Question 1

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Accepted Answer

A)  medium of exchange 
B)  source of liquidity 
C)  unit of account 
D)  store of value 
A)  medium of exchange 
B)  source of liquidity 
C)  unit of account 
D)  store of value

Question 2

M2 .

Accepted Answer

A)  is a broader measure of money than M1 
B)  does not include currency 
C)  does not include checking deposits held at credit unions 
D)  does not include traveler's checks 
A)  is a broader measure of money than M1 
B)  does not include currency 
C)  does not include checking deposits held at credit unions 
D)  does not include traveler's checks

Question 3

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

Accepted Answer

A)  $1,725 billion in currency. 
B)  $17.25 billion in excess reserves. 
C)  $534.75 in reserves. 
D)  $17.25 billion in reserves. 
A)  $1,725 billion in currency. 
B)  $17.25 billion in excess reserves. 
C)  $534.75 in reserves. 
D)  $17.25 billion in reserves.

Question 4

The monetary base is

Accepted Answer

A)  the money borrowed by banks from other banks. 
B)  the sum of Federal Reserve notes, coins, and depository institutions' deposits at the Federal Reserve. 
C)  Federal Reserve notes minus depository institutions' deposits at the Federal Reserve. 
D)  depository institutions' deposits at the Federal Reserve minus Federal Reserve notes. 
A)  the money borrowed by banks from other banks. 
B)  the sum of Federal Reserve notes, coins, and depository institutions' deposits at the Federal Reserve. 
C)  Federal Reserve notes minus depository institutions' deposits at the Federal Reserve. 
D)  depository institutions' deposits at the Federal Reserve minus Federal Reserve notes.

Question 5

On a given day the quantity of money is and the supply of money curve is .

Accepted Answer

A)  variable; vertical 
B)  variable; horizontal 
C)  fixed; horizontal 
D)  fixed; vertical 
A)  variable; vertical 
B)  variable; horizontal 
C)  fixed; horizontal 
D)  fixed; vertical

Question 6

If a savings and loan "pools risk," which of the following must it do?

Accepted Answer

A)  lend money to a large number of firms 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  take funds in from a large number of lenders 
D)  Both answers A and C are correct. 
A)  lend money to a large number of firms 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  take funds in from a large number of lenders 
D)  Both answers A and C are correct.

Question 7

Explain how the money market determines the equilibrium interest rate.

Accepted Answer

The demand for money curve, MD, is downw

Question 8

Since the 1970s, which factors have lead to an increase in demand for M1?

Accepted Answer

A)  financial innovation 
B)  increases in real GDP 
C)  increased use of credit cards 
D)  Both answers A and B are correct. 
A)  financial innovation 
B)  increases in real GDP 
C)  increased use of credit cards 
D)  Both answers A and B are correct.

Question 9

Barter occurs when you exchange

Accepted Answer

A)  money for goods. 
B)  one money, such as U.S. dollars, for another money, such as Japanese yen. 
C)  goods for money. 
D)  goods for other goods. 
A)  money for goods. 
B)  one money, such as U.S. dollars, for another money, such as Japanese yen. 
C)  goods for money. 
D)  goods for other goods.

Question 10

When the nominal interest rate rises, the opportunity cost of holding money

Accepted Answer

A)  rises and people hold less money. 
B)  falls and people hold less money. 
C)  falls and people hold more money. 
D)  rises and people hold more money. 
A)  rises and people hold less money. 
B)  falls and people hold less money. 
C)  falls and people hold more money. 
D)  rises and people hold more money.

Question 11

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

Accepted Answer

The bank can make loans equal to its exc

Question 12

An increase in real GDP

Accepted Answer

A)  shifts the demand for money curve rightward. 
B)  leads to an upward movement along the demand for money curve. 
C)  shifts the demand for money curve leftward. 
D)  leads to a downward movement along the demand for money curve. 
A)  shifts the demand for money curve rightward. 
B)  leads to an upward movement along the demand for money curve. 
C)  shifts the demand for money curve leftward. 
D)  leads to a downward movement along the demand for money curve.

Question 13

A bank has checking deposits of $400, saving deposits of $900, time deposits of $900, loans of $950, government securities of $900, outstanding credit card balances of $400, currency in its vault of $40, and deposits in its reserv at the Fed of $40.
a) What is the amount of this bank's deposits that are in M1?
b) What is the amount of this bank's deposits that are in M2?
c) What is the amount of this bank's reserves?

Accepted Answer

a) The only deposit that is in M1 is the

Question 14

Reserves are .

Accepted Answer

A)  cash in a bank's vault plus its deposits at Federal Reserve banks 
B)  cash in a bank's vault plus its gold at Federal Reserve banks 
C)  gold in a bank's vault plus its gold at Federal Reserve banks 
D)  cash in a bank's vault plus the cash carried by its customers 
A)  cash in a bank's vault plus its deposits at Federal Reserve banks 
B)  cash in a bank's vault plus its gold at Federal Reserve banks 
C)  gold in a bank's vault plus its gold at Federal Reserve banks 
D)  cash in a bank's vault plus the cash carried by its customers

Question 15

The monetary base is the sum of

Accepted Answer

A)  currency, travelers' checks, and checking deposits 
B)  M1 and M2 
C)  currency 
D)  Federal Reserve notes, coins, and deposits of depository institutions 
A)  currency, travelers' checks, and checking deposits 
B)  M1 and M2 
C)  currency 
D)  Federal Reserve notes, coins, and deposits of depository institutions

Question 16

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 and the quantity of M2 _ .

Accepted Answer

A)  decreases; increases 
B)  decreases; does not change 
C)  increases; decreases 
D)  decreases; decreases 
A)  decreases; increases 
B)  decreases; does not change 
C)  increases; decreases 
D)  decreases; decreases

Question 17

The quantity of money people want to hold increases if

Accepted Answer

A)  real GDP increases. 
B)  the interest rate rises. 
C)  the price level falls. 
D)  All of the above answers are correct. 
A)  real GDP increases. 
B)  the interest rate rises. 
C)  the price level falls. 
D)  All of the above answers are correct.

Question 18

Liquidity can

Accepted Answer

A)  not be created. 
B)  be created by borrowing long and lending short. 
C)  be created by borrowing short and lending long. 
D)  only be created by the government. 
A)  not be created. 
B)  be created by borrowing long and lending short. 
C)  be created by borrowing short and lending long. 
D)  only be created by the government.

Question 19

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

Accepted Answer

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

Question 20

Which of the following is considered a depository institution?
I. the U.S. Treasury
II. a commercial bank like Citibank
III. a credit union for federal government employees

Accepted Answer

A)  II and III 
B)  I only 
C)  I and II 
D)  I, II and III 
A)  II and III 
B)  I only 
C)  I and II 
D)  I, II and III

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

M2 .

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

The monetary base is

On a given day the quantity of money is and the supply of money curve is .

If a savings and loan "pools risk," which of the following must it do?

Explain how the money market determines the equilibrium interest rate.

Since the 1970s, which factors have lead to an increase in demand for M1?

Barter occurs when you exchange

When the nominal interest rate rises, the opportunity cost of holding money

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

An increase in real GDP

Reserves are .

The monetary base is the sum of

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 and the quantity of M2 _ .

The quantity of money people want to hold increases if

Liquidity can

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

Which of the following is considered a depository institution? I. the U.S. Treasury II. a commercial bank like Citibank III. a credit union for federal government employees

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

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

M2 .

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

The monetary base is

On a given day the quantity of money is and the supply of money curve is .

If a savings and loan "pools risk," which of the following must it do?

Explain how the money market determines the equilibrium interest rate.

Since the 1970s, which factors have lead to an increase in demand for M1?

Barter occurs when you exchange

When the nominal interest rate rises, the opportunity cost of holding money

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

An increase in real GDP

Reserves are .

The monetary base is the sum of

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1 and the quantity of M2 _ .

The quantity of money people want to hold increases if

Liquidity can

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

Which of the following is considered a depository institution? I. the U.S. Treasury II. a commercial bank like Citibank III. a credit union for federal government employees

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