Question 1

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the .

Accepted Answer

A)  the quantity of money; growth rate of real GDP 
B)  the quantity of money; inflation rate 
C)  real GDP; growth rate of velocity 
D)  real GDP; inflation rate 
A)  the quantity of money; growth rate of real GDP 
B)  the quantity of money; inflation rate 
C)  real GDP; growth rate of velocity 
D)  real GDP; inflation rate B

Question 2

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

Accepted Answer

A)  zero, because Bank A has no excess reserves 
B)  $850 
C)  $200 
D)  $50 
A)  zero, because Bank A has no excess reserves 
B)  $850 
C)  $200 
D)  $50 A

Question 3

real GDP increases the demand for money and the interest rate decreases the quantity of money demanded.

Accepted Answer

A)  Increasing; decreasing 
B)  Decreasing; increasing 
C)  Decreasing; decreasing 
D)  Increasing; increasing 
A)  Increasing; decreasing 
B)  Decreasing; increasing 
C)  Decreasing; decreasing 
D)  Increasing; increasing D

Question 4

The opportunity cost of holding money is the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 5

How are the nominal and real demands for money related to changes in the price level?

Accepted Answer

When the price level rises the nominal d

Question 6

Bank managers lend the excess reserves created when new deposits come in because they want to

Accepted Answer

A)  earn a profit. 
B)  deplete desired reserves. 
C)  create new money in the economy. 
D)  deplete required reserves. 
A)  earn a profit. 
B)  deplete desired reserves. 
C)  create new money in the economy. 
D)  deplete required reserves.

Question 7

If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

Accepted Answer

All of the assets me

Question 8

If an economy has no money, then all transactions must be conducted through the use of .

Accepted Answer

A)  tobacco or wampum 
B)  barter 
C)  credit cards 
D)  debit cards 
A)  tobacco or wampum 
B)  barter 
C)  credit cards 
D)  debit cards

Question 9

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Accepted Answer

A)  store of value. 
B)  standard of deferred payment. 
C)  medium of exchange. 
D)  unit of account. 
A)  store of value. 
B)  standard of deferred payment. 
C)  medium of exchange. 
D)  unit of account.

Question 10

Credit cards are

Accepted Answer

A)  a part of money when the transaction approach is used but not when the liquidity approach is used. 
B)  a part of money because they are used in so many transactions. 
C)  not part of money because they represent a loan of money to the user. 
D)  not part of money because the government has no control over the amount of credit outstanding. 
A)  a part of money when the transaction approach is used but not when the liquidity approach is used. 
B)  a part of money because they are used in so many transactions. 
C)  not part of money because they represent a loan of money to the user. 
D)  not part of money because the government has no control over the amount of credit outstanding.

Question 11

The Federal Open Market Committee consists of the

Accepted Answer

A)  Federal Reserve chairman and the Federal Reserve branch bank presidents. 
B)  Federal Reserve branch bank presidents. 
C)  Federal Reserve chairman, the other six members of the Board of Governors, and the Federal Reserve branch bank presidents. 
D)  Federal Reserve chairman and the other six members of the Board of Governors. 
A)  Federal Reserve chairman and the Federal Reserve branch bank presidents. 
B)  Federal Reserve branch bank presidents. 
C)  Federal Reserve chairman, the other six members of the Board of Governors, and the Federal Reserve branch bank presidents. 
D)  Federal Reserve chairman and the other six members of the Board of Governors.

Question 12

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of
$75,000 is made. Immediately after the deposit is made, the bank's excess reserves equal

Accepted Answer

A)  $67,500. 
B)  zero. 
C)  $7,500. 
D)  It is impossible to determine without additional information. 
A)  $67,500. 
B)  zero. 
C)  $7,500. 
D)  It is impossible to determine without additional information.

Question 13

When you buy a hamburger for lunch, you are using money as a

Accepted Answer

A)  unit of accounting. 
B)  standard of deferred payment. 
C)  store of value. 
D)  medium of exchange. 
A)  unit of accounting. 
B)  standard of deferred payment. 
C)  store of value. 
D)  medium of exchange.

Question 14

Matthew purchases a candy bar with his allowance. This purchase represents using money as

Accepted Answer

A)  an unit of account. 
B)  a store of value. 
C)  a medium of exchange. 
D)  none of the above 
A)  an unit of account. 
B)  a store of value. 
C)  a medium of exchange. 
D)  none of the above

Question 15

The Federal Reserve System

Accepted Answer

A)  was recently declared unconstitutional by the Supreme Court. 
B)  has officers that are elected, like members of Congress. 
C)  controls the amount of currency in circulation. 
D)  is headquartered in San Francisco. 
A)  was recently declared unconstitutional by the Supreme Court. 
B)  has officers that are elected, like members of Congress. 
C)  controls the amount of currency in circulation. 
D)  is headquartered in San Francisco.

Question 16

Explain which of the following count as money.
a) a check in Ann's checkbook
b) currency in Ann's bank
c) currency in Ann's purse
d) Ann's checking deposit

Accepted Answer

Only parts (c), currency in Ann's purse,

Question 17

Which of the following is true regarding the required reserve ratio?

Accepted Answer

A)  The ratio determines the amount of excess reserves a bank must hold. 
B)  The ratio is only enforced against banks that are operating in a risky manner. 
C)  The ratio determines the legally required amount of reserves a bank must hold. 
D)  None of the above answers is correct. 
A)  The ratio determines the amount of excess reserves a bank must hold. 
B)  The ratio is only enforced against banks that are operating in a risky manner. 
C)  The ratio determines the legally required amount of reserves a bank must hold. 
D)  None of the above answers is correct.

Question 18

The Federal Reserve system does NOT

Accepted Answer

A)  consist of 12 regional Federal Reserve banks. 
B)  control the U.S. quantity of money. 
C)  lend reserves to commercial banks. 
D)  approve loans that are greater than $50 million made by commercial banks. 
A)  consist of 12 regional Federal Reserve banks. 
B)  control the U.S. quantity of money. 
C)  lend reserves to commercial banks. 
D)  approve loans that are greater than $50 million made by commercial banks.

Question 19

According to the quantity theory of money, a 15 percent increase in the quantity of money causes a 15 percent rise in

Accepted Answer

A)  the velocity of circulation. 
B)  the price level. 
C)  the unemployment rate. 
D)  real GDP. 
A)  the velocity of circulation. 
B)  the price level. 
C)  the unemployment rate. 
D)  real GDP.

Question 20

A currency drain

Accepted Answer

A)  leads to an increase in excess reserves. 
B)  results in an increase in deposits. 
C)  decreases the size of the money multiplier. 
D)  results in an increase in required reserves. 
A)  leads to an increase in excess reserves. 
B)  results in an increase in deposits. 
C)  decreases the size of the money multiplier. 
D)  results in an increase in required reserves.

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the .

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

real GDP increases the demand for money and the interest rate decreases the quantity of money demanded.

The opportunity cost of holding money is the nominal interest rate.

How are the nominal and real demands for money related to changes in the price level?

Bank managers lend the excess reserves created when new deposits come in because they want to

If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

If an economy has no money, then all transactions must be conducted through the use of .

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Credit cards are

The Federal Open Market Committee consists of the

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made. Immediately after the deposit is made, the bank's excess reserves equal

When you buy a hamburger for lunch, you are using money as a

Matthew purchases a candy bar with his allowance. This purchase represents using money as

The Federal Reserve System

Explain which of the following count as money. a) a check in Ann's checkbook b) currency in Ann's bank c) currency in Ann's purse d) Ann's checking deposit

Which of the following is true regarding the required reserve ratio?

The Federal Reserve system does NOT

According to the quantity theory of money, a 15 percent increase in the quantity of money causes a 15 percent rise in

A currency drain

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the .

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

real GDP increases the demand for money and the interest rate decreases the quantity of money demanded.

The opportunity cost of holding money is the nominal interest rate.

How are the nominal and real demands for money related to changes in the price level?

Bank managers lend the excess reserves created when new deposits come in because they want to

If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

If an economy has no money, then all transactions must be conducted through the use of .

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Credit cards are

The Federal Open Market Committee consists of the

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made. Immediately after the deposit is made, the bank's excess reserves equal

When you buy a hamburger for lunch, you are using money as a

Matthew purchases a candy bar with his allowance. This purchase represents using money as

The Federal Reserve System

Explain which of the following count as money. a) a check in Ann's checkbook b) currency in Ann's bank c) currency in Ann's purse d) Ann's checking deposit

Which of the following is true regarding the required reserve ratio?

The Federal Reserve system does NOT

According to the quantity theory of money, a 15 percent increase in the quantity of money causes a 15 percent rise in

A currency drain

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters