Question 1

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

Accepted Answer

The bank has no excess reserve

Question 2

What are the three functions of money?

Accepted Answer

Money serves as a medium of exchange (so

Question 3

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.

Accepted Answer

A) True 
 B)False

Question 4

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of a rise in the interest rate?

Accepted Answer

A)  The demand for money curve would shift rightward to MD2. 
B)  There would be a movement upward along the demand for money curve MD1. 
C)  There would be a movement downward along the demand for money curve MD1. 
D)  The demand for money curve would shift leftward to MD0. 
A)  The demand for money curve would shift rightward to MD2. 
B)  There would be a movement upward along the demand for money curve MD1. 
C)  There would be a movement downward along the demand for money curve MD1. 
D)  The demand for money curve would shift leftward to MD0.

Question 5

The discount rate is the interest rate

Accepted Answer

A)  that the Fed charges on its last resort loans. 
B)  on interbank lending. 
C)  that bank insurers pay on insured deposits. 
D)  that banks charge their best customers. 
A)  that the Fed charges on its last resort loans. 
B)  on interbank lending. 
C)  that bank insurers pay on insured deposits. 
D)  that banks charge their best customers.

Question 6

If an economy has a velocity of circulation of 3, then

Accepted Answer

A)  nominal GDP is 1/3 the size of the quantity of money. 
B)  the quantity of money is $3 for every dollar of GDP. 
C)  the quantity of money is 3 times real GDP. 
D)  in a year the average dollar is exchanged 3 times to purchase goods and services in GDP. 
A)  nominal GDP is 1/3 the size of the quantity of money. 
B)  the quantity of money is $3 for every dollar of GDP. 
C)  the quantity of money is 3 times real GDP. 
D)  in a year the average dollar is exchanged 3 times to purchase goods and services in GDP.

Question 7

The discount rate is the interest rate

Accepted Answer

A)  paid on funds that depository institutions borrow from the Federal Reserve. 
B)  that banks charge their "best" customers. 
C)  paid on funds banks borrow from other banks. 
D)  paid on time deposits. 
A)  paid on funds that depository institutions borrow from the Federal Reserve. 
B)  that banks charge their "best" customers. 
C)  paid on funds banks borrow from other banks. 
D)  paid on time deposits.

Question 8

The monetary base does NOT include

Accepted Answer

A)  commercial banks' reserves. 
B)  checking accounts at commercial banks. 
C)  Federal Reserve notes. 
D)  reserves of depository institutions. 
A)  commercial banks' reserves. 
B)  checking accounts at commercial banks. 
C)  Federal Reserve notes. 
D)  reserves of depository institutions.

Question 9

Bank managers lend excess reserves because they want to

Accepted Answer

A)  curry favor with borrowers 
B)  create new money in the economy 
C)  borrow money from the Federal Reserve 
D)  make a profit 
A)  curry favor with borrowers 
B)  create new money in the economy 
C)  borrow money from the Federal Reserve 
D)  make a profit

Question 10

Which of the following is correct? The demand for money

Accepted Answer

A)  decreases as the price level increases. 
B)  increases when the interest rate increases. 
C)  increases as real GDP increases. 
D)  depends on the quantity of money. 
A)  decreases as the price level increases. 
B)  increases when the interest rate increases. 
C)  increases as real GDP increases. 
D)  depends on the quantity of money.

Question 11

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

Accepted Answer

A)  5 
B)  20.0 
C)  0.2 
D)  none of the above 
A)  5 
B)  20.0 
C)  0.2 
D)  none of the above

Question 12

A credit card is not money because

Accepted Answer

A)  the use of a credit card doesn't make a final payment. 
B)  not everyone can get a credit card. 
C)  the opportunity cost of using the credit card is the interest rate. 
D)  there is a maximum credit limit for most credit card users. 
A)  the use of a credit card doesn't make a final payment. 
B)  not everyone can get a credit card. 
C)  the opportunity cost of using the credit card is the interest rate. 
D)  there is a maximum credit limit for most credit card users.

Question 13

Other things constant, the quantity theory of money concludes that any increase in the quantity of money

Accepted Answer

A)  decreases the aggregate level of nominal income. 
B)  proportionally increases the price level. 
C)  decreases the demand for money. 
D)  decreases in the aggregate price level. 
A)  decreases the aggregate level of nominal income. 
B)  proportionally increases the price level. 
C)  decreases the demand for money. 
D)  decreases in the aggregate price level.

Question 14

The functions of money are

Accepted Answer

A)  medium of exchange and the ability to buy goods and services. 
B)  medium of exchange, unit of account, and store of value. 
C)  pricing, contracts, and means of payment. 
D)  medium of exchange, unit of account, and means of payment. 
A)  medium of exchange and the ability to buy goods and services. 
B)  medium of exchange, unit of account, and store of value. 
C)  pricing, contracts, and means of payment. 
D)  medium of exchange, unit of account, and means of payment.

Question 15

Checks and credit cards are NOT considered money because they

Accepted Answer

A)  typically require an identification check, such as your driver's license. 
B)  are not backed by all commercial banks. 
C)  are not the means of payment. 
D)  are issued by banks, not the Federal Reserve. 
A)  typically require an identification check, such as your driver's license. 
B)  are not backed by all commercial banks. 
C)  are not the means of payment. 
D)  are issued by banks, not the Federal Reserve.

Question 16

Which of the following does NOT describe a function of money?

Accepted Answer

A)  a store of value 
B)  a medium of exchange 
C)  mutual fund. 
D)  a unit of account 
A)  a store of value 
B)  a medium of exchange 
C)  mutual fund. 
D)  a unit of account

Question 17

The largest influence on the Fed's monetary policy actions is

Accepted Answer

A)  held by the New York Federal Reserve Bank because it implements policy. 
B)  held by the chairman of the Board of Governors, who sets the policy agenda. 
C)  held by the Board of Governors. 
D)  distributed equally among the district banks. 
A)  held by the New York Federal Reserve Bank because it implements policy. 
B)  held by the chairman of the Board of Governors, who sets the policy agenda. 
C)  held by the Board of Governors. 
D)  distributed equally among the district banks.

Question 18

When you bought your textbook for this course, you were using money as a

Accepted Answer

A)  medium of exchange. 
B)  price mechanism. 
C)  unit of account. 
D)  store of value. 
A)  medium of exchange. 
B)  price mechanism. 
C)  unit of account. 
D)  store of value.

Question 19

Currency held outside the banking system is included

Accepted Answer

A)  in neither M1 nor M2. 
B)  in M2 but not M1. 
C)  in M1 but not M2. 
D)  in both M1 and M2. 
A)  in neither M1 nor M2. 
B)  in M2 but not M1. 
C)  in M1 but not M2. 
D)  in both M1 and M2.

Question 20

Discuss the quantity theory of money. Be sure to mention the velocity of circulation and the equation of exchange.

Accepted Answer

The quantity theory of money is the prop

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

What are the three functions of money?

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of a rise in the interest rate?

The discount rate is the interest rate

If an economy has a velocity of circulation of 3, then

The discount rate is the interest rate

The monetary base does NOT include

Bank managers lend excess reserves because they want to

Which of the following is correct? The demand for money

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

A credit card is not money because

Other things constant, the quantity theory of money concludes that any increase in the quantity of money

The functions of money are

Checks and credit cards are NOT considered money because they

Which of the following does NOT describe a function of money?

The largest influence on the Fed's monetary policy actions is

When you bought your textbook for this course, you were using money as a

Currency held outside the banking system is included

Discuss the quantity theory of money. Be sure to mention the velocity of circulation and the equation of exchange.

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 desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

What are the three functions of money?

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of a rise in the interest rate?

The discount rate is the interest rate

If an economy has a velocity of circulation of 3, then

The discount rate is the interest rate

The monetary base does NOT include

Bank managers lend excess reserves because they want to

Which of the following is correct? The demand for money

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

A credit card is not money because

Other things constant, the quantity theory of money concludes that any increase in the quantity of money

The functions of money are

Checks and credit cards are NOT considered money because they

Which of the following does NOT describe a function of money?

The largest influence on the Fed's monetary policy actions is

When you bought your textbook for this course, you were using money as a

Currency held outside the banking system is included

Discuss the quantity theory of money. Be sure to mention the velocity of circulation and the equation of exchange.

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

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of a rise in the interest rate?