Question 1

Suppose people are holding $100 million of currency, total deposits in the banking system are $2,000 million, and bank reserves are $400 million. In this case,

Accepted Answer

A) the supply of money is $2,100 million. 
B) the supply of money is $2,400 million. 
C) the supply of money is $2,500 million. 
D) the supply of money is $2,000 million. 
E) we do not have enough information to determine the money supply. 
A) the supply of money is $2,100 million. 
B) the supply of money is $2,400 million. 
C) the supply of money is $2,500 million. 
D) the supply of money is $2,000 million. 
E) we do not have enough information to determine the money supply.

Question 2

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 3

Suppose the balance sheet for Bank ABC is as given below, where numbers are in thousands of dollars. Assume that reserves are 10 percent of deposits and that people hold no currency.

Accepted Answer

The answer of Suppose the balance sheet for Bank ABC...

Question 4

The "Fed" is the nickname for

Accepted Answer

A) Congress. 
B) the presidency. 
C) the Federal Reserve System. 
D) the federal government. 
E) the United States Treasury. 
A) Congress. 
B) the presidency. 
C) the Federal Reserve System. 
D) the federal government. 
E) the United States Treasury.

Question 5

Exhibit 22-1  
-According to the data in Exhibit 22-1, the amount of deposits Bank INF holds at the Fed equals

Accepted Answer

A) $150 million. 
B) $1000 million. 
C) $850 million. 
D) $50 million. 
E) $25 million. 
A) $150 million. 
B) $1000 million. 
C) $850 million. 
D) $50 million. 
E) $25 million.

Question 6

To look for evidence concerning whether higher money growth leads to higher inflation, one should, according to the quantity equation, examine periods of time when

Accepted Answer

A) changes in velocity and real GDP were small compared to changes in inflation and money growth. 
B) changes in the price level and real GDP were small compared to changes in velocity and money growth. 
C) changes in the price level and velocity were small compared to changes in velocity and real GDP. 
D) changes in the price level and money growth were small compared to changes in inflation and money growth. 
E) changes in velocity were small compared to changes in the price level, money growth, and real GDP. 
A) changes in velocity and real GDP were small compared to changes in inflation and money growth. 
B) changes in the price level and real GDP were small compared to changes in velocity and money growth. 
C) changes in the price level and velocity were small compared to changes in velocity and real GDP. 
D) changes in the price level and money growth were small compared to changes in inflation and money growth. 
E) changes in velocity were small compared to changes in the price level, money growth, and real GDP.

Question 7

If the Fed sells $15 million worth of government bonds to Bank A, then initially

Accepted Answer

A) the amount of deposits held by Bank A will increase by $15 million. 
B) the amount of reserves held by Bank A will decrease by $15 million. 
C) the amount of bonds held by Bank A will decrease by $15 million. 
D) the amount of deposits held by Bank A will decrease by $15 million. 
E) the amount of reserves held by Bank A will increase by $15 million. 
A) the amount of deposits held by Bank A will increase by $15 million. 
B) the amount of reserves held by Bank A will decrease by $15 million. 
C) the amount of bonds held by Bank A will decrease by $15 million. 
D) the amount of deposits held by Bank A will decrease by $15 million. 
E) the amount of reserves held by Bank A will increase by $15 million.

Question 8

If a country's currency is on a gold standard, does that mean there can be no inflation? Explain.

Accepted Answer

No. If the supply of gold incr

Question 9

The most recent episode of hyperinflation occurred in

Accepted Answer

A) Germany. 
B) Brazil. 
C) Chile. 
D) Zimbabwe. 
E) Greece. 
A) Germany. 
B) Brazil. 
C) Chile. 
D) Zimbabwe. 
E) Greece.

Question 10

The supply of money is defined in the text as

Accepted Answer

A) currency plus reserves plus deposits. 
B) currency plus deposits. 
C) currency minus reserves. 
D) reserves plus deposits. 
E) currency plus reserves. 
A) currency plus reserves plus deposits. 
B) currency plus deposits. 
C) currency minus reserves. 
D) reserves plus deposits. 
E) currency plus reserves.

Question 11

The Federal Reserve System is divided into 52 districts, 1 for each state, plus 1 for Washington, D.C., and 1 for Puerto Rico.

Accepted Answer

A) True 
 B)False

Question 12

The United States has never been on a gold standard.

Accepted Answer

A) True 
 B)False

Question 13

For the period 1973 through 1991 the relationship between money and inflation did not hold for all seven of the largest developed countries.

Accepted Answer

A) True 
 B)False

Question 14

About what percentage of M1 is currency?

Accepted Answer

A) 50 percent 
B) 10 percent 
C) 75 percent 
D) 100 percent 
E) 30 percent 
A) 50 percent 
B) 10 percent 
C) 75 percent 
D) 100 percent 
E) 30 percent

Question 15

Velocity, V, measures

Accepted Answer

A) the percent of income held in the form of money. 
B) real GDP. 
C) nominal GDP. 
D) how frequently money is used. 
E) currency as a percentage of GDP. 
A) the percent of income held in the form of money. 
B) real GDP. 
C) nominal GDP. 
D) how frequently money is used. 
E) currency as a percentage of GDP.

Question 16

An economy that uses commodity money will not experience inflation.

Accepted Answer

A) True 
 B)False

Question 17

The FOMC implements monetary policy after obtaining the approval of the president.

Accepted Answer

A) True 
 B)False

Question 18

Banks are referred to as intermediaries because they

Accepted Answer

A) are part of the money supply process. 
B) earn a profit. 
C) charge interest on a loan. 
D) channel funds from depositors to borrowers. 
E) provide a way for people to save their money. 
A) are part of the money supply process. 
B) earn a profit. 
C) charge interest on a loan. 
D) channel funds from depositors to borrowers. 
E) provide a way for people to save their money.

Question 19

To increase bank reserves, the Fed will

Accepted Answer

A) sell bonds to banks. 
B) buy bonds from banks. 
C) sell bonds to the government. 
D) buy bonds from the government. 
E) sell bonds to the public. 
A) sell bonds to banks. 
B) buy bonds from banks. 
C) sell bonds to the government. 
D) buy bonds from the government. 
E) sell bonds to the public.

Question 20

About what percentage of M2 is currency?

Accepted Answer

A) 50 percent 
B) 30 percent 
C) 10 percent 
D) 100 percent 
E) 75 percent 
A) 50 percent 
B) 30 percent 
C) 10 percent 
D) 100 percent 
E) 75 percent

Exam 22: Money and Inflation

Suppose people are holding $100 million of currency, total deposits in the banking system are $2,000 million, and bank reserves are $400 million. In this case,

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

Suppose the balance sheet for Bank ABC is as given below, where numbers are in thousands of dollars. Assume that reserves are 10 percent of deposits and that people hold no currency.

The "Fed" is the nickname for

Exhibit 22-1 -According to the data in Exhibit 22-1, the amount of deposits Bank INF holds at the Fed equals

To look for evidence concerning whether higher money growth leads to higher inflation, one should, according to the quantity equation, examine periods of time when

If the Fed sells $15 million worth of government bonds to Bank A, then initially

If a country's currency is on a gold standard, does that mean there can be no inflation? Explain.

The most recent episode of hyperinflation occurred in

The supply of money is defined in the text as

The Federal Reserve System is divided into 52 districts, 1 for each state, plus 1 for Washington, D.C., and 1 for Puerto Rico.

The United States has never been on a gold standard.

For the period 1973 through 1991 the relationship between money and inflation did not hold for all seven of the largest developed countries.

About what percentage of M1 is currency?

Velocity, V, measures

An economy that uses commodity money will not experience inflation.

The FOMC implements monetary policy after obtaining the approval of the president.

Banks are referred to as intermediaries because they

To increase bank reserves, the Fed will

About what percentage of M2 is currency?

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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