Question 1

The money multiplier is the ratio of the change in the

Accepted Answer

A)  currency drain to the change in the quantity of money. 
B)  monetary base to the change in the quantity of money 
C)  desired reserve ratio to the change in the monetary base 
D)  quantity of money to the change in the monetary base 
A)  currency drain to the change in the quantity of money. 
B)  monetary base to the change in the quantity of money 
C)  desired reserve ratio to the change in the monetary base 
D)  quantity of money to the change in the monetary base

Question 2

Given the list of assets below, which is the most liquid?

Accepted Answer

A)  a one- ounce gold coin 
B)  a $500 traveler's check 
C)  $500 worth of General Motors bonds 
D)  $500 worth of General Motors common stock 
A)  a one- ounce gold coin 
B)  a $500 traveler's check 
C)  $500 worth of General Motors bonds 
D)  $500 worth of General Motors common stock

Question 3

The equation of exchange states that the quantity of money

Accepted Answer

A)  divided by price level equals real GDP. 
B)  multiplied by nominal GDP equals the price level. 
C)  divided by nominal GDP equals real GDP. 
D)  multiplied by the velocity of circulation equals nominal GDP. 
A)  divided by price level equals real GDP. 
B)  multiplied by nominal GDP equals the price level. 
C)  divided by nominal GDP equals real GDP. 
D)  multiplied by the velocity of circulation equals nominal GDP.

Question 4

Credit cards are

Accepted Answer

A)  a part of M1 but not of M2. 
B)  a part of M2 but not a part of M1. 
C)  not a part of money because they are not a means of payment. 
D)  a part of money because they are used to purchase goods and services. 
A)  a part of M1 but not of M2. 
B)  a part of M2 but not a part of M1. 
C)  not a part of money because they are not a means of payment. 
D)  a part of money because they are used to purchase goods and services.

Question 5

Barter is an inefficient means of exchange because

Accepted Answer

A)  barter transactions require a double coincidence of wants. 
B)  barter only occurs in relatively primitive economies. 
C)  in a barter transaction only one party needs to want what the other party has to sell. 
D)  demand will not necessarily equal supply. 
A)  barter transactions require a double coincidence of wants. 
B)  barter only occurs in relatively primitive economies. 
C)  in a barter transaction only one party needs to want what the other party has to sell. 
D)  demand will not necessarily equal supply.

Question 6

The opportunity cost of holding money is the

Accepted Answer

A)  price of goods and services. 
B)  level of wage and rental income. 
C)  ease with which an asset can be converted into a means of payment. 
D)  nominal interest rate on assets other than money. 
A)  price of goods and services. 
B)  level of wage and rental income. 
C)  ease with which an asset can be converted into a means of payment. 
D)  nominal interest rate on assets other than money.

Question 7

In the short run, which of the following actions lower the interest rate?

Accepted Answer

A)  an increase in the demand for money 
B)  a decrease in the quantity of money 
C)  a decrease in bond prices 
D)  a decrease in the demand for money 
A)  an increase in the demand for money 
B)  a decrease in the quantity of money 
C)  a decrease in bond prices 
D)  a decrease in the demand for money

Question 8

The required reserve ratio ranges from

Accepted Answer

A)  0 to 7 percent. 
B)  0 to 10 percent. 
C)  0 to 3 percent. 
D)  3 to 30 percent. 
A)  0 to 7 percent. 
B)  0 to 10 percent. 
C)  0 to 3 percent. 
D)  3 to 30 percent.

Question 9

The real quantity of money is

Accepted Answer

A)  inversely related to GDP. 
B)  inversely related to the price level. 
C)  measured in current dollars. 
D)  measured in constant dollars. 
A)  inversely related to GDP. 
B)  inversely related to the price level. 
C)  measured in current dollars. 
D)  measured in constant dollars.

Question 10

In a barter system, we would see

Accepted Answer

A)  wide- spread depository institutions. 
B)  many different units of money. 
C)  money and goods exchanged for each other. 
D)  goods traded directly for other goods and services. 
A)  wide- spread depository institutions. 
B)  many different units of money. 
C)  money and goods exchanged for each other. 
D)  goods traded directly for other goods and services.

Question 11

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,

Accepted Answer

A)  real GDP increases. 
B)  the interest rate rises. 
C)  people buy bonds and the interest rate falls. 
D)  the demand for money curve shifts rightward. 
A)  real GDP increases. 
B)  the interest rate rises. 
C)  people buy bonds and the interest rate falls. 
D)  the demand for money curve shifts rightward.

Question 12

The reserves of a commercial bank

Accepted Answer

A)  consist of vault cash and deposits at the Federal Reserve. 
B)  are a small fraction of the bank's demand and time deposits. 
C)  are the funds the bank can use to satisfy the cash demands of its customers. 
D)  All of the above answers are correct. 
A)  consist of vault cash and deposits at the Federal Reserve. 
B)  are a small fraction of the bank's demand and time deposits. 
C)  are the funds the bank can use to satisfy the cash demands of its customers. 
D)  All of the above answers are correct.

Question 13

In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?

Accepted Answer

The interest rate is determined in the m

Question 14

Liquidity is the

Accepted Answer

A)  same as the velocity of money. 
B)  inverse of the velocity of money. 
C)  speed with which the price of an asset changes as its intrinsic value changes. 
D)  ease with which an asset can be converted into money. 
A)  same as the velocity of money. 
B)  inverse of the velocity of money. 
C)  speed with which the price of an asset changes as its intrinsic value changes. 
D)  ease with which an asset can be converted into money.

Question 15

Which of the following correctly completes this statement? Money in the United States includes

Accepted Answer

A)  the sum of currency, deposits, and bonds held by the public and by the banking industry. 
B)  the cash in banks plus the sum of all checks written. 
C)  the sum of all money incomes. 
D)  the currency and bank deposits outside of banks. 
A)  the sum of currency, deposits, and bonds held by the public and by the banking industry. 
B)  the cash in banks plus the sum of all checks written. 
C)  the sum of all money incomes. 
D)  the currency and bank deposits outside of banks.

Question 16

-In the figure above, a decrease in the monetary base would create a change such as a

Accepted Answer

A)  movement from point a to point b along the supply of money curve MS0. 
B)  shift from the supply of money curve MS0 to the supply of money curve MS1. 
C)  shift from the supply of money curve MS1 to the supply of money curve MS0. 
D)  movement from point b to point a along the supply of money curve MS0. 
A)  movement from point a to point b along the supply of money curve MS0. 
B)  shift from the supply of money curve MS0 to the supply of money curve MS1. 
C)  shift from the supply of money curve MS1 to the supply of money curve MS0. 
D)  movement from point b to point a along the supply of money curve MS0.

Question 17

Which of the following is NOT money?

Accepted Answer

A)  checks in the checkbook 
B)  checking deposits 
C)  currency 
D)  All of the above are money. 
A)  checks in the checkbook 
B)  checking deposits 
C)  currency 
D)  All of the above are money.

Question 18

-The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has desired reserves of .

Accepted Answer

A)  $450 
B)  $2,500 
C)  $3,000 
D)  $500 
A)  $450 
B)  $2,500 
C)  $3,000 
D)  $500

Question 19

Suppose the Fed buys government securities from a commercial bank. Why is there a multiplier effect on the quantity of money?

Accepted Answer

When the Fed buys government securities

Question 20

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Accepted Answer

A)  financial innovation. 
B)  unit of account. 
C)  store of value. 
D)  medium of exchange. 
A)  financial innovation. 
B)  unit of account. 
C)  store of value. 
D)  medium of exchange.

The money multiplier is the ratio of the change in the

Given the list of assets below, which is the most liquid?

The equation of exchange states that the quantity of money

Credit cards are

Barter is an inefficient means of exchange because

The opportunity cost of holding money is the

In the short run, which of the following actions lower the interest rate?

The required reserve ratio ranges from

The real quantity of money is

In a barter system, we would see

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,

The reserves of a commercial bank

In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?

Liquidity is the

Which of the following correctly completes this statement? Money in the United States includes

-In the figure above, a decrease in the monetary base would create a change such as a

Which of the following is NOT money?

-The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has desired reserves of .

Suppose the Fed buys government securities from a commercial bank. Why is there a multiplier effect on the quantity of money?

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

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 is the ratio of the change in the

Given the list of assets below, which is the most liquid?

The equation of exchange states that the quantity of money

Credit cards are

Barter is an inefficient means of exchange because

The opportunity cost of holding money is the

In the short run, which of the following actions lower the interest rate?

The required reserve ratio ranges from

The real quantity of money is

In a barter system, we would see

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,

The reserves of a commercial bank

In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?

Liquidity is the

Which of the following correctly completes this statement? Money in the United States includes

-In the figure above, a decrease in the monetary base would create a change such as a

Which of the following is NOT money?

-The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has desired reserves of .

Suppose the Fed buys government securities from a commercial bank. Why is there a multiplier effect on the quantity of money?

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

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