Question 1

Which of the following is the most liquid?

Accepted Answer

A)  your house. 
B)  your friend's house. 
C)  the U.S. dollars in your pocket. 
D)  the funds in your checking account. 
A)  your house. 
B)  your friend's house. 
C)  the U.S. dollars in your pocket. 
D)  the funds in your checking account.

Question 2

A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Accepted Answer

A)  $20,000 
B)  $80,000 
C)  $500,000 
D)  $400,000 
A)  $20,000 
B)  $80,000 
C)  $500,000 
D)  $400,000

Question 3

The quantity theory of money predicts how changes in

Accepted Answer

A)  real GDP affect the nominal GDP. 
B)  the price level affect nominal GDP. 
C)  the price level affect real GDP. 
D)  the quantity of money affect the price level. 
A)  real GDP affect the nominal GDP. 
B)  the price level affect nominal GDP. 
C)  the price level affect real GDP. 
D)  the quantity of money affect the price level.

Question 4

Checks are

Accepted Answer

A)  the largest component of the money supply. 
B)  only part of M2 but not part of M1. 
C)  not money. 
D)  part of M1 but not part of M2. 
A)  the largest component of the money supply. 
B)  only part of M2 but not part of M1. 
C)  not money. 
D)  part of M1 but not part of M2.

Question 5

The definition of M2 includes
I. M1.
II. money market mutual funds.
III. currency held outside of banks.

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III

Question 6

Between 2006 and 2007, personal income in the U.S. increased from $11 billion to $11.6 billion. As a result, the real demand for money and the demand for money curve .

Accepted Answer

A)  increased; shifted leftward 
B)  decreased; shifted rightward 
C)  did not change; did not shift 
D)  increased; shifted rightward 
A)  increased; shifted leftward 
B)  decreased; shifted rightward 
C)  did not change; did not shift 
D)  increased; shifted rightward

Question 7

The velocity of circulation is the

Accepted Answer

A)  average number of times a dollar of money is used in a year to buy goods and services in GDP. 
B)  amount of time it takes for excess reserves to be lent out by financial institutions. 
C)  rate at which new financial serves are developed. 
D)  speed at which paychecks are cashed and converted to money. 
A)  average number of times a dollar of money is used in a year to buy goods and services in GDP. 
B)  amount of time it takes for excess reserves to be lent out by financial institutions. 
C)  rate at which new financial serves are developed. 
D)  speed at which paychecks are cashed and converted to money.

Question 8

The quantity theory of money asserts that inflation is the result of growth in

Accepted Answer

A)  potential GDP. 
B)  the quantity of money. 
C)  the natural rate of unemployment. 
D)  money wages. 
A)  potential GDP. 
B)  the quantity of money. 
C)  the natural rate of unemployment. 
D)  money wages.

Question 9

In Zealand, banks' desired reserve ratio is 20 percent and there is no currency drain. The money multiplier equals .

Accepted Answer

A)  20.0 
B)  0.20 
C)  0.50 
D)  5.0 
A)  20.0 
B)  0.20 
C)  0.50 
D)  5.0

Question 10

Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?

Accepted Answer

In the money market, the interaction bet

Question 11

Financial innovation is

Accepted Answer

A)  the development of new financial products and services. 
B)  the process of turning assets into a more liquid form. 
C)  responsible for credit cards being included as part of money. 
D)  causing a decrease in bank profits. 
A)  the development of new financial products and services. 
B)  the process of turning assets into a more liquid form. 
C)  responsible for credit cards being included as part of money. 
D)  causing a decrease in bank profits.

Question 12

Credit cards are not part of the money supply.

Accepted Answer

A) True 
 B)False

Question 13

-The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, what volume of loans will be made by MegaBank if the bank wants more profit and holds no excess reserves?

Accepted Answer

A)  $48.50 
B)  $33.00 
C)  $15.00 
D)  $50.00 
A)  $48.50 
B)  $33.00 
C)  $15.00 
D)  $50.00

Question 14

The Federal Reserve has regional Federal Reserve banks and members of the Board of Governors.

Accepted Answer

A)  7; 12 
B)  7; 7 
C)  12; 7 
D)  12; 12 
A)  7; 12 
B)  7; 7 
C)  12; 7 
D)  12; 12

Question 15

When part of the quantity of money is held in currency, then

Accepted Answer

A)  there is a higher level of excess reserves. 
B)  a currency drain occurs. 
C)  the Fed will find it beneficial to increase the discount rate. 
D)  the money multiplier will increase in value. 
A)  there is a higher level of excess reserves. 
B)  a currency drain occurs. 
C)  the Fed will find it beneficial to increase the discount rate. 
D)  the money multiplier will increase in value.

Question 16

-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. If the desired reserve ratio equals 10 percent, FBN Bank has excess reserves of

Accepted Answer

A)  $280 million. 
B)  $100 million. 
C)  $200 million. 
D)  $0. 
A)  $280 million. 
B)  $100 million. 
C)  $200 million. 
D)  $0.

Question 17

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Accepted Answer

A)  increases the quantity of money by $10 billion. 
B)  increases the quantity of money by $35 billion. 
C)  increases the quantity of money by $3.5 billion. 
D)  increases the quantity of money but not by an amount given above. 
A)  increases the quantity of money by $10 billion. 
B)  increases the quantity of money by $35 billion. 
C)  increases the quantity of money by $3.5 billion. 
D)  increases the quantity of money but not by an amount given above.

Question 18

Which of the following is true?
I. Checks are considered money because they can be used as a medium of exchange.
II. Checks represent a transfer of money.

Accepted Answer

A)  I only 
B)  II only 
C)  neither I nor II 
D)  both I and II 
A)  I only 
B)  II only 
C)  neither I nor II 
D)  both I and II

Question 19

The interest rate that the Fed charges when it makes a last resort loan is the _ rate.

Accepted Answer

A)  federal funds 
B)  reserve 
C)  short- term 
D)  discount 
A)  federal funds 
B)  reserve 
C)  short- term 
D)  discount

Question 20

The demand for nominal money

Accepted Answer

A)  is the same as the demand for real money. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  increases as the price level increases. 
A)  is the same as the demand for real money. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  increases as the price level increases.

Which of the following is the most liquid?

A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

The quantity theory of money predicts how changes in

Checks are

The definition of M2 includes I. M1. II. money market mutual funds. III. currency held outside of banks.

Between 2006 and 2007, personal income in the U.S. increased from $11 billion to $11.6 billion. As a result, the real demand for money and the demand for money curve .

The velocity of circulation is the

The quantity theory of money asserts that inflation is the result of growth in

In Zealand, banks' desired reserve ratio is 20 percent and there is no currency drain. The money multiplier equals .

Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?

Financial innovation is

Credit cards are not part of the money supply.

The Federal Reserve has regional Federal Reserve banks and members of the Board of Governors.

When part of the quantity of money is held in currency, then

-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. If the desired reserve ratio equals 10 percent, FBN Bank has excess reserves of

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Which of the following is true? I. Checks are considered money because they can be used as a medium of exchange. II. Checks represent a transfer of money.

The interest rate that the Fed charges when it makes a last resort loan is the _ rate.

The demand for nominal money

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 the most liquid?

A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

The quantity theory of money predicts how changes in

Checks are

The definition of M2 includes I. M1. II. money market mutual funds. III. currency held outside of banks.

Between 2006 and 2007, personal income in the U.S. increased from $11 billion to $11.6 billion. As a result, the real demand for money and the demand for money curve .

The velocity of circulation is the

The quantity theory of money asserts that inflation is the result of growth in

In Zealand, banks' desired reserve ratio is 20 percent and there is no currency drain. The money multiplier equals .

Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?

Financial innovation is

Credit cards are not part of the money supply.

The Federal Reserve has regional Federal Reserve banks and members of the Board of Governors.

When part of the quantity of money is held in currency, then

-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. If the desired reserve ratio equals 10 percent, FBN Bank has excess reserves of

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Which of the following is true? I. Checks are considered money because they can be used as a medium of exchange. II. Checks represent a transfer of money.

The interest rate that the Fed charges when it makes a last resort loan is the _ rate.

The demand for nominal money

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