Question 1

Is money the same as income? Explain.

Accepted Answer

Money is not the same as incom

Question 2

Before you buy your new car, you visit four local auto dealerships and collect information on the prices and features of the cars. In this case, you are using money as a

Accepted Answer

A) unit of account. 
B) store of value and unit of account. 
C) store of value and medium of exchange. 
D) store of value. 
E) medium of exchange. 
A) unit of account. 
B) store of value and unit of account. 
C) store of value and medium of exchange. 
D) store of value. 
E) medium of exchange.

Question 3

Paper money

Accepted Answer

A) is a less efficient form of money than checking deposits. 
B) is as efficient a form of money as coins. 
C) is the most efficient form of money. 
D) must be linked by law to the supply of gold. 
E) is an efficient form of money only if it is backed by a precious commodity. 
A) is a less efficient form of money than checking deposits. 
B) is as efficient a form of money as coins. 
C) is the most efficient form of money. 
D) must be linked by law to the supply of gold. 
E) is an efficient form of money only if it is backed by a precious commodity.

Question 4

When the Fed sells government bonds to banks, reserves increase.

Accepted Answer

A) True 
 B)False

Question 5

Suppose a bank's deposit liabilities increase by $10 million. If the required reserve ratio is 20 percent, bank reserves will increase by

Accepted Answer

A) Not enough information is given. 
B) $2 million. 
C) $8 million. 
D) $1 million. 
E) $10 million. 
A) Not enough information is given. 
B) $2 million. 
C) $8 million. 
D) $1 million. 
E) $10 million.

Question 6

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.

Accepted Answer

The answer of Suppose Joe is digging around in his...

Question 7

Which of the following will cause velocity to increase?

Accepted Answer

A) An increase in the activity of the "underground" economy 
B) A reduction in credit card interest rates 
C) An increase in the unreliability of automatic teller machines 
D) A surcharge on all credit card purchases 
E) A decrease in crime rates 
A) An increase in the activity of the "underground" economy 
B) A reduction in credit card interest rates 
C) An increase in the unreliability of automatic teller machines 
D) A surcharge on all credit card purchases 
E) A decrease in crime rates

Question 8

What is the most common reason for hyperinflation?

Accepted Answer

The most common reason is that governmen

Question 9

Suppose that transactions are conducted in euros and prices are quoted in dollars. In this case the dollar functions primarily as a

Accepted Answer

A) store of value. 
B) unit of account and store of value. 
C) medium of exchange. 
D) unit of account. 
E) medium of exchange and store of value. 
A) store of value. 
B) unit of account and store of value. 
C) medium of exchange. 
D) unit of account. 
E) medium of exchange and store of value.

Question 10

According to the text, during the 1990s the quantity equation was unable to explain variations in the rate of inflation among the seven largest developed economies. Does this imply that the quantity equation is unable to explain variations in the rate of inflation?

Accepted Answer

No. The quantity equation is suited for

Question 11

An increase in reserves leads to an even larger increase in deposits because banks have an incentive to lend their excess reserves.

Accepted Answer

A) True 
 B)False

Question 12

Hyperinflation has not occurred since the German hyperinflation of 1923.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If an individual withdraws $20 million from Bank Y, then the amount of reserves held by Bank Y will

Accepted Answer

A) decrease by $20 million. 
B) decrease by $2 million. 
C) increase by $2 million. 
D) increase by $20 million. 
E) not change. 
A) decrease by $20 million. 
B) decrease by $2 million. 
C) increase by $2 million. 
D) increase by $20 million. 
E) not change.

Question 14

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 15

Exhibit 22-2
  
-According to the data in Exhibit 22-2, in 2016, velocity equaled about

Accepted Answer

A) 10.1. 
B) 8.0. 
C) 6.6. 
D) 2.7. 
E) 1.5. 
A) 10.1. 
B) 8.0. 
C) 6.6. 
D) 2.7. 
E) 1.5.

Question 16

Financial intermediaries exist primarily because

Accepted Answer

A) they are part of the U.S.Treasury. 
B) they are part of the Federal Reserve System. 
C) of historical accident. 
D) they can make a profit. 
E) of federal mandates. 
A) they are part of the U.S.Treasury. 
B) they are part of the Federal Reserve System. 
C) of historical accident. 
D) they can make a profit. 
E) of federal mandates.

Question 17

Is the Federal Reserve System a federal government agency? Explain.

Accepted Answer

No. Though the members of the Board of G

Question 18

If the Fed purchases $15 million worth of government bonds from Bank X, initially

Accepted Answer

A) the amount of Bank X's deposits at the Fed will decrease by $15 million. 
B) the amount of Bank X's deposits at the Fed will increase by $15 million. 
C) nothing will happen to Bank X's balance sheet. 
D) the amount of funds deposited at Bank X will increase by $15 million. 
E) the amount of funds deposited at Bank X will decrease by $15 million. 
A) the amount of Bank X's deposits at the Fed will decrease by $15 million. 
B) the amount of Bank X's deposits at the Fed will increase by $15 million. 
C) nothing will happen to Bank X's balance sheet. 
D) the amount of funds deposited at Bank X will increase by $15 million. 
E) the amount of funds deposited at Bank X will decrease by $15 million.

Question 19

Which of the following is money?

Accepted Answer

A) All of these 
B) Checks in the checkbook 
C) Checking deposits 
D) ATM cards 
E) Credit cards 
A) All of these 
B) Checks in the checkbook 
C) Checking deposits 
D) ATM cards 
E) Credit cards

Question 20

M1 consists of

Accepted Answer

A) paper money only. 
B) currency plus checking deposits only. 
C) currency plus checking deposits plus travelers' checks plus savings deposits only. 
D) currency only. 
E) currency plus checking deposits plus travelers' checks only. 
A) paper money only. 
B) currency plus checking deposits only. 
C) currency plus checking deposits plus travelers' checks plus savings deposits only. 
D) currency only. 
E) currency plus checking deposits plus travelers' checks only.

Exam 22: Money and Inflation

Is money the same as income? Explain.

Before you buy your new car, you visit four local auto dealerships and collect information on the prices and features of the cars. In this case, you are using money as a

Paper money

When the Fed sells government bonds to banks, reserves increase.

Suppose a bank's deposit liabilities increase by $10 million. If the required reserve ratio is 20 percent, bank reserves will increase by

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.

Which of the following will cause velocity to increase?

What is the most common reason for hyperinflation?

Suppose that transactions are conducted in euros and prices are quoted in dollars. In this case the dollar functions primarily as a

According to the text, during the 1990s the quantity equation was unable to explain variations in the rate of inflation among the seven largest developed economies. Does this imply that the quantity equation is unable to explain variations in the rate of inflation?

An increase in reserves leads to an even larger increase in deposits because banks have an incentive to lend their excess reserves.

Hyperinflation has not occurred since the German hyperinflation of 1923.

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If an individual withdraws $20 million from Bank Y, then the amount of reserves held by Bank Y will

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

Exhibit 22-2 -According to the data in Exhibit 22-2, in 2016, velocity equaled about

Financial intermediaries exist primarily because

Is the Federal Reserve System a federal government agency? Explain.

If the Fed purchases $15 million worth of government bonds from Bank X, initially

Which of the following is money?

M1 consists of

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of 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 Around the World

International Trade

International Finance

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