Question 1

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

Accepted Answer

A)  checking deposits at savings and loans 
B)  currency held outside banks 
C)  time deposits 
D)  traveler's checks 
A)  checking deposits at savings and loans 
B)  currency held outside banks 
C)  time deposits 
D)  traveler's checks

Question 2

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

Accepted Answer

According to the quantity theo

Question 3

The change in the quantity of money divided by the change in the monetary base is called the
Multiplier.

Accepted Answer

A)  monetary policy 
B)  monetary base 
C)  money 
D)  deposit 
A)  monetary policy 
B)  monetary base 
C)  money 
D)  deposit

Question 4

Most of the day- to- day power in monetary policy decisions lies with

Accepted Answer

A)  the Senate Banking Committee 
B)  the President of the United States 
C)  the chairman of the Board of Governors 
D)  large commercial banks 
A)  the Senate Banking Committee 
B)  the President of the United States 
C)  the chairman of the Board of Governors 
D)  large commercial banks

Question 5

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Accepted Answer

A) True 
 B)False

Question 6

Liquidity is the same as

Accepted Answer

A)  easy conversion of money to an asset, allowing for loss of value. 
B)  easy conversion of an asset to a means of payment, with little or no loss of value. 
C)  diversification of an investor's store of value. 
D)  easy conversion of an asset to a means of payment, allowing for loss of value. 
A)  easy conversion of money to an asset, allowing for loss of value. 
B)  easy conversion of an asset to a means of payment, with little or no loss of value. 
C)  diversification of an investor's store of value. 
D)  easy conversion of an asset to a means of payment, allowing for loss of value.

Question 7

A highly liquid asset

Accepted Answer

A)  is highly leveraged. 
B)  has high transaction costs associated with its sale. 
C)  generally has a very limited market for its resale. 
D)  can be converted into a means of payment easily without loss of value. 
A)  is highly leveraged. 
B)  has high transaction costs associated with its sale. 
C)  generally has a very limited market for its resale. 
D)  can be converted into a means of payment easily without loss of value.

Question 8

List and discuss the four economic functions that depository institutions provide their customers.

Accepted Answer

Depository institutions create liquidity

Question 9

The definition of M2 includes

Accepted Answer

A)  time deposits. 
B)  savings deposits. 
C)  M1. 
D)  all of the above 
A)  time deposits. 
B)  savings deposits. 
C)  M1. 
D)  all of the above

Question 10

Commercial banks do not

Accepted Answer

A)  make loans to creditworthy individuals and businesses. 
B)  buy U.S. government Treasury bills. 
C)  determine what assets are money. 
D)  accept deposits from their customers. 
A)  make loans to creditworthy individuals and businesses. 
B)  buy U.S. government Treasury bills. 
C)  determine what assets are money. 
D)  accept deposits from their customers.

Question 11

Modern U.S. commercial banks perform all of the following functions EXCEPT

Accepted Answer

A)  make loans to households and business firms. 
B)  issue paper currency. 
C)  accept checking deposits. 
D)  accept savings deposits. 
A)  make loans to households and business firms. 
B)  issue paper currency. 
C)  accept checking deposits. 
D)  accept savings deposits.

Question 12

A decrease in decreases the demand for money.

Accepted Answer

A)  the interest rate 
B)  the discount rate 
C)  the quantity of money 
D)  real GDP 
A)  the interest rate 
B)  the discount rate 
C)  the quantity of money 
D)  real GDP

Question 13

An increase in the interest rate creates a _ the money demand curve, and an increase in real GDP creates a the money demand curve.

Accepted Answer

A)  movement down along; leftward shift of 
B)  rightward shift of; movement up along 
C)  leftward shift of; rightward shift of 
D)  movement up along; rightward shift of 
A)  movement down along; leftward shift of 
B)  rightward shift of; movement up along 
C)  leftward shift of; rightward shift of 
D)  movement up along; rightward shift of

Question 14

An open market operation involves

Accepted Answer

A)  raising the debt limit of the United States. 
B)  the issuance of new corporate stock. 
C)  the Federal Reserve's purchase or sale of government securities. 
D)  changing federal income tax rates. 
A)  raising the debt limit of the United States. 
B)  the issuance of new corporate stock. 
C)  the Federal Reserve's purchase or sale of government securities. 
D)  changing federal income tax rates.

Question 15

For a commercial bank, the term "reserves" refers to

Accepted Answer

A)  a banker's concern ("reservation") in making loans to an individual without a job. 
B)  the net interest that it earns on loans. 
C)  the profit that the bank retains at the end of the year. 
D)  the cash in its vaults and its deposits at the Federal Reserve. 
A)  a banker's concern ("reservation") in making loans to an individual without a job. 
B)  the net interest that it earns on loans. 
C)  the profit that the bank retains at the end of the year. 
D)  the cash in its vaults and its deposits at the Federal Reserve.

Question 16

When the quantity of money demanded is greater than the quantity of money supplied, people
Bonds and the interest rate .

Accepted Answer

A)  sell; rises 
B)  buy; rises 
C)  buy; falls 
D)  sell; falls 
A)  sell; rises 
B)  buy; rises 
C)  buy; falls 
D)  sell; falls

Question 17

Assuming velocity is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 18

_ in the desired reserve ratio will the money multiplier.

Accepted Answer

A)  A decrease; will have no effect on 
B)  An increase; decrease 
C)  An increase; have no effect on 
D)  A decrease; decrease 
A)  A decrease; will have no effect on 
B)  An increase; decrease 
C)  An increase; have no effect on 
D)  A decrease; decrease

Question 19

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

Accepted Answer

A)  6 percent 
B)  3 percent 
C)  1 percent 
D)  5 percent 
A)  6 percent 
B)  3 percent 
C)  1 percent 
D)  5 percent

Question 20

Liquidity is the

Accepted Answer

A)  ease with which an asset can be converted into a means of payment with little loss of value. 
B)  degree to which an asset acts as money without a loss of value. 
C)  ease with which credit cards are accepted as a means of payment. 
D)  degree to which money can be converted into an asset with little loss of value. 
A)  ease with which an asset can be converted into a means of payment with little loss of value. 
B)  degree to which an asset acts as money without a loss of value. 
C)  ease with which credit cards are accepted as a means of payment. 
D)  degree to which money can be converted into an asset with little loss of value.

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

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

The change in the quantity of money divided by the change in the monetary base is called the Multiplier.

Most of the day- to- day power in monetary policy decisions lies with

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Liquidity is the same as

A highly liquid asset

List and discuss the four economic functions that depository institutions provide their customers.

The definition of M2 includes

Commercial banks do not

Modern U.S. commercial banks perform all of the following functions EXCEPT

A decrease in decreases the demand for money.

An increase in the interest rate creates a _ the money demand curve, and an increase in real GDP creates a the money demand curve.

An open market operation involves

For a commercial bank, the term "reserves" refers to

When the quantity of money demanded is greater than the quantity of money supplied, people Bonds and the interest rate .

Assuming velocity is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

_ in the desired reserve ratio will the money multiplier.

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

Liquidity is the

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 is NOT included in the M1 definition of money?

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

The change in the quantity of money divided by the change in the monetary base is called the Multiplier.

Most of the day- to- day power in monetary policy decisions lies with

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Liquidity is the same as

A highly liquid asset

List and discuss the four economic functions that depository institutions provide their customers.

The definition of M2 includes

Commercial banks do not

Modern U.S. commercial banks perform all of the following functions EXCEPT

A decrease in decreases the demand for money.

An increase in the interest rate creates a _ the money demand curve, and an increase in real GDP creates a the money demand curve.

An open market operation involves

For a commercial bank, the term "reserves" refers to

When the quantity of money demanded is greater than the quantity of money supplied, people Bonds and the interest rate .

Assuming velocity is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

_ in the desired reserve ratio will the money multiplier.

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

Liquidity is the

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