Question 1

If the Fed increases reserves in the banking system,

Accepted Answer

A) deposit holdings will decrease,and currency holdings will increase. 
B) deposit holdings will increase,and currency holdings will fall. 
C) deposit and currency holdings will decrease. 
D) both deposit and currency holdings will increase. 
E) deposits will increase,and currency holdings by the public will not be affected. 
A) deposit holdings will decrease,and currency holdings will increase. 
B) deposit holdings will increase,and currency holdings will fall. 
C) deposit and currency holdings will decrease. 
D) both deposit and currency holdings will increase. 
E) deposits will increase,and currency holdings by the public will not be affected. D

Question 2

The voting members of the FOMC are

Accepted Answer

A) the governors of the Federal Reserve Board and the president of the United States. 
B) the governors of the Federal Reserve Board and the president of the New York Fed. 
C) the governors of the Federal Reserve Board and 5 of the 12 Federal Reserve district bank presidents. 
D) the governors of the Federal Reserve Board and the 12 Federal Reserve district bank presidents. 
E) the governors of the Federal Reserve Board,5 of the 12 Federal Reserve district bank presidents,and the secretary of the Treasury. 
A) the governors of the Federal Reserve Board and the president of the United States. 
B) the governors of the Federal Reserve Board and the president of the New York Fed. 
C) the governors of the Federal Reserve Board and 5 of the 12 Federal Reserve district bank presidents. 
D) the governors of the Federal Reserve Board and the 12 Federal Reserve district bank presidents. 
E) the governors of the Federal Reserve Board,5 of the 12 Federal Reserve district bank presidents,and the secretary of the Treasury. C

Question 3

Which of the following would not be counted as part of M1?

Accepted Answer

A) Paper money 
B) Demand deposits 
C) Savings deposits 
D) Travelers' checks 
E) Currency 
A) Paper money 
B) Demand deposits 
C) Savings deposits 
D) Travelers' checks 
E) Currency C

Question 4

Although there has been a reported increase in counterfeit money,it is estimated to currently account for

Accepted Answer

A) less than 1 percent of genuine currency. 
B) between 1 and 2 percent of genuine currency. 
C) between 2 and 5 percent of genuine currency. 
D) between 5 and 10 percent of genuine currency. 
E) more than 10 percent of genuine currency,but less than 50 percent. 
A) less than 1 percent of genuine currency. 
B) between 1 and 2 percent of genuine currency. 
C) between 2 and 5 percent of genuine currency. 
D) between 5 and 10 percent of genuine currency. 
E) more than 10 percent of genuine currency,but less than 50 percent.

Question 5

Is money the same as income? Explain.

Accepted Answer

Money is not the same as incom

Question 6

The volume of transactions

Accepted Answer

A) increases only with the price of an item. 
B) has nothing to do with the supply of money. 
C) increases only with the number of items purchased. 
D) is measured in real terms. 
E) increases when the number of items purchased increases or when the price of an item increases. 
A) increases only with the price of an item. 
B) has nothing to do with the supply of money. 
C) increases only with the number of items purchased. 
D) is measured in real terms. 
E) increases when the number of items purchased increases or when the price of an item increases.

Question 7

Which of the following would increase the value of the money supply?

Accepted Answer

A) An increase in the quantity of excess reserves held by banks 
B) An increase in the quantity of bonds held by the banking system 
C) An increase in the fear of crime 
D) A decrease in the fear of crime 
E) A decrease in the number of businesses that will accept a personal check 
A) An increase in the quantity of excess reserves held by banks 
B) An increase in the quantity of bonds held by the banking system 
C) An increase in the fear of crime 
D) A decrease in the fear of crime 
E) A decrease in the number of businesses that will accept a personal check

Question 8

The United States has never been on a gold standard.

Accepted Answer

A) True 
 B)False

Question 9

All members of the Federal Reserve Board of Governors are appointed by the president and confirmed by the Senate.

Accepted Answer

A) True 
 B)False

Question 10

If real GDP depends only on capital,labor,and technology,a higher growth rate in the money supply will lead to

Accepted Answer

A) an increase in velocity. 
B) an increase in the rate of productivity. 
C) higher inflation. 
D) lower inflation. 
E) a decrease in velocity. 
A) an increase in velocity. 
B) an increase in the rate of productivity. 
C) higher inflation. 
D) lower inflation. 
E) a decrease in velocity.

Question 11

Starting in the mid-twentieth century,paper money began to be used widely and supplemented or replaced coins as a form of money.

Accepted Answer

A) True 
 B)False

Question 12

Items in M1 are more liquid than items in M2.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the required reserve ratio is 10 percent,and banks hold no excess reserves.If the Fed purchases $10 million worth of government bonds from Bank INF,the amount of deposits held by the entire banking system will ultimately

Accepted Answer

A) increase by $100 million. 
B) decrease by $10 million. 
C) decrease by $100 million. 
D) not change. 
E) increase by $10 million. 
A) increase by $100 million. 
B) decrease by $10 million. 
C) decrease by $100 million. 
D) not change. 
E) increase by $10 million.

Question 14

Throughout history,the most common form of commodity money has been

Accepted Answer

A) cattle. 
B) salt. 
C) metallic coins. 
D) shells. 
E) stones. 
A) cattle. 
B) salt. 
C) metallic coins. 
D) shells. 
E) stones.

Question 15

Velocity will decline if

Accepted Answer

A) the public becomes more confident about the economy's future. 
B) there is an increase in the use of credit cards. 
C) automatic teller machines become more accessible. 
D) the crime rate increases. 
E) banks increase the interest rate paid on checking deposits. 
A) the public becomes more confident about the economy's future. 
B) there is an increase in the use of credit cards. 
C) automatic teller machines become more accessible. 
D) the crime rate increases. 
E) banks increase the interest rate paid on checking deposits.

Question 16

Historians trace the origins of money to the very origins of civilization.

Accepted Answer

A) True 
 B)False

Question 17

If the Fed wants to decrease the amount of deposits that banks hold,it can

Accepted Answer

A) buy government bonds in an open market operation. 
B) sell government bonds in an open market operation. 
C) force banks by decree to do so. 
D) sell domestic deposits to foreign investors. 
E) None of these 
A) buy government bonds in an open market operation. 
B) sell government bonds in an open market operation. 
C) force banks by decree to do so. 
D) sell domestic deposits to foreign investors. 
E) None of these

Question 18

Only money can serve as a store of value.

Accepted Answer

A) True 
 B)False

Question 19

The central bank of the United States of America is commonly known as the Fed.

Accepted Answer

A) True 
 B)False

Question 20

Suppose Joe is digging around in his basement and he finds $1,000 hidden behind a wall.Assume that Joe takes the $1,000 and deposits it in his bank.Assume also that banks hold no excess reserves,people hold no currency,and the required reserve ratio is 5 percent.
(A)When Joe deposits the $1,000 in his bank,what happens to the balance sheet?
(B)How many loans can the bank create?
(C)Suppose Joe's bank makes a loan to Sally,and she deposits the money in her bank.How many loans can Sally's bank make?
(D)If banks continue to make loans,what is the total change in deposits?

Accepted Answer

(A) Deposits and reserves increase by $1

Exam 22: Money and Inflation

If the Fed increases reserves in the banking system,

The voting members of the FOMC are

Which of the following would not be counted as part of M1?

Although there has been a reported increase in counterfeit money,it is estimated to currently account for

Is money the same as income? Explain.

The volume of transactions

Which of the following would increase the value of the money supply?

The United States has never been on a gold standard.

All members of the Federal Reserve Board of Governors are appointed by the president and confirmed by the Senate.

If real GDP depends only on capital,labor,and technology,a higher growth rate in the money supply will lead to

Starting in the mid-twentieth century,paper money began to be used widely and supplemented or replaced coins as a form of money.

Items in M1 are more liquid than items in M2.

Suppose the required reserve ratio is 10 percent,and banks hold no excess reserves.If the Fed purchases $10 million worth of government bonds from Bank INF,the amount of deposits held by the entire banking system will ultimately

Throughout history,the most common form of commodity money has been

Velocity will decline if

Historians trace the origins of money to the very origins of civilization.

If the Fed wants to decrease the amount of deposits that banks hold,it can

Only money can serve as a store of value.

The central bank of the United States of America is commonly known as the Fed.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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