Question 1

Checking deposits are

Accepted Answer

A)  small in volume relative to currency in circulation. 
B)  part of money. 
C)  not part of money. 
D)  quite different from checking accounts. 
A)  small in volume relative to currency in circulation. 
B)  part of money. 
C)  not part of money. 
D)  quite different from checking accounts.

Question 2

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in real GDP?

Accepted Answer

A)  The demand for money curve would shift leftward to MD0. 
B)  The demand for money curve would shift rightward to MD2. 
C)  There would be a movement upward along the demand for money curve MD1. 
D)  There would be a movement downward along the demand for money curve MD1. 
A)  The demand for money curve would shift leftward to MD0. 
B)  The demand for money curve would shift rightward to MD2. 
C)  There would be a movement upward along the demand for money curve MD1. 
D)  There would be a movement downward along the demand for money curve MD1.

Question 3

Which of the following does NOT describe a function of money?

Accepted Answer

A)  a hedge against inflation 
B)  a store of value 
C)  a medium of exchange 
D)  a unit of account 
A)  a hedge against inflation 
B)  a store of value 
C)  a medium of exchange 
D)  a unit of account

Question 4

Which of the following is a depository institution?

Accepted Answer

A)  the U.S. Treasury 
B)  private citizen with available lending funds 
C)  a broker 
D)  a commercial bank 
A)  the U.S. Treasury 
B)  private citizen with available lending funds 
C)  a broker 
D)  a commercial bank

Question 5

Which of the following is NOT included in the M2 measure of money?

Accepted Answer

A)  time deposits 
B)  checking deposits 
C)  shares of the stocks of large companies 
D)  traveler's checks 
A)  time deposits 
B)  checking deposits 
C)  shares of the stocks of large companies 
D)  traveler's checks

Question 6

When the interest rate rises, the quantity of money demanded decreases because

Accepted Answer

A)  people move funds from interest- bearing assets into money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people will buy fewer goods and hold less money. 
D)  people shift funds from money holdings to interest- bearing assets. 
A)  people move funds from interest- bearing assets into money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people will buy fewer goods and hold less money. 
D)  people shift funds from money holdings to interest- bearing assets.

Question 7

A decrease in the interest rate

Accepted Answer

A)  decreases the opportunity cost of holding money. 
B)  can increase or decrease the opportunity cost of holding money. 
C)  increases the opportunity cost of holding money. 
D)  None of the above answers is correct. 
A)  decreases the opportunity cost of holding money. 
B)  can increase or decrease the opportunity cost of holding money. 
C)  increases the opportunity cost of holding money. 
D)  None of the above answers is correct.

Question 8

Required reserves for a commercial bank

Accepted Answer

A)  are only the money used by the bank tellers. 
B)  are only the reserves required to be held in the bank's vault. 
C)  consist only of deposits at the Fed. 
D)  are the reserves a bank is legally required to hold to back its deposits. 
A)  are only the money used by the bank tellers. 
B)  are only the reserves required to be held in the bank's vault. 
C)  consist only of deposits at the Fed. 
D)  are the reserves a bank is legally required to hold to back its deposits.

Question 9

A depository institution is a firm that takes deposits from and makes loans to _.

Accepted Answer

A)  firms; households 
B)  households; firms 
C)  firms; other firms 
D)  households and firms; other households and firms 
A)  firms; households 
B)  households; firms 
C)  firms; other firms 
D)  households and firms; other households and firms

Question 10

-The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals _ .

Accepted Answer

A)  20 percent 
B)  25 percent 
C)  33.3 percent 
D)  14.3 percent 
A)  20 percent 
B)  25 percent 
C)  33.3 percent 
D)  14.3 percent

Question 11

Reserve requirements are

Accepted Answer

A)  rules covering the types of assets that banks may purchase. 
B)  the minimum amount of an owner's financial resources that must be placed in a depository institution. 
C)  rules covering the types of deposits that banks may offer. 
D)  minimum percentages of deposits that banks must hold as reserves. 
A)  rules covering the types of assets that banks may purchase. 
B)  the minimum amount of an owner's financial resources that must be placed in a depository institution. 
C)  rules covering the types of deposits that banks may offer. 
D)  minimum percentages of deposits that banks must hold as reserves.

Question 12

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that

Accepted Answer

A)  bond prices rise so that the interest rate rises. 
B)  the money market is in equilibrium. 
C)  people buy bonds and the interest rate falls. 
D)  people sell bonds and the interest rate rises. 
A)  bond prices rise so that the interest rate rises. 
B)  the money market is in equilibrium. 
C)  people buy bonds and the interest rate falls. 
D)  people sell bonds and the interest rate rises.

Question 13

How has growth in M2 minus the growth in real GDP compared to the inflation rate in the United States?

Accepted Answer

Since 1960, M2 growth minus the growth i

Question 14

The quantity theory of money states that in the long run

Accepted Answer

A)  the price level will not consistently rise, it will fluctuate. 
B)  an increase in the quantity of money increases real GDP by a smaller percentage. 
C)  a rise in the price level rises causes the quantity of money to increase. 
D)  an increase in the quantity of money results in an equal percentage increase in the price level. 
A)  the price level will not consistently rise, it will fluctuate. 
B)  an increase in the quantity of money increases real GDP by a smaller percentage. 
C)  a rise in the price level rises causes the quantity of money to increase. 
D)  an increase in the quantity of money results in an equal percentage increase in the price level.

Question 15

In 2007, interest rates in Germany were 4.7 percent while the inflation rate was 1.7 percent. In 2008, interest rates increased to 5.3 percent and the inflation rate increased to 2.0. As a result, there is

Accepted Answer

A)  a leftward shift in Germany's demand for money curve. 
B)  a rightward shift in Germany's money supply curve. 
C)  a downward movement along Germany's demand for money curve. 
D)  an upward movement along Germany's demand for money curve. 
A)  a leftward shift in Germany's demand for money curve. 
B)  a rightward shift in Germany's money supply curve. 
C)  a downward movement along Germany's demand for money curve. 
D)  an upward movement along Germany's demand for money curve.

Question 16

The demand for money curve shifts rightward if

Accepted Answer

A)  the price level falls. 
B)  the interest rate falls. 
C)  financial innovation creates new substitutes for cash. 
D)  real GDP increases. 
A)  the price level falls. 
B)  the interest rate falls. 
C)  financial innovation creates new substitutes for cash. 
D)  real GDP increases.

Question 17

Money serves as

Accepted Answer

A)  a unit of account. 
B)  a medium of exchange. 
C)  a store of value. 
D)  all of the above 
A)  a unit of account. 
B)  a medium of exchange. 
C)  a store of value. 
D)  all of the above

Question 18

The current chairman of the Federal Reserve System is

Accepted Answer

A)  Alan Greenspan. 
B)  John Keynes. 
C)  Milton Friedman. 
D)  Ben Bernanke. 
A)  Alan Greenspan. 
B)  John Keynes. 
C)  Milton Friedman. 
D)  Ben Bernanke.

Question 19

According to the quantity theory of money, changes in the price level are the result of changes in the

Accepted Answer

A)  real interest rate. 
B)  prime interest rate. 
C)  quantity of money. 
D)  velocity of circulation. 
A)  real interest rate. 
B)  prime interest rate. 
C)  quantity of money. 
D)  velocity of circulation.

Question 20

in the currency drain the money multiplier.

Accepted Answer

A)  A decrease; decreases 
B)  An increase; decreases 
C)  A decrease; does not change 
D)  An increase; increases 
A)  A decrease; decreases 
B)  An increase; decreases 
C)  A decrease; does not change 
D)  An increase; increases

Checking deposits are

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in real GDP?

Which of the following does NOT describe a function of money?

Which of the following is a depository institution?

Which of the following is NOT included in the M2 measure of money?

When the interest rate rises, the quantity of money demanded decreases because

A decrease in the interest rate

Required reserves for a commercial bank

A depository institution is a firm that takes deposits from and makes loans to _.

-The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals _ .

Reserve requirements are

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that

How has growth in M2 minus the growth in real GDP compared to the inflation rate in the United States?

The quantity theory of money states that in the long run

In 2007, interest rates in Germany were 4.7 percent while the inflation rate was 1.7 percent. In 2008, interest rates increased to 5.3 percent and the inflation rate increased to 2.0. As a result, there is

The demand for money curve shifts rightward if

Money serves as

The current chairman of the Federal Reserve System is

According to the quantity theory of money, changes in the price level are the result of changes in the

in the currency drain the money multiplier.

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

Checking deposits are

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in real GDP?

Which of the following does NOT describe a function of money?

Which of the following is a depository institution?

Which of the following is NOT included in the M2 measure of money?

When the interest rate rises, the quantity of money demanded decreases because

A decrease in the interest rate

Required reserves for a commercial bank

A depository institution is a firm that takes deposits from and makes loans to _.

-The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals _ .

Reserve requirements are

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that

How has growth in M2 minus the growth in real GDP compared to the inflation rate in the United States?

The quantity theory of money states that in the long run

In 2007, interest rates in Germany were 4.7 percent while the inflation rate was 1.7 percent. In 2008, interest rates increased to 5.3 percent and the inflation rate increased to 2.0. As a result, there is

The demand for money curve shifts rightward if

Money serves as

The current chairman of the Federal Reserve System is

According to the quantity theory of money, changes in the price level are the result of changes in the

in the currency drain the money multiplier.

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

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in real GDP?