Question 1

M1 differs from M2 in that

Accepted Answer

A)  M1 includes currency and balances held in chequing accounts,which are not included in M2. 
B)  M2 includes personal deposits and non-personal demand and notice deposits,which are not included in M1. 
C)  M2 includes small savings accounts,and money market mutual funds,which are not included in M1. 
D)  M1 is a broader measure of the money supply than M2. 
E)  the assets in M2 are more liquid than the assets in M1. 
A)  M1 includes currency and balances held in chequing accounts,which are not included in M2. 
B)  M2 includes personal deposits and non-personal demand and notice deposits,which are not included in M1. 
C)  M2 includes small savings accounts,and money market mutual funds,which are not included in M1. 
D)  M1 is a broader measure of the money supply than M2. 
E)  the assets in M2 are more liquid than the assets in M1. B

Question 2

In Macroland,currency held by the public is 2000 econs,bank reserves are 300 econs,and the desired reserve-deposit ratio is 10%.If the central bank sells government bonds to the public in exchange for 200 econs that are then destroyed,the money supply in Macroland will decrease from _________ econs to _________ econs,assuming that the public does not wish to change the amount of currency it holds.

Accepted Answer

A)  2,000;1,800 
B)  2,300;2,100 
C)  3,000;1,000 
D)  5,000;3,000 
E)  6,000;2,000 
A)  2,000;1,800 
B)  2,300;2,100 
C)  3,000;1,000 
D)  5,000;3,000 
E)  6,000;2,000 D

Question 3

In Macroland,currency held by the public is 2000 econs,bank reserves are 600 econs,and the desired reserve-deposit ratio is 15%.If the central bank sells government bonds to the public in exchange for 300 econs that are then destroyed,the money supply in Macroland will decrease from ________ econs to ________ econs,assuming that the public does not wish to change the amount of currency it holds.

Accepted Answer

A)  2,000;1,700 
B)  2,600;2,300 
C)  2,990;2,645 
D)  6,000;4,000 
E)  7,000;6,000 
A)  2,000;1,700 
B)  2,600;2,300 
C)  2,990;2,645 
D)  6,000;4,000 
E)  7,000;6,000 D

Question 4

When the actual reserve-deposit ratio exceeds the desired reserve-deposit ratio,banks will

Accepted Answer

A)  do nothing because this is a profitable situation. 
B)  stop making loans. 
C)  send the extra reserves to the central bank. 
D)  request that customers withdraw deposits from the bank. 
E)  make more loans in order to earn interest. 
A)  do nothing because this is a profitable situation. 
B)  stop making loans. 
C)  send the extra reserves to the central bank. 
D)  request that customers withdraw deposits from the bank. 
E)  make more loans in order to earn interest.

Question 5

Based on the following information,compute the value of the M2 measure of the money supply.

Accepted Answer

A)  $20 billion. 
B)  $50 billion. 
C)  $130 billion. 
D)  $550 billion. 
E)  $630 billion. 
A)  $20 billion. 
B)  $50 billion. 
C)  $130 billion. 
D)  $550 billion. 
E)  $630 billion.

Question 6

A promise by the central bank to maintain its key policy rate at the effective lower bound for an extended period of time is called a(n)___________ commitment.

Accepted Answer

A)  overnight lending 
B)  prime rate 
C)  credit easing. 
D)  zero interest rate. 
E)  long-term real interest rate 
A)  overnight lending 
B)  prime rate 
C)  credit easing. 
D)  zero interest rate. 
E)  long-term real interest rate

Question 7

When the central bank sells $1,000,000 worth of government bonds to the public,the money supply

Accepted Answer

A)  decreases by more than $1,000,000. 
B)  decreases by $1,000,000. 
C)  decreases by less than $1,000,000. 
D)  does not change. 
E)  increases by $1,000,000. 
A)  decreases by more than $1,000,000. 
B)  decreases by $1,000,000. 
C)  decreases by less than $1,000,000. 
D)  does not change. 
E)  increases by $1,000,000.

Question 8

If a bank's desired reserve-deposit ratio is 33% and it has deposit liabilities of $100 million and reserves of $50 million,it

Accepted Answer

A)  has too few reserves and will reduce its lending. 
B)  has excess reserves and will increase its lending. 
C)  has the correct amount of reserves and outstanding loans. 
D)  should increase the amount of its reserves. 
E)  should decrease the amount of its reserves. 
A)  has too few reserves and will reduce its lending. 
B)  has excess reserves and will increase its lending. 
C)  has the correct amount of reserves and outstanding loans. 
D)  should increase the amount of its reserves. 
E)  should decrease the amount of its reserves.

Question 9

-The table above represents a bank's T-account.Suppose it is the only bank in town and individuals in town hold no cash.Assuming the reserve ratio is 10%,what will be the bank's loans at the end of the money creation process?

Accepted Answer

A)  $180,000. 
B)  $200,000. 
C)  $1,800,000. 
D)  $2,000,000. 
E)  $2,200,000. 
A)  $180,000. 
B)  $200,000. 
C)  $1,800,000. 
D)  $2,000,000. 
E)  $2,200,000.

Question 10

Banks hold reserves

Accepted Answer

A)  to earn interest. 
B)  to increase profits. 
C)  to escape the double coincidence of wants. 
D)  to meet depositor withdrawals and payments. 
E)  only because the government requires them to hold reserves. 
A)  to earn interest. 
B)  to increase profits. 
C)  to escape the double coincidence of wants. 
D)  to meet depositor withdrawals and payments. 
E)  only because the government requires them to hold reserves.

Question 11

The M1 measure of money consists of the sum of

Accepted Answer

A)  currency and demand deposits. 
B)  currency and travellers' cheques. 
C)  currency,demand deposits,and savings deposits. 
D)  demand deposits and travellers' cheques. 
E)  demand and savings deposits. 
A)  currency and demand deposits. 
B)  currency and travellers' cheques. 
C)  currency,demand deposits,and savings deposits. 
D)  demand deposits and travellers' cheques. 
E)  demand and savings deposits.

Question 12

An episode when depositors,spurred by news or rumours of the imminent bankruptcy of a particular bank,rush to withdraw their deposits from that bank is called a(n)

Accepted Answer

A)  open-market withdrawal. 
B)  open-market sale. 
C)  banking panic. 
D)  bank run. 
E)  reserve requirement crisis. 
A)  open-market withdrawal. 
B)  open-market sale. 
C)  banking panic. 
D)  bank run. 
E)  reserve requirement crisis.

Question 13

The equation stating that the rate of growth of the money supply equals the rate of inflation applies better to countries with ________ than to countries with ________.

Accepted Answer

A)  zero inflation;hyperinflation 
B)  zero inflation;low or moderate inflation 
C)  low or moderate inflation;zero inflation 
D)  low or moderate inflation;high inflation 
E)  hyperinflation;low or moderate inflation 
A)  zero inflation;hyperinflation 
B)  zero inflation;low or moderate inflation 
C)  low or moderate inflation;zero inflation 
D)  low or moderate inflation;high inflation 
E)  hyperinflation;low or moderate inflation

Question 14

When an individual deposits currency into a chequing account,

Accepted Answer

A)  bank reserves increase,which increases the amount banks can lend,thereby increasing the money supply. 
B)  bank reserves decrease,which reduces the amount banks can lend,thereby reducing the money supply. 
C)  bank reserves are unchanged. 
D)  bank reserves decrease,which increases the amount banks can lend,thereby increasing the money supply. 
E)  bank reserves increase,which reduces the amount banks can lend,thereby reducing the money supply. 
A)  bank reserves increase,which increases the amount banks can lend,thereby increasing the money supply. 
B)  bank reserves decrease,which reduces the amount banks can lend,thereby reducing the money supply. 
C)  bank reserves are unchanged. 
D)  bank reserves decrease,which increases the amount banks can lend,thereby increasing the money supply. 
E)  bank reserves increase,which reduces the amount banks can lend,thereby reducing the money supply.

Question 15

After the central bank decreases reserves in the banking system through open-market sales,banks reduce deposits through multiple rounds of calling in loans and losing deposits until the

Accepted Answer

A)  central bank requires them to stop. 
B)  reserve-deposit ratio reaches one-half. 
C)  actual reserve-deposit ratio is greater than the desired reserve-deposit ratio. 
D)  actual reserve-deposit ratio is equal to the desired reserve-deposit ratio. 
E)  actual reserve-deposit ratio is less than the desired reserve-deposit ratio. 
A)  central bank requires them to stop. 
B)  reserve-deposit ratio reaches one-half. 
C)  actual reserve-deposit ratio is greater than the desired reserve-deposit ratio. 
D)  actual reserve-deposit ratio is equal to the desired reserve-deposit ratio. 
E)  actual reserve-deposit ratio is less than the desired reserve-deposit ratio.

Question 16

An episode when depositors,spurred by news or rumours of the imminent bankruptcy of one or more banks,rush to withdraw their deposits from the banking system is called a(n)

Accepted Answer

A)  open-market withdrawal. 
B)  open-market sale. 
C)  banking panic. 
D)  bank run. 
E)  reserve requirement crisis. 
A)  open-market withdrawal. 
B)  open-market sale. 
C)  banking panic. 
D)  bank run. 
E)  reserve requirement crisis.

Question 17

If bank reserves are 200,the public holds 400 in currency,and the desired reserve-deposit ratio is 20%,deposits are ________ and the money supply is ________.

Accepted Answer

A)  200;600 
B)  400;800 
C)  600;1,000 
D)  1,000;1,400 
E)  2,400;2,800 
A)  200;600 
B)  400;800 
C)  600;1,000 
D)  1,000;1,400 
E)  2,400;2,800

Question 18

Holding money as a store of wealth has the advantage of being useful as a medium of exchange.The disadvantages of holding your wealth in the form of money are that it

Accepted Answer

A)  may be stolen or lost,and people may think you're a smuggler or drug dealer. 
B)  is difficult to trace,and may be lost or stolen. 
C)  may be lost or stolen,and usually pays no interest. 
D)  pays no interest,and it is difficult to trace. 
E)  pays no interest,and people may think you're a smuggler or drug dealer. 
A)  may be stolen or lost,and people may think you're a smuggler or drug dealer. 
B)  is difficult to trace,and may be lost or stolen. 
C)  may be lost or stolen,and usually pays no interest. 
D)  pays no interest,and it is difficult to trace. 
E)  pays no interest,and people may think you're a smuggler or drug dealer.

Question 19

The money supply in Macroland is currently 3,000,bank reserves are 250,currency held by the public is 500,and the banks' desired reserve-deposit ratio is 10%.Assuming that the values of the currency held by the public and the desired reserve-deposit ratio do not change,if the Central Bank of Macroland wishes to decrease the money supply to 2,500,then it should conduct an open-market _________ government bonds to/from the public.

Accepted Answer

A)  purchase of 50 
B)  purchase of 250 
C)  purchase of 500 
D)  sale of 50 
E)  sale of 500 
A)  purchase of 50 
B)  purchase of 250 
C)  purchase of 500 
D)  sale of 50 
E)  sale of 500

Question 20

Given a required reserve-deposit ratio of 5% for all banks and assuming individuals hold no cash,total bank reserves of $400 billion can support deposits of

Accepted Answer

A)  $400 billion. 
B)  $800 billion. 
C)  $4,000 billion. 
D)  $8,000 billion. 
E)  $9,000 billion. 
A)  $400 billion. 
B)  $800 billion. 
C)  $4,000 billion. 
D)  $8,000 billion. 
E)  $9,000 billion.

M1 differs from M2 in that

When the actual reserve-deposit ratio exceeds the desired reserve-deposit ratio,banks will

Based on the following information,compute the value of the M2 measure of the money supply.

A promise by the central bank to maintain its key policy rate at the effective lower bound for an extended period of time is called a(n)___________ commitment.

When the central bank sells $1,000,000 worth of government bonds to the public,the money supply

If a bank's desired reserve-deposit ratio is 33% and it has deposit liabilities of $100 million and reserves of $50 million,it

-The table above represents a bank's T-account.Suppose it is the only bank in town and individuals in town hold no cash.Assuming the reserve ratio is 10%,what will be the bank's loans at the end of the money creation process?

Banks hold reserves

The M1 measure of money consists of the sum of

An episode when depositors,spurred by news or rumours of the imminent bankruptcy of a particular bank,rush to withdraw their deposits from that bank is called a(n)

The equation stating that the rate of growth of the money supply equals the rate of inflation applies better to countries with than to countries with .

When an individual deposits currency into a chequing account,

After the central bank decreases reserves in the banking system through open-market sales,banks reduce deposits through multiple rounds of calling in loans and losing deposits until the

An episode when depositors,spurred by news or rumours of the imminent bankruptcy of one or more banks,rush to withdraw their deposits from the banking system is called a(n)

If bank reserves are 200,the public holds 400 in currency,and the desired reserve-deposit ratio is 20%,deposits are and the money supply is .

Holding money as a store of wealth has the advantage of being useful as a medium of exchange.The disadvantages of holding your wealth in the form of money are that it

Given a required reserve-deposit ratio of 5% for all banks and assuming individuals hold no cash,total bank reserves of $400 billion can support deposits of

Measuring Macroeconomic Performance: Output and Prices

Measuring Macroeconomic Performance: Saving and Wealth

Measuring Macroeconomic Performance: Wages, Employment and the Labour Market

Short-Term Economic Fluctuations

Spending and Output in the Short Run

Fiscal Policy

Money, Prices and the Reserve Bank

The Reserve Bank and the Economy

Macroeconomic Policy

The Economy in the Long Run: an Introduction to Economic Growth

The Production Function Approach to Understanding Growth

Savings, Capital Formation and Comparative Economic Growth

International Trade

Exchange Rates and the Open Economy

The Balance of Payments: Net Exports and International Capital Flows

Filters

Exam 9: The Aggregate Demand - Aggregate Supply Model

M1 differs from M2 in that

When the actual reserve-deposit ratio exceeds the desired reserve-deposit ratio,banks will

Based on the following information,compute the value of the M2 measure of the money supply.

A promise by the central bank to maintain its key policy rate at the effective lower bound for an extended period of time is called a(n)___________ commitment.

When the central bank sells $1,000,000 worth of government bonds to the public,the money supply

If a bank's desired reserve-deposit ratio is 33% and it has deposit liabilities of $100 million and reserves of $50 million,it

-The table above represents a bank's T-account.Suppose it is the only bank in town and individuals in town hold no cash.Assuming the reserve ratio is 10%,what will be the bank's loans at the end of the money creation process?

Banks hold reserves

The M1 measure of money consists of the sum of

An episode when depositors,spurred by news or rumours of the imminent bankruptcy of a particular bank,rush to withdraw their deposits from that bank is called a(n)

The equation stating that the rate of growth of the money supply equals the rate of inflation applies better to countries with ________ than to countries with ________.

When an individual deposits currency into a chequing account,

After the central bank decreases reserves in the banking system through open-market sales,banks reduce deposits through multiple rounds of calling in loans and losing deposits until the

An episode when depositors,spurred by news or rumours of the imminent bankruptcy of one or more banks,rush to withdraw their deposits from the banking system is called a(n)

If bank reserves are 200,the public holds 400 in currency,and the desired reserve-deposit ratio is 20%,deposits are ________ and the money supply is ________.

Holding money as a store of wealth has the advantage of being useful as a medium of exchange.The disadvantages of holding your wealth in the form of money are that it

Given a required reserve-deposit ratio of 5% for all banks and assuming individuals hold no cash,total bank reserves of $400 billion can support deposits of

Measuring Macroeconomic Performance: Output and Prices

Measuring Macroeconomic Performance: Saving and Wealth

Measuring Macroeconomic Performance: Wages, Employment and the Labour Market

Short-Term Economic Fluctuations

Spending and Output in the Short Run

Fiscal Policy

Money, Prices and the Reserve Bank

The Reserve Bank and the Economy

Macroeconomic Policy

The Economy in the Long Run: an Introduction to Economic Growth

The Production Function Approach to Understanding Growth

Savings, Capital Formation and Comparative Economic Growth

International Trade

Exchange Rates and the Open Economy

The Balance of Payments: Net Exports and International Capital Flows

Filters

The equation stating that the rate of growth of the money supply equals the rate of inflation applies better to countries with than to countries with .

If bank reserves are 200,the public holds 400 in currency,and the desired reserve-deposit ratio is 20%,deposits are and the money supply is .