Question 1

If the Fed attempts 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 2

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 3

In general, there is much disagreement among economists about the technical ability of the central bank to control the money supply.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the required reserve ratio is 20 percent. The balance sheet for Bank AAA is given below (figures are in billions).

Accepted Answer

The answer of Suppose the required reserve ratio is 20...

Question 5

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 reserves held by Bank INF will

Accepted Answer

A) not change. 
B) increase by $1 million. 
C) decrease by $10 million. 
D) decrease by $1 million. 
E) increase by $10 million. 
A) not change. 
B) increase by $1 million. 
C) decrease by $10 million. 
D) decrease by $1 million. 
E) increase by $10 million.

Question 6

The Federal Reserve serves as a financial intermediary only for other financial intermediaries.

Accepted Answer

A) True 
 B)False

Question 7

Only money can serve as a store of value.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a German individual, prior to the hyperinflation of 1923, had a cash holding equivalent to $100 million. At the end of the hyperinflation, this amount of cash would have been worth

Accepted Answer

A) $100. 
B) $10 
C) $1. 
D) $0.01 
E) $0.001. 
A) $100. 
B) $10 
C) $1. 
D) $0.01 
E) $0.001.

Question 9

Reserves are another name for commercial bank deposits at the Fed.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The buying and selling of government bonds by the central bank is known as

Accepted Answer

A) government bond barter. 
B) fiscal policy. 
C) open market operations. 
D) banking equivalency. 
E) None of these 
A) government bond barter. 
B) fiscal policy. 
C) open market operations. 
D) banking equivalency. 
E) None of these

Question 12

The central bank of the United States is known as the

Accepted Answer

A) Bundesbank. 
B) Fed. 
C) Bank of America. 
D) First National Bank. 
E) Department of the Treasury. 
A) Bundesbank. 
B) Fed. 
C) Bank of America. 
D) First National Bank. 
E) Department of the Treasury.

Question 13

The sum of all currency (coin and paper money) coupled with all bank deposits is known by economists as

Accepted Answer

A) convertible currency. 
B) foreign exchange. 
C) the money supply. 
D) cash and marketable securities. 
E) None of these 
A) convertible currency. 
B) foreign exchange. 
C) the money supply. 
D) cash and marketable securities. 
E) None of these

Question 14

When the Fed buys bonds in an open market operation, it can predict what will happen to deposits and currency holdings.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 22-3
  
-According to the data in Exhibit 22-3, the rate of inflation between 2015 and 2016 was about

Accepted Answer

A) 2 percent. 
B) 1 percent. 
C) 0 percent. 
D) -1 percent. 
E) -2 percent. 
A) 2 percent. 
B) 1 percent. 
C) 0 percent. 
D) -1 percent. 
E) -2 percent.

Question 16

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 17

The U.S. dollar is not backed by any precious metal or commodity.

Accepted Answer

A) True 
 B)False

Question 18

If the Fed's actions cause a bank's reserves to increase, we know the bank will have an incentive to convert the new reserves into loans and bonds because

Accepted Answer

A) of government regulation. 
B) reserves are taxed by the federal government. 
C) of moral suasion. 
D) reserves don't earn interest. 
E) the Fed will take the reserves back if they are not used. 
A) of government regulation. 
B) reserves are taxed by the federal government. 
C) of moral suasion. 
D) reserves don't earn interest. 
E) the Fed will take the reserves back if they are not used.

Question 19

The chair of the Board of Governors of the Federal Reserve is

Accepted Answer

A) appointed by the president and confirmed by the Senate, the appointment can be renewed for additional terms. 
B) appointed by the president and confirmed by the Senate, and the appointment cannot be renewed for additional terms. 
C) elected by Congress and serves a 7-year term. 
D) elected by Congress and serves a 4-year term. 
E) elected by Congress and serves a 10-year term. 
A) appointed by the president and confirmed by the Senate, the appointment can be renewed for additional terms. 
B) appointed by the president and confirmed by the Senate, and the appointment cannot be renewed for additional terms. 
C) elected by Congress and serves a 7-year term. 
D) elected by Congress and serves a 4-year term. 
E) elected by Congress and serves a 10-year term.

Question 20

Which of the following monetary terms, which originally meant one-third of an ounce of silver, was invented thousands of years ago?

Accepted Answer

A) Peso 
B) Dollar 
C) Shekel 
D) Euro 
E) Yen 
A) Peso 
B) Dollar 
C) Shekel 
D) Euro 
E) Yen

Exam 22: Money and Inflation

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

The volume of transactions

In general, there is much disagreement among economists about the technical ability of the central bank to control the money supply.

Suppose the required reserve ratio is 20 percent. The balance sheet for Bank AAA is given below (figures are in billions).

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 reserves held by Bank INF will

The Federal Reserve serves as a financial intermediary only for other financial intermediaries.

Only money can serve as a store of value.

Suppose a German individual, prior to the hyperinflation of 1923, had a cash holding equivalent to $100 million. At the end of the hyperinflation, this amount of cash would have been worth

Reserves are another name for commercial bank deposits at the Fed.

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

The buying and selling of government bonds by the central bank is known as

The central bank of the United States is known as the

The sum of all currency (coin and paper money) coupled with all bank deposits is known by economists as

When the Fed buys bonds in an open market operation, it can predict what will happen to deposits and currency holdings.

Exhibit 22-3 -According to the data in Exhibit 22-3, the rate of inflation between 2015 and 2016 was about

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

The U.S. dollar is not backed by any precious metal or commodity.

If the Fed's actions cause a bank's reserves to increase, we know the bank will have an incentive to convert the new reserves into loans and bonds because

The chair of the Board of Governors of the Federal Reserve is

Which of the following monetary terms, which originally meant one-third of an ounce of silver, was invented thousands of years ago?

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

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