Question 1

Nominal GDP increases only if the price level rises.

Accepted Answer

A) True 
 B)False

Question 2

Currency includes only

Accepted Answer

A) coins and paper money. 
B) coins, paper money, and checking deposits. 
C) paper money. 
D) greenbacks. 
E) coins. 
A) coins and paper money. 
B) coins, paper money, and checking deposits. 
C) paper money. 
D) greenbacks. 
E) coins.

Question 3

Suppose the Fed purchases $100 million worth of government bonds from a bond dealer who then deposits the proceeds at Bank ABC.

Accepted Answer

The answer of Suppose the Fed purchases $100 million worth...

Question 4

Time deposits require the depositor to keep the money at the bank for a certain amount of time or else lose interest. They are therefore not as liquid as checking deposits, but it is normally possible to withdraw funds from them.

Accepted Answer

A) True 
 B)False

Question 5

Why did the reserve ratio increase sharply in the fall of 2008?

Accepted Answer

Because as the reserves increased the ba

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 22-5  
-According to the data in Exhibit 22-5, what was the price level in 1973?

Accepted Answer

The answer of Exhibit 22-5  
-According to the data...

Question 8

As a measure of money, M1 emphasizes the use of money as

Accepted Answer

A) an illiquid asset. 
B) a unit of account. 
C) a standard of deferred payment. 
D) a medium of exchange. 
E) a store of value. 
A) an illiquid asset. 
B) a unit of account. 
C) a standard of deferred payment. 
D) a medium of exchange. 
E) a store of value.

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

Which of the following is the most common form of money?

Accepted Answer

A) Commodity money 
B) Currency 
C) Paper money 
D) Coins 
E) Checking deposits 
A) Commodity money 
B) Currency 
C) Paper money 
D) Coins 
E) Checking deposits

Question 11

If inflation is high, the local currency may not be the most efficient unit of account.

Accepted Answer

A) True 
 B)False

Question 12

If gold is being used for money, an increase in the supply of gold will cause

Accepted Answer

A) a decrease in the money supply. 
B) the price of all other goods to fall. 
C) the price of gold to increase. 
D) an increase in the price of all other goods. 
E) nothing to happen to inflation. 
A) a decrease in the money supply. 
B) the price of all other goods to fall. 
C) the price of gold to increase. 
D) an increase in the price of all other goods. 
E) nothing to happen to inflation.

Question 13

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If an individual withdraws $20 million from Bank Zip,

Accepted Answer

A) the amount of loans or bonds must decrease by $18 million. 
B) the amount of loans must increase by $20 million. 
C) the amount of loans or bonds must decrease by $20 million. 
D) the amount of loans or bonds must increase by $18 million. 
E) the amount of loans must decease by $20 million. 
A) the amount of loans or bonds must decrease by $18 million. 
B) the amount of loans must increase by $20 million. 
C) the amount of loans or bonds must decrease by $20 million. 
D) the amount of loans or bonds must increase by $18 million. 
E) the amount of loans must decease by $20 million.

Question 14

Deposits are an asset for the bank because the bank can use the deposits to generate a profit.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 22-4  
-According to the data in Exhibit 22-4, what was real GDP in 1978?

Accepted Answer

The answer of Exhibit 22-4  
-According to the data...

Question 16

What do the current controversies about money pertain to?

Accepted Answer

Many of the current controvers

Question 17

The gold standard

Accepted Answer

A) is no longer observed in the United States. 
B) imposes a limit on the amount of paper money in circulation. 
C) All of these 
D) means that the price of gold in terms of paper money is fixed by the government. 
E) was devised as a means of controlling inflation. 
A) is no longer observed in the United States. 
B) imposes a limit on the amount of paper money in circulation. 
C) All of these 
D) means that the price of gold in terms of paper money is fixed by the government. 
E) was devised as a means of controlling inflation.

Question 18

For the largest developed economies during the 1990s,

Accepted Answer

A) the quantity equation did not work well in explaining variations in the rate of inflation in spite of the high rates of inflation that occurred in several of these countries. 
B) the quantity equation worked well in explaining the variation in rates of inflation during this period. 
C) economic growth was too high for the quantity equation to explain variations in the rate of inflation. 
D) inflation was too varied for the quantity equation to be of any use. 
E) there was not enough variation in the rate of inflation to test the quantity equation because inflation was low for all these countries. 
A) the quantity equation did not work well in explaining variations in the rate of inflation in spite of the high rates of inflation that occurred in several of these countries. 
B) the quantity equation worked well in explaining the variation in rates of inflation during this period. 
C) economic growth was too high for the quantity equation to explain variations in the rate of inflation. 
D) inflation was too varied for the quantity equation to be of any use. 
E) there was not enough variation in the rate of inflation to test the quantity equation because inflation was low for all these countries.

Question 19

Which of the following are money, and which are not? Explain.

Accepted Answer

The answer of Which of the following are money, and...

Question 20

During the 1990s the quantity equation was able to explain variations in the rate of inflation for the seven largest developed economies.

Accepted Answer

A) True 
 B)False

Exam 22: Money and Inflation

Nominal GDP increases only if the price level rises.

Currency includes only

Suppose the Fed purchases $100 million worth of government bonds from a bond dealer who then deposits the proceeds at Bank ABC.

Time deposits require the depositor to keep the money at the bank for a certain amount of time or else lose interest. They are therefore not as liquid as checking deposits, but it is normally possible to withdraw funds from them.

Why did the reserve ratio increase sharply in the fall of 2008?

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

Exhibit 22-5 -According to the data in Exhibit 22-5, what was the price level in 1973?

As a measure of money, M1 emphasizes the use of money as

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

Which of the following is the most common form of money?

If inflation is high, the local currency may not be the most efficient unit of account.

If gold is being used for money, an increase in the supply of gold will cause

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If an individual withdraws $20 million from Bank Zip,

Deposits are an asset for the bank because the bank can use the deposits to generate a profit.

Exhibit 22-4 -According to the data in Exhibit 22-4, what was real GDP in 1978?

What do the current controversies about money pertain to?

The gold standard

For the largest developed economies during the 1990s,

Which of the following are money, and which are not? Explain.

During the 1990s the quantity equation was able to explain variations in the rate of inflation for the seven largest developed economies.

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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