Question 1

The money multiplier determines how much

Accepted Answer

A)  money demand will expand given a change in the quantity of money. 
B)  the quantity of money will be expanded given a change in the monetary base. 
C)  the monetary base will be expanded given a change in the quantity of money. 
D)  real GDP will be expanded given an increase in autonomous investment. 
A)  money demand will expand given a change in the quantity of money. 
B)  the quantity of money will be expanded given a change in the monetary base. 
C)  the monetary base will be expanded given a change in the quantity of money. 
D)  real GDP will be expanded given an increase in autonomous investment.

Question 2

The sale of $1 billion of government securities by the Fed is an example of

Accepted Answer

A)  a change in the required reserve ratio. 
B)  a multiple contraction of the quantity of money. 
C)  a last resort loan. 
D)  an open market operation. 
A)  a change in the required reserve ratio. 
B)  a multiple contraction of the quantity of money. 
C)  a last resort loan. 
D)  an open market operation.

Question 3

The sum of Federal Reserve notes, coins, and depository institutions' reserves is the .

Accepted Answer

A)  liabilities of the Fed 
B)  reserves of the Fed 
C)  monetary base 
D)  assets of the Fed 
A)  liabilities of the Fed 
B)  reserves of the Fed 
C)  monetary base 
D)  assets of the Fed

Question 4

The Federal Reserve is divided into 7 districts.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a primary function of money?

Accepted Answer

A)  to reduce the burden of excessive imports 
B)  to serve as an encouragement to work 
C)  to serve as a unit of account 
D)  to raise funds for the government 
A)  to reduce the burden of excessive imports 
B)  to serve as an encouragement to work 
C)  to serve as a unit of account 
D)  to raise funds for the government

Question 6

The majority of money is created when

Accepted Answer

A)  new bills are printed 
B)  new coins are minted 
C)  the Fed sells bonds 
D)  banks make loans 
A)  new bills are printed 
B)  new coins are minted 
C)  the Fed sells bonds 
D)  banks make loans

Question 7

The velocity of circulation is

Accepted Answer

A)  the relationship between increases in income and investment. 
B)  the relationship between income and spending. 
C)  the average number of times per year a dollar is spent on goods and services in GDP. 
D)  the ratio of currency to demand deposits. 
A)  the relationship between increases in income and investment. 
B)  the relationship between income and spending. 
C)  the average number of times per year a dollar is spent on goods and services in GDP. 
D)  the ratio of currency to demand deposits.

Question 8

When money is accepted as payment in a market transaction, it is functioning as a

Accepted Answer

A)  unit of accounting. 
B)  store of value. 
C)  unit of investment. 
D)  medium of exchange. 
A)  unit of accounting. 
B)  store of value. 
C)  unit of investment. 
D)  medium of exchange.

Question 9

The Federal Reserve reports that it has coins valued at $10 billion, bank reserves at the Fed of $15 billion, gold valued at $10 billion, Federal Reserves notes of $400 billion, and U.S. government securities of $300 billion. What is the size of the monetary base?

Accepted Answer

The monetary base is the sum o

Question 10

Which of the following measures is NOT included in the M1 definition of money?

Accepted Answer

A)  travelers checks 
B)  time deposits 
C)  checking deposits 
D)  currency held by the public 
A)  travelers checks 
B)  time deposits 
C)  checking deposits 
D)  currency held by the public

Question 11

The quantity of money that people choose to hold is

Accepted Answer

A)  positively related to the interest rate. 
B)  negatively related to the price level. 
C)  positively related to real GDP. 
D)  positively related to the availability of ATM machines. 
A)  positively related to the interest rate. 
B)  negatively related to the price level. 
C)  positively related to real GDP. 
D)  positively related to the availability of ATM machines.

Question 12

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

Accepted Answer

A) True 
 B)False

Question 13

-The above table has the demand for money schedule.
a) If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate?
b) If the Fed wants the interest rate to be 4 percent, what must it do?

Accepted Answer

a) If the Fed sets the quantity of money

Question 14

The larger the public's currency drain from the banking system, the

Accepted Answer

A)  larger is the money multiplier. 
B)  smaller is the money multiplier. 
C)  larger is the monetary base. 
D)  smaller is the monetary base. 
A)  larger is the money multiplier. 
B)  smaller is the money multiplier. 
C)  larger is the monetary base. 
D)  smaller is the monetary base.

Question 15

Which function of money refers to the use of money to state the prices of goods and services?

Accepted Answer

A)  store of value 
B)  medium of exchange 
C)  means of payment 
D)  unit of account 
A)  store of value 
B)  medium of exchange 
C)  means of payment 
D)  unit of account

Question 16

A firm that takes deposits from households and firms and makes loans to other households and firms is a

Accepted Answer

A)  depository institution. 
B)  usurer. 
C)  stockbroker. 
D)  credit company. 
A)  depository institution. 
B)  usurer. 
C)  stockbroker. 
D)  credit company.

Question 17

In comparing growth rates of money growth and inflation across countries, the long- run proposition of the quantity theory of money is supported.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that a bank begins with $500 million in deposits and $100 million in reserves and is just meeting its desired reserve ratio. Now suppose a decrease in the required reserve ratio lowers the desired reserve ratio to 10 percent. After the fall in the desired reserve ratio but before the bank makes any changes, the bank's excess reserves are

Accepted Answer

A)  $400 million. 
B)  $50 million. 
C)  $450 million. 
D)  0. 
A)  $400 million. 
B)  $50 million. 
C)  $450 million. 
D)  0.

Question 19

An open market operation is the federal Reserve's purchase or sale of

Accepted Answer

A)  corporate bonds. 
B)  Treasury reserves. 
C)  excess reserves. 
D)  Treasury securities. 
A)  corporate bonds. 
B)  Treasury reserves. 
C)  excess reserves. 
D)  Treasury securities.

Question 20

Commercial banks are able to create money by

Accepted Answer

A)  exchanging their reserves at the Fed for vault cash. 
B)  making customers pay back their loans. 
C)  making loans. 
D)  printing Federal Reserve Notes. 
A)  exchanging their reserves at the Fed for vault cash. 
B)  making customers pay back their loans. 
C)  making loans. 
D)  printing Federal Reserve Notes.

The money multiplier determines how much

The sale of $1 billion of government securities by the Fed is an example of

The sum of Federal Reserve notes, coins, and depository institutions' reserves is the .

The Federal Reserve is divided into 7 districts.

Which of the following is a primary function of money?

The majority of money is created when

The velocity of circulation is

When money is accepted as payment in a market transaction, it is functioning as a

The Federal Reserve reports that it has coins valued at $10 billion, bank reserves at the Fed of $15 billion, gold valued at $10 billion, Federal Reserves notes of $400 billion, and U.S. government securities of $300 billion. What is the size of the monetary base?

Which of the following measures is NOT included in the M1 definition of money?

The quantity of money that people choose to hold is

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

-The above table has the demand for money schedule. a) If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate? b) If the Fed wants the interest rate to be 4 percent, what must it do?

The larger the public's currency drain from the banking system, the

Which function of money refers to the use of money to state the prices of goods and services?

A firm that takes deposits from households and firms and makes loans to other households and firms is a

In comparing growth rates of money growth and inflation across countries, the long- run proposition of the quantity theory of money is supported.

An open market operation is the federal Reserve's purchase or sale of

Commercial banks are able to create money by

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 money multiplier determines how much

The sale of $1 billion of government securities by the Fed is an example of

The sum of Federal Reserve notes, coins, and depository institutions' reserves is the .

The Federal Reserve is divided into 7 districts.

Which of the following is a primary function of money?

The majority of money is created when

The velocity of circulation is

When money is accepted as payment in a market transaction, it is functioning as a

The Federal Reserve reports that it has coins valued at $10 billion, bank reserves at the Fed of $15 billion, gold valued at $10 billion, Federal Reserves notes of $400 billion, and U.S. government securities of $300 billion. What is the size of the monetary base?

Which of the following measures is NOT included in the M1 definition of money?

The quantity of money that people choose to hold is

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

-The above table has the demand for money schedule. a) If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate? b) If the Fed wants the interest rate to be 4 percent, what must it do?

The larger the public's currency drain from the banking system, the

Which function of money refers to the use of money to state the prices of goods and services?

A firm that takes deposits from households and firms and makes loans to other households and firms is a

In comparing growth rates of money growth and inflation across countries, the long- run proposition of the quantity theory of money is supported.

An open market operation is the federal Reserve's purchase or sale of

Commercial banks are able to create money by

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