Question 1

According to the quantity theory of money,

Accepted Answer

A)  V and Y are not affected by the quantity of money. 
B)  V and P are not affected by the quantity of money. 
C)  V and M are not affected by changes in the price level. 
D)  V and M are constant. 
A)  V and Y are not affected by the quantity of money. 
B)  V and P are not affected by the quantity of money. 
C)  V and M are not affected by changes in the price level. 
D)  V and M are constant.

Question 2

When the Fed is _ it is .

Accepted Answer

A)  adjusting the amount of money in circulation; issuing government bonds 
B)  regulating the nation's financial institutions; conducting monetary policy 
C)  adjusting the amount of money in circulation; conducting monetary policy 
D)  issuing government bonds; conducting monetary policy 
A)  adjusting the amount of money in circulation; issuing government bonds 
B)  regulating the nation's financial institutions; conducting monetary policy 
C)  adjusting the amount of money in circulation; conducting monetary policy 
D)  issuing government bonds; conducting monetary policy

Question 3

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Accepted Answer

The Federal Reserve, or Fed, is the U.S.

Question 4

Depository institution create liquidity when they

Accepted Answer

A)  have liabilities that are illiquid. 
B)  buy assets that are liquid. 
C)  borrow short and lend long. 
D)  borrow long and lend short. 
A)  have liabilities that are illiquid. 
B)  buy assets that are liquid. 
C)  borrow short and lend long. 
D)  borrow long and lend short.

Question 5

Which of the following is a goal of monetary policy?

Accepted Answer

A)  promote faster long- term economic growth 
B)  keep inflation in check 
C)  maintain full employment 
D)  All of the above answers are correct. 
A)  promote faster long- term economic growth 
B)  keep inflation in check 
C)  maintain full employment 
D)  All of the above answers are correct.

Question 6

The "double coincidence of wants" problem is

Accepted Answer

A)  always present in all economic systems. 
B)  created by the use of money. 
C)  resolved under a system of barter. 
D)  resolved by the use of money. 
A)  always present in all economic systems. 
B)  created by the use of money. 
C)  resolved under a system of barter. 
D)  resolved by the use of money.

Question 7

In September 2008, Regions Bank held $78 million in loans, $95 million in deposits and $5 million in reserves. If Regions Bank's desired reserve ratio is 2.5 percent, then the bank

Accepted Answer

A)  can create money 
B)  has excess reserves. 
C)  can make loans. 
D)  all of the above are true. 
A)  can create money 
B)  has excess reserves. 
C)  can make loans. 
D)  all of the above are true.

Question 8

The Board of Governors is the

Accepted Answer

A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  12- member monetary policy committee of the Federal Reserve. 
C)  50- member organization of state banking regulators of the Federal Reserve. 
D)  7- member group that oversees the Federal Reserve. 
A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  12- member monetary policy committee of the Federal Reserve. 
C)  50- member organization of state banking regulators of the Federal Reserve. 
D)  7- member group that oversees the Federal Reserve.

Question 9

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Accepted Answer

Actual reserves are equal to the bank's

Question 10

When macroeconomists say that the velocity of circulation was equal to 4 in 2008, what they mean is that

Accepted Answer

A)  on average, each dollar of money in the economy purchased four dollars of goods and services in GDP in 2008. 
B)  real output of goods and services in GDP rose by four dollars for each additional dollar of money consumers saved. 
C)  consumers held four dollars in wealth for each dollar they spent in 2008. 
D)  for each additional dollar of money injected into the economy, the price level rose 4 percent in 2008. 
A)  on average, each dollar of money in the economy purchased four dollars of goods and services in GDP in 2008. 
B)  real output of goods and services in GDP rose by four dollars for each additional dollar of money consumers saved. 
C)  consumers held four dollars in wealth for each dollar they spent in 2008. 
D)  for each additional dollar of money injected into the economy, the price level rose 4 percent in 2008.

Question 11

List the Fed's main policy tools and briefly explain each one.

Accepted Answer

The Fed's main policy tools are: require

Question 12

Checks are

Accepted Answer

A)  money, as are credit cards. 
B)  not money, but credit cards are. 
C)  not money, and neither are credit cards. 
D)  money, but credit cards are not. 
A)  money, as are credit cards. 
B)  not money, but credit cards are. 
C)  not money, and neither are credit cards. 
D)  money, but credit cards are not.

Question 13

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Accepted Answer

A) True 
 B)False

Question 14

The discount rate is the interest rate that

Accepted Answer

A)  the Federal Reserve charges when it loans reserves to depository institutions. 
B)  the Federal Reserve charges when it loans to the U.S. Government. 
C)  is the lowest rate that banks will charge when lending to their best customers. 
D)  banks charge when they lend to each other. 
A)  the Federal Reserve charges when it loans reserves to depository institutions. 
B)  the Federal Reserve charges when it loans to the U.S. Government. 
C)  is the lowest rate that banks will charge when lending to their best customers. 
D)  banks charge when they lend to each other.

Question 15

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

Accepted Answer

The equation of exchange is that M × V =

Question 16

When a depository institution pools risk, it

Accepted Answer

A)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
B)  makes loans to just one firm. 
C)  buys short and lends long. 
D)  borrows reserves from the Federal Reserve. 
A)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
B)  makes loans to just one firm. 
C)  buys short and lends long. 
D)  borrows reserves from the Federal Reserve.

Question 17

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

Accepted Answer

A)  less money than the quantity supplied and the interest rate will fall. 
B)  more money than the quantity supplied and the interest rate will fall. 
C)  more money than the quantity supplied and the interest rate will rise. 
D)  less money than the quantity supplied and the interest rate will rise. 
A)  less money than the quantity supplied and the interest rate will fall. 
B)  more money than the quantity supplied and the interest rate will fall. 
C)  more money than the quantity supplied and the interest rate will rise. 
D)  less money than the quantity supplied and the interest rate will rise.

Question 18

The commercial banks in Lendland have Reserves $400 million
Loans $3,600 million
Deposits $4,000 million
Total assets $4,600 million The banks hold no excess reserves.
a) Calculate the banks' reserve ratio.
b) An immigrant arrives in Lendland with $5 million, which he deposits in a bank. How much does the immigr bank lend initially?

Accepted Answer

a) With no excess reserves, the desired

Question 19

"Even though we can convert them into money, deposits at banks are not money." Is the previous statement correct or not?

Accepted Answer

The statement is incorrect. So

Question 20

The main policy designer of the Federal Reserve system is the

Accepted Answer

A)  12 district banks. 
B)  Federal Open Market Committee. 
C)  Council of Economic Advisors. 
D)  President and Congress. 
A)  12 district banks. 
B)  Federal Open Market Committee. 
C)  Council of Economic Advisors. 
D)  President and Congress.

According to the quantity theory of money,

When the Fed is _ it is .

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Depository institution create liquidity when they

Which of the following is a goal of monetary policy?

The "double coincidence of wants" problem is

In September 2008, Regions Bank held $78 million in loans, $95 million in deposits and $5 million in reserves. If Regions Bank's desired reserve ratio is 2.5 percent, then the bank

The Board of Governors is the

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

When macroeconomists say that the velocity of circulation was equal to 4 in 2008, what they mean is that

List the Fed's main policy tools and briefly explain each one.

Checks are

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

The discount rate is the interest rate that

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

When a depository institution pools risk, it

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

"Even though we can convert them into money, deposits at banks are not money." Is the previous statement correct or not?

The main policy designer of the Federal Reserve system 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

According to the quantity theory of money,

When the Fed is _ it is .

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Depository institution create liquidity when they

Which of the following is a goal of monetary policy?

The "double coincidence of wants" problem is

In September 2008, Regions Bank held $78 million in loans, $95 million in deposits and $5 million in reserves. If Regions Bank's desired reserve ratio is 2.5 percent, then the bank

The Board of Governors is the

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

When macroeconomists say that the velocity of circulation was equal to 4 in 2008, what they mean is that

List the Fed's main policy tools and briefly explain each one.

Checks are

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

The discount rate is the interest rate that

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

When a depository institution pools risk, it

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

"Even though we can convert them into money, deposits at banks are not money." Is the previous statement correct or not?

The main policy designer of the Federal Reserve system 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