Question 1

Which of the following equations represents the equation of exchange?

Accepted Answer

A)  MV = PY 
B)  MY = PV 
C)  PM = VY 
D)  M = VP/Y 
A)  MV = PY 
B)  MY = PV 
C)  PM = VY 
D)  M = VP/Y

Question 2

Checking deposits are included in

Accepted Answer

A)  M2 only. 
B)  M1 only. 
C)  M1 and M2. 
D)  savings balances only. 
A)  M2 only. 
B)  M1 only. 
C)  M1 and M2. 
D)  savings balances only.

Question 3

An increase in currency held outside the banks is .

Accepted Answer

A)  income 
B)  wealth 
C)  a currency surplus 
D)  a currency drain 
A)  income 
B)  wealth 
C)  a currency surplus 
D)  a currency drain

Question 4

Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, _.

Accepted Answer

A)  M1 and M2 do not change 
B)  M1 decreases by $400 and M2 increases by $250 
C)  M1 decreases by $250 and M2 does not change 
D)  M1 does not change and M2 increases by $250 
A)  M1 and M2 do not change 
B)  M1 decreases by $400 and M2 increases by $250 
C)  M1 decreases by $250 and M2 does not change 
D)  M1 does not change and M2 increases by $250

Question 5

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

Accepted Answer

The bank can make new loans equal to the

Question 6

A change in the price level changes the amount of nominal money people demand.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following institutions is a depository institution?

Accepted Answer

A)  the U.S. Treasury 
B)  the New York Stock Exchange 
C)  a financial firm 
D)  a money market mutual fund 
A)  the U.S. Treasury 
B)  the New York Stock Exchange 
C)  a financial firm 
D)  a money market mutual fund

Question 8

Which of the following is a liability of the Federal Reserve?

Accepted Answer

A)  U.S. coins 
B)  loans to depository institutions 
C)  U.S. government securities 
D)  Federal Reserve notes 
A)  U.S. coins 
B)  loans to depository institutions 
C)  U.S. government securities 
D)  Federal Reserve notes

Question 9

Which of the following is the most liquid asset?

Accepted Answer

A)  a share of stock 
B)  money 
C)  land 
D)  a government bond 
A)  a share of stock 
B)  money 
C)  land 
D)  a government bond

Question 10

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

Accepted Answer

A)  85 percent 
B)  10 percent 
C)  5 percent 
D)  15 percent 
A)  85 percent 
B)  10 percent 
C)  5 percent 
D)  15 percent

Question 11

The Federal Open Market Committee (FOMC)

Accepted Answer

A)  lends to the least credit- worthy customers who otherwise can't get loans. 
B)  determines the government's tax policy. 
C)  determines the Fed's monetary policy. 
D)  oversees all transactions on the stock market. 
A)  lends to the least credit- worthy customers who otherwise can't get loans. 
B)  determines the government's tax policy. 
C)  determines the Fed's monetary policy. 
D)  oversees all transactions on the stock market.

Question 12

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits,
$500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of these assets and liabilities that is in M1?

Accepted Answer

The only deposit that is in M1

Question 13

Which of the following is a service of depository institutions?

Accepted Answer

A)  loaning funds to other depository institutions at the discount rate 
B)  monitoring the Federal Reserve 
C)  creating liquidity 
D)  decreasing the liquidity drain in the banking system 
A)  loaning funds to other depository institutions at the discount rate 
B)  monitoring the Federal Reserve 
C)  creating liquidity 
D)  decreasing the liquidity drain in the banking system

Question 14

The equation of exchange

Accepted Answer

A)  cannot be used in an economy with inflation. 
B)  becomes the quantity theory if velocity and the price level are constant. 
C)  is MV = PY. 
D)  All of the above answers are correct. 
A)  cannot be used in an economy with inflation. 
B)  becomes the quantity theory if velocity and the price level are constant. 
C)  is MV = PY. 
D)  All of the above answers are correct.

Question 15

According to the quantity theory of money, in the long run

Accepted Answer

A)  the quantity of money in a society will always be just the right amount. 
B)  an increase in the quantity of money creates an increase in prices but no additional increase in real GDP. 
C)  an increase in the quantity of money creates an increase in real GDP. 
D)  None of the above answers are correct. 
A)  the quantity of money in a society will always be just the right amount. 
B)  an increase in the quantity of money creates an increase in prices but no additional increase in real GDP. 
C)  an increase in the quantity of money creates an increase in real GDP. 
D)  None of the above answers are correct.

Question 16

A bank expands the quantity of money directly by

Accepted Answer

A)  taking in reserves in return for checking deposits. 
B)  buying and selling bonds with the Federal Reserve. 
C)  making loans. 
D)  taking in reserves in return for time deposits. 
A)  taking in reserves in return for checking deposits. 
B)  buying and selling bonds with the Federal Reserve. 
C)  making loans. 
D)  taking in reserves in return for time deposits.

Question 17

The price of movies is equivalent to 2 six- packs of soda. A six- pack of soda is equivalent to 2
Ice- cream cones. An increase cone is equivalent to 3 packs of jelly beans. What can be said, given this data?

Accepted Answer

A)  A pack of jelly beans is equivalent to 1.33 movies. 
B)  Movies are $6.00 each. 
C)  Using a unit of account would make this problem much easier. 
D)  Movies are equivalent to 6 packs of jelly beans. 
A)  A pack of jelly beans is equivalent to 1.33 movies. 
B)  Movies are $6.00 each. 
C)  Using a unit of account would make this problem much easier. 
D)  Movies are equivalent to 6 packs of jelly beans.

Question 18

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of increased use of credit cards?

Accepted Answer

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

Question 19

Federal Reserve policy tools include all of the following EXCEPT

Accepted Answer

A)  excess reserve ratios. 
B)  required reserve ratios. 
C)  open market operations. 
D)  last resort loans. 
A)  excess reserve ratios. 
B)  required reserve ratios. 
C)  open market operations. 
D)  last resort loans.

Question 20

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

Accepted Answer

A)  the quantity of money by $2,000. 
B)  deposits by $2,000. 
C)  the quantity of money by $1,600. 
D)  deposits by $1,600. 
A)  the quantity of money by $2,000. 
B)  deposits by $2,000. 
C)  the quantity of money by $1,600. 
D)  deposits by $1,600.

Which of the following equations represents the equation of exchange?

Checking deposits are included in

An increase in currency held outside the banks is .

Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, _.

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

A change in the price level changes the amount of nominal money people demand.

Which of the following institutions is a depository institution?

Which of the following is a liability of the Federal Reserve?

Which of the following is the most liquid asset?

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

The Federal Open Market Committee (FOMC)

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of these assets and liabilities that is in M1?

Which of the following is a service of depository institutions?

The equation of exchange

According to the quantity theory of money, in the long run

A bank expands the quantity of money directly by

The price of movies is equivalent to 2 six- packs of soda. A six- pack of soda is equivalent to 2 Ice- cream cones. An increase cone is equivalent to 3 packs of jelly beans. What can be said, given this data?

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of increased use of credit cards?

Federal Reserve policy tools include all of the following EXCEPT

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

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

Which of the following equations represents the equation of exchange?

Checking deposits are included in

An increase in currency held outside the banks is .

Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, _.

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

A change in the price level changes the amount of nominal money people demand.

Which of the following institutions is a depository institution?

Which of the following is a liability of the Federal Reserve?

Which of the following is the most liquid asset?

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

The Federal Open Market Committee (FOMC)

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of these assets and liabilities that is in M1?

Which of the following is a service of depository institutions?

The equation of exchange

According to the quantity theory of money, in the long run

A bank expands the quantity of money directly by

The price of movies is equivalent to 2 six- packs of soda. A six- pack of soda is equivalent to 2 Ice- cream cones. An increase cone is equivalent to 3 packs of jelly beans. What can be said, given this data?

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of increased use of credit cards?

Federal Reserve policy tools include all of the following EXCEPT

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

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 increased use of credit cards?