change in M,the quantity of money,leads to a 25 percent change in

The U.S.historical evidence

Which of the following is NOT a part of 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

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

The equation of exchange becomes the same as the quantity theory of money by assuming that the velocity of circulation when the quantity of money changes and potential GDP when the quantity of money changes.