Question 1

When real GDP increases, the demand for money

Accepted Answer

A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  we cannot make a prediction without additional information. 
A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  we cannot make a prediction without additional information.

Question 2

The risk of making a loan is

Accepted Answer

A)  called "default risk" when taxes are not paid. 
B)  the risk that lender does not pay. 
C)  the risk that the borrower does not pay. 
D)  earning profits that are too high and cause higher taxes. 
A)  called "default risk" when taxes are not paid. 
B)  the risk that lender does not pay. 
C)  the risk that the borrower does not pay. 
D)  earning profits that are too high and cause higher taxes.

Question 3

Which of the following is NOT a policy tool of the Federal Reserve System?

Accepted Answer

A)  the amount of required reserves held by member banks 
B)  the interest rate charged by the Fed for loans to member banks 
C)  open market operations 
D)  the tax rate imposed on interest income 
A)  the amount of required reserves held by member banks 
B)  the interest rate charged by the Fed for loans to member banks 
C)  open market operations 
D)  the tax rate imposed on interest income

Question 4

Currency outside of banks increases from $100 million to $200 million. This change is considered

Accepted Answer

A)  expansionary monetary policy. 
B)  a decrease in the monetary base. 
C)  a currency drain. 
D)  contractionary monetary policy. 
A)  expansionary monetary policy. 
B)  a decrease in the monetary base. 
C)  a currency drain. 
D)  contractionary monetary policy.

Question 5

If real GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

Accepted Answer

A)  is $5 trillion. 
B)  is $2 trillion. 
C)  is $20 trillion. 
D)  cannot be determined from the information given. 
A)  is $5 trillion. 
B)  is $2 trillion. 
C)  is $20 trillion. 
D)  cannot be determined from the information given.

Question 6

-The above table has the demand for money schedule.
a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate?
b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

Accepted Answer

a) The equilibrium interest rate is 4 pe

Question 7

M2 is

Accepted Answer

A)  smaller than M1. 
B)  equal to M1, but only when all three functions of money apply. 
C)  equal to M1, given full employment. 
D)  larger than M1. 
A)  smaller than M1. 
B)  equal to M1, but only when all three functions of money apply. 
C)  equal to M1, given full employment. 
D)  larger than M1.

Question 8

The rate is the interest rate at which the Fed lends to depository institutions.

Accepted Answer

A)  federal funds rate; deposits 
B)  federal funds rate; reserves 
C)  discount rate; gold 
D)  discount rate; reserves 
A)  federal funds rate; deposits 
B)  federal funds rate; reserves 
C)  discount rate; gold 
D)  discount rate; reserves

Question 9

Suppose that the money multiplier is 6. If the monetary base increases by $1 million, the quantity of money will

Accepted Answer

A)  increase by $6 million. 
B)  increase by $166,667. 
C)  decrease by $166,667. 
D)  decrease by $6 million. 
A)  increase by $6 million. 
B)  increase by $166,667. 
C)  decrease by $166,667. 
D)  decrease by $6 million.

Question 10

If nominal GDP equals $10 trillion and the velocity of circulation is 5, then

Accepted Answer

A)  the quantity of money is $2 trillion. 
B)  the real value of the quantity of money is $10 trillion. 
C)  the quantity of money is $50 trillion. 
D)  real GDP is $2 trillion. 
A)  the quantity of money is $2 trillion. 
B)  the real value of the quantity of money is $10 trillion. 
C)  the quantity of money is $50 trillion. 
D)  real GDP is $2 trillion.

Question 11

The quantity of real money demanded is

Accepted Answer

A)  independent of the price level. 
B)  positively related to the price level. 
C)  sometimes negatively and sometimes positively related to the price level. 
D)  negatively related to the price level. 
A)  independent of the price level. 
B)  positively related to the price level. 
C)  sometimes negatively and sometimes positively related to the price level. 
D)  negatively related to the price level.

Question 12

Are Federal Reserve notes an asset or a liability of the Fed? Why?

Accepted Answer

Federal Reserve notes are a liability of

Question 13

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

Accepted Answer

The statement is false. Credit cards are

Question 14

The effect of an increase in the interest rate on the demand for money curve is to

Accepted Answer

A)  shift the demand for money curve leftward. 
B)  shift the demand for money curve rightward. 
C)  create a movement downward along the demand for money curve. 
D)  create a movement upward along the demand for money curve. 
A)  shift the demand for money curve leftward. 
B)  shift the demand for money curve rightward. 
C)  create a movement downward along the demand for money curve. 
D)  create a movement upward along the demand for money curve.

Question 15

M1 includes all the following items EXCEPT .

Accepted Answer

A)  currency owned by individuals and businesses 
B)  traveler's checks 
C)  deposits in money market mutual funds 
D)  checking deposits owned by individuals and businesses 
A)  currency owned by individuals and businesses 
B)  traveler's checks 
C)  deposits in money market mutual funds 
D)  checking deposits owned by individuals and businesses

Question 16

There are _ regional Federal Reserve banks.

Accepted Answer

A)  12 
B)  15 
C)  10 
D)  over 10,000 
A)  12 
B)  15 
C)  10 
D)  over 10,000

Question 17

-The above figure has the demand for money curve. Suppose the Fed initially sets the quantity of money equal to
$0.6 trillion. Draw the supply of money curve in the figure. What is the equilibrium interest rate? Now suppose the Fed increases the quantity of money to $0.9 trillion. Draw the new supply curve. What is the new equilibrium interest rate?

Accepted Answer

@#IMG-DLM& The initial supply of money curve is MS

Question 18

A medium of exchange is

Accepted Answer

A)  an asset that is used to settle future debts. 
B)  a measure by which prices are expressed. 
C)  an object that sellers will accept as payment. 
D)  the thing traded when barter takes place. 
A)  an asset that is used to settle future debts. 
B)  a measure by which prices are expressed. 
C)  an object that sellers will accept as payment. 
D)  the thing traded when barter takes place.

Question 19

Which of the following statements concerning commercial banks is true?

Accepted Answer

A)  Cash reserves earn the highest rate of return of any asset for a bank. 
B)  Banks need to maintain cash reserves equal to their deposits. 
C)  Most banks maintain cash reserves equal to a fraction of deposits. 
D)  Since the advent of the Federal Reserve, banks do not need to maintain cash reserves. 
A)  Cash reserves earn the highest rate of return of any asset for a bank. 
B)  Banks need to maintain cash reserves equal to their deposits. 
C)  Most banks maintain cash reserves equal to a fraction of deposits. 
D)  Since the advent of the Federal Reserve, banks do not need to maintain cash reserves.

Question 20

Depository institutions do all the following EXCEPT

Accepted Answer

A)  minimize the cost of obtaining funds. 
B)  pool risks. 
C)  create required reserve ratios. 
D)  create liquidity. 
A)  minimize the cost of obtaining funds. 
B)  pool risks. 
C)  create required reserve ratios. 
D)  create liquidity.

When real GDP increases, the demand for money

The risk of making a loan is

Which of the following is NOT a policy tool of the Federal Reserve System?

Currency outside of banks increases from $100 million to $200 million. This change is considered

If real GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

-The above table has the demand for money schedule. a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate? b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

M2 is

The rate is the interest rate at which the Fed lends to depository institutions.

Suppose that the money multiplier is 6. If the monetary base increases by $1 million, the quantity of money will

If nominal GDP equals $10 trillion and the velocity of circulation is 5, then

The quantity of real money demanded is

Are Federal Reserve notes an asset or a liability of the Fed? Why?

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

The effect of an increase in the interest rate on the demand for money curve is to

M1 includes all the following items EXCEPT .

There are _ regional Federal Reserve banks.

A medium of exchange is

Which of the following statements concerning commercial banks is true?

Depository institutions do all the following EXCEPT

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

When real GDP increases, the demand for money

The risk of making a loan is

Which of the following is NOT a policy tool of the Federal Reserve System?

Currency outside of banks increases from $100 million to $200 million. This change is considered

If real GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

-The above table has the demand for money schedule. a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate? b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

M2 is

The rate is the interest rate at which the Fed lends to depository institutions.

Suppose that the money multiplier is 6. If the monetary base increases by $1 million, the quantity of money will

If nominal GDP equals $10 trillion and the velocity of circulation is 5, then

The quantity of real money demanded is

Are Federal Reserve notes an asset or a liability of the Fed? Why?

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

The effect of an increase in the interest rate on the demand for money curve is to

M1 includes all the following items EXCEPT .

There are _ regional Federal Reserve banks.

A medium of exchange is

Which of the following statements concerning commercial banks is true?

Depository institutions do all the following EXCEPT

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