Question 1

An open market operation occurs when the__________ buys or sells securities _________.

Accepted Answer

A)  Federal Reserve System; from or to the federal government 
B)  a commercial bank; from or to the public 
C)  Federal Reserve System; in the open market 
D)  a commercial bank; from or to the federal government 
A)  Federal Reserve System; from or to the federal government 
B)  a commercial bank; from or to the public 
C)  Federal Reserve System; in the open market 
D)  a commercial bank; from or to the federal government

Question 2

Barter eliminates the double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 3

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

Accepted Answer

The bank can make loans equal to its exc

Question 4

The president of which Federal Reserve bank is always a voting member of the FOMC?

Accepted Answer

The president of the New York Federal Re

Question 5

Which of the following is the central bank of the United States?

Accepted Answer

A)  Comptroller of the Currency 
B)  Federal Reserve System 
C)  Treasury Department 
D)  Office of the Budget 
A)  Comptroller of the Currency 
B)  Federal Reserve System 
C)  Treasury Department 
D)  Office of the Budget

Question 6

Are credit cards or debit cards money? Explain your answer.

Accepted Answer

Neither credit cards nor debit cards are

Question 7

According to the quantity theory of money, a 25 percent change in M, the quantity of money, leads to a 25 percent change in

Accepted Answer

A)  P, the price level. 
B)  Y, real GDP. 
C)  V, the velocity of circulation. 
D)  R, the interest rate. 
A)  P, the price level. 
B)  Y, real GDP. 
C)  V, the velocity of circulation. 
D)  R, the interest rate.

Question 8

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1_________ and the quantity of M2____________ .

Accepted Answer

A)  decreases; increases 
B)  decreases; does not change 
C)  increases; decreases 
D)  decreases; decreases 
A)  decreases; increases 
B)  decreases; does not change 
C)  increases; decreases 
D)  decreases; decreases

Question 9

In 2006, real GDP in Belgium grew at a 3 percent rate and inflation was 1.8 percent while the population did not change. As a result, there was___________ demand for money curve in Belgium.

Accepted Answer

A)  a movement up along the 
B)  a leftward shift of the 
C)  no change in the 
D)  a rightward shift of the 
A)  a movement up along the 
B)  a leftward shift of the 
C)  no change in the 
D)  a rightward shift of the

Question 10

The monetary policy-making body of the Federal Reserve is the

Accepted Answer

A)  the New York Federal Reserve Bank 
B)  Board of Governors 
C)  the Federal Open Market Committee 
D)  regional Federal Reserve Banks 
A)  the New York Federal Reserve Bank 
B)  Board of Governors 
C)  the Federal Open Market Committee 
D)  regional Federal Reserve Banks

Question 11

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Accepted Answer

A)  source of liquidity 
B)  store of value 
C)  unit of account 
D)  medium of exchange 
A)  source of liquidity 
B)  store of value 
C)  unit of account 
D)  medium of exchange

Question 12

Which of the following allow banks to minimize the cost to a business of borrowing?
I. Borrowing long and lending short.
II. Raising funds from a large number of depositors.
III. Creating money by lending all their reserves.

Accepted Answer

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

Question 13

The banking system in the United States creates money through the combination of excess reserves and

Accepted Answer

A)  banks loaning excess reserves. 
B)  commodity money. 
C)  stringent Federal Reserve regulations. 
D)  banksʹ assets being more than their liabilities. 
A)  banks loaning excess reserves. 
B)  commodity money. 
C)  stringent Federal Reserve regulations. 
D)  banksʹ assets being more than their liabilities.

Question 14

The quantity theory of money predicts that in the_________ , a 10 percent increase in the quantity of money leads to a 10 percent increase in ___________.

Accepted Answer

A)  short run; velocity 
B)  long run; real GDP 
C)  long run; velocity 
D)  long run; price level 
A)  short run; velocity 
B)  long run; real GDP 
C)  long run; velocity 
D)  long run; price level

Question 15

Which of the following is NOT a part of the monetary base?

Accepted Answer

A)  U.S. government securities owned by the Fed 
B)  First Bankʹs required reserves held at the Federal Reserve 
C)  Chemical Bankʹs deposits of reserves at the Fed 
D)  Federal Reserve notes 
A)  U.S. government securities owned by the Fed 
B)  First Bankʹs required reserves held at the Federal Reserve 
C)  Chemical Bankʹs deposits of reserves at the Fed 
D)  Federal Reserve notes

Question 16

The table below shows data for Indonesia between 2005 and 2006.
$$\begin{array} { | l | l | l | } 
\hline & 2005 & 2006 \
\hline \text { Money growth rate } & 21.4 & 12.0 \
\hline \text { Real GDP growth rate } & 5.7 & 5.5 \
\hline
\end{array}$$
Assume the rate of velocity change is constant. According to the quantity theory of money, Indonesia?s inflation rate

Accepted Answer

A)  will increase over the 12 months. 
B)  is higher in 2005 than in 2006. 
C)  was 17.5 percent in 2006. 
D)  is 27.1 percent in 2005. 
A)  will increase over the 12 months. 
B)  is higher in 2005 than in 2006. 
C)  was 17.5 percent in 2006. 
D)  is 27.1 percent in 2005.

Question 17

Checking deposits are

Accepted Answer

A)  part of money. 
B)  not part of money. 
C)  small in volume relative to currency in circulation. 
D)  quite different from checking accounts. 
A)  part of money. 
B)  not part of money. 
C)  small in volume relative to currency in circulation. 
D)  quite different from checking accounts.

Question 18

Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank,

Accepted Answer

A)  the bank can make loans of $1,000. 
B)  the bankʹs desired reserves rise by $1,000. 
C)  immediately after the deposit, excess reserves increase by $880. 
D)  Both answers B and C are correct. 
A)  the bank can make loans of $1,000. 
B)  the bankʹs desired reserves rise by $1,000. 
C)  immediately after the deposit, excess reserves increase by $880. 
D)  Both answers B and C are correct.

Question 19

Which of the following decreases the demand for nominal money?

Accepted Answer

A)  an increase in real GDP 
B)  an increase in the quantity of money 
C)  a decrease in the price level 
D)  a decrease in the nominal interest rate 
A)  an increase in real GDP 
B)  an increase in the quantity of money 
C)  a decrease in the price level 
D)  a decrease in the nominal interest rate

Question 20

You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as desired reserves. As a direct result of your deposit, your bank will make loans and by so doing will create

Accepted Answer

A)  $1,600 of new money. 
B)  $200 of new money. 
C)  $3,200 of new money. 
D)  $800 of new money. 
A)  $1,600 of new money. 
B)  $200 of new money. 
C)  $3,200 of new money. 
D)  $800 of new money.

An open market operation occurs when the__ buys or sells securities _.

Barter eliminates the double coincidence of wants.

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

The president of which Federal Reserve bank is always a voting member of the FOMC?

Which of the following is the central bank of the United States?

Are credit cards or debit cards money? Explain your answer.

According to the quantity theory of money, a 25 percent change in M, the quantity of money, leads to a 25 percent change in

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1_ and the quantity of M2____ .

In 2006, real GDP in Belgium grew at a 3 percent rate and inflation was 1.8 percent while the population did not change. As a result, there was___________ demand for money curve in Belgium.

The monetary policy-making body of the Federal Reserve is the

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Which of the following allow banks to minimize the cost to a business of borrowing? I. Borrowing long and lending short. II. Raising funds from a large number of depositors. III. Creating money by lending all their reserves.

The banking system in the United States creates money through the combination of excess reserves and

The quantity theory of money predicts that in the_ , a 10 percent increase in the quantity of money leads to a 10 percent increase in ___.

Which of the following is NOT a part of the monetary base?

The table below shows data for Indonesia between 2005 and 2006. 2005 2006 Money growth rate 21.4 12.0 Real GDP growth rate 5.7 5.5 Assume the rate of velocity change is constant. According to the quantity theory of money, Indonesia?s inflation rate

Checking deposits are

Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank,

Which of the following decreases the demand for nominal money?

You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as desired reserves. As a direct result of your deposit, your bank will make loans and by so doing will create

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 8: Money, the Price Level, and Inflation

An open market operation occurs when the__________ buys or sells securities _________.

Barter eliminates the double coincidence of wants.

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

The president of which Federal Reserve bank is always a voting member of the FOMC?

Which of the following is the central bank of the United States?

Are credit cards or debit cards money? Explain your answer.

According to the quantity theory of money, a 25 percent change in M, the quantity of money, leads to a 25 percent change in

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1_________ and the quantity of M2____________ .

In 2006, real GDP in Belgium grew at a 3 percent rate and inflation was 1.8 percent while the population did not change. As a result, there was___________ demand for money curve in Belgium.

The monetary policy-making body of the Federal Reserve is the

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Which of the following allow banks to minimize the cost to a business of borrowing? I. Borrowing long and lending short. II. Raising funds from a large number of depositors. III. Creating money by lending all their reserves.

The banking system in the United States creates money through the combination of excess reserves and

The quantity theory of money predicts that in the_________ , a 10 percent increase in the quantity of money leads to a 10 percent increase in ___________.

Which of the following is NOT a part of the monetary base?

The table below shows data for Indonesia between 2005 and 2006. 2005 2006 Money growth rate 21.4 12.0 Real GDP growth rate 5.7 5.5 Assume the rate of velocity change is constant. According to the quantity theory of money, Indonesia?s inflation rate

Checking deposits are

Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank,

Which of the following decreases the demand for nominal money?

You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as desired reserves. As a direct result of your deposit, your bank will make loans and by so doing will create

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

An open market operation occurs when the__ buys or sells securities _.

A new financial innovation results in people switching their funds from checking deposits to savings accounts. The quantity of M1_ and the quantity of M2____ .

The quantity theory of money predicts that in the_ , a 10 percent increase in the quantity of money leads to a 10 percent increase in ___.