Question 1

Barter is an inefficient means of exchange because

Accepted Answer

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

Question 2

In the economy of Briskland, the commercial banks have deposits of $500 billion. Their reserves are $50 billion, 80 percent of which is in deposits with the Central Bank. There is $20 billion in Central Bank notes outside the banks, and there are no coins.
a) What is the monetary base?
b) If all the deposits are money, what is the total quantity of money?
c) What is the banksʹ reserve ratio?
d) What is the currency drain as a percentage of the quantity of deposits?

Accepted Answer

a) The monetary base is the sum of Centr

Question 3

After you finish your degree, suppose your salary is $52,000 per year. This is an example of using the function of money known as

Accepted Answer

A)  M1. 
B)  a store of value. 
C)  a unit of account. 
D)  medium of exchange. 
A)  M1. 
B)  a store of value. 
C)  a unit of account. 
D)  medium of exchange.

Question 4

If the Fed buys $100 in securities from a commercial bank, the

Accepted Answer

A)  amount of reserves will not change. 
B)  Fedʹs assets will decrease. 
C)  quantity of money will decrease. 
D)  quantity of reserves will increase. 
A)  amount of reserves will not change. 
B)  Fedʹs assets will decrease. 
C)  quantity of money will decrease. 
D)  quantity of reserves will increase.

Question 5

According to the quantity theory of money, in the long run

Accepted Answer

A)  the quantity of money in the economy will always be just the right amount. 
B)  an increase in the quantity of money creates an increase in the price level and in real GDP. 
C)  an increase in the quantity of money creates an increase the price level but no increase in real GDP. 
D)  None of the above answers are correct. 
A)  the quantity of money in the economy will always be just the right amount. 
B)  an increase in the quantity of money creates an increase in the price level and in real GDP. 
C)  an increase in the quantity of money creates an increase the price level but no increase in real GDP. 
D)  None of the above answers are correct.

Question 6

Barter is

Accepted Answer

A)  another type of money. 
B)  the exchange of goods and services for any type of money. 
C)  the exchange of goods and services directly for other goods and services. 
D)  printing too much money. 
A)  another type of money. 
B)  the exchange of goods and services for any type of money. 
C)  the exchange of goods and services directly for other goods and services. 
D)  printing too much money.

Question 7

A savings bank is a depository institution that __________.

Accepted Answer

A)  makes mostly consumer loans 
B)  sells shares which it uses to purchase shares in U.S. Treasury bills 
C)  is owned by a social or economic group 
D)  makes mostly home-purchase loans 
A)  makes mostly consumer loans 
B)  sells shares which it uses to purchase shares in U.S. Treasury bills 
C)  is owned by a social or economic group 
D)  makes mostly home-purchase loans

Question 8

Which of the following are part of a commercial bankʹs reserves?
I. cash in the bankʹs vaults
II. loans
III. cash in checking accounts

Accepted Answer

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

Question 9

Which function of money refers to the use of money to state the prices of goods and services?

Accepted Answer

A)  unit of account 
B)  means of payment 
C)  medium of exchange 
D)  store of value 
A)  unit of account 
B)  means of payment 
C)  medium of exchange 
D)  store of value

Question 10

The Fed buys $100 million of government securities from Bank A. What is the effect on Bank Aʹs balance sheet?

Accepted Answer

A)  Securities increase by $100 million and reserves increase by $100 million. 
B)  Securities increase by $100 million and reserves decrease by $100 million. 
C)  Securities decrease by $100 million and deposits decrease by $100 million. 
D)  Securities decrease by $100 million and reserves increase by $100 million. 
A)  Securities increase by $100 million and reserves increase by $100 million. 
B)  Securities increase by $100 million and reserves decrease by $100 million. 
C)  Securities decrease by $100 million and deposits decrease by $100 million. 
D)  Securities decrease by $100 million and reserves increase by $100 million.

Question 11

Commercial banks are able to create money by

Accepted Answer

A)  exchanging their reserves at the Fed for vault cash. 
B)  making loans. 
C)  making customers pay back their loans. 
D)  printing Federal Reserve Notes. 
A)  exchanging their reserves at the Fed for vault cash. 
B)  making loans. 
C)  making customers pay back their loans. 
D)  printing Federal Reserve Notes.

Question 12

Explain how a currency drain affects the size of the money multiplier. In your explanation, suppose that a bank gains $1 million in new deposits and reserves. Further suppose that the desired reserve ratio is 10 percent and the currency drain is 50 percent.

Accepted Answer

A currency drain decreases the size of t

Question 13

In September 2008, Regions Bank has $89 million in M1 deposits, $3 million in reserves and $81 million in loans. Regions Bankʹs desired reserve ratio is

Accepted Answer

A)  3.7 percent 
B)  3.4 percent 
C)  91 percent 
D)  29.67 percent 
A)  3.7 percent 
B)  3.4 percent 
C)  91 percent 
D)  29.67 percent

Question 14

The Federal Reserve System is the

Accepted Answer

A)  insurance agency the insures deposits. 
B)  law enforcement agency that tracks counterfeit money. 
C)  federal government agency that undertakes deregulation for depository institutions. 
D)  central bank of the United States. 
A)  insurance agency the insures deposits. 
B)  law enforcement agency that tracks counterfeit money. 
C)  federal government agency that undertakes deregulation for depository institutions. 
D)  central bank of the United States.

Question 15

Which of the following is NOT included in M1?

Accepted Answer

A)  currency 
B)  saving deposits 
C)  travelerʹs checks 
D)  checking deposits owned by individuals 
A)  currency 
B)  saving deposits 
C)  travelerʹs checks 
D)  checking deposits owned by individuals

Question 16

The difference between actual reserves and required reserves is

Accepted Answer

A)  excess reserves. 
B)  net worth. 
C)  borrowings from the Fed. 
D)  illegal reserves. 
A)  excess reserves. 
B)  net worth. 
C)  borrowings from the Fed. 
D)  illegal reserves.

Question 17

If an economy tried to use bananas as money, which function would bananas likely have the most difficult time fulfilling?

Accepted Answer

A)  a store of value 
B)  a medium of exchange 
C)  a means of payment 
D)  a unit of account 
A)  a store of value 
B)  a medium of exchange 
C)  a means of payment 
D)  a unit of account

Question 18

An increase in real GDP

Accepted Answer

A)  leads to an upward movement along the demand for money curve. 
B)  shifts the demand for money curve rightward. 
C)  shifts the demand for money curve leftward. 
D)  leads to a downward movement along the demand for money curve. 
A)  leads to an upward movement along the demand for money curve. 
B)  shifts the demand for money curve rightward. 
C)  shifts the demand for money curve leftward. 
D)  leads to a downward movement along the demand for money curve.

Question 19

The Federal Reserve is divided into 7 districts.

Accepted Answer

A) True 
 B)False

Question 20

If M = $100, Y = $500 and P = $2, then V is equal to

Accepted Answer

A)  10. 
B)  50. 
C) .10 
D)  1.0. 
A)  10. 
B)  50. 
C) .10 
D)  1.0.

Barter is an inefficient means of exchange because

After you finish your degree, suppose your salary is $52,000 per year. This is an example of using the function of money known as

If the Fed buys $100 in securities from a commercial bank, the

According to the quantity theory of money, in the long run

Barter is

A savings bank is a depository institution that __________.

Which of the following are part of a commercial bankʹs reserves? I. cash in the bankʹs vaults II. loans III. cash in checking accounts

Which function of money refers to the use of money to state the prices of goods and services?

The Fed buys $100 million of government securities from Bank A. What is the effect on Bank Aʹs balance sheet?

Commercial banks are able to create money by

Explain how a currency drain affects the size of the money multiplier. In your explanation, suppose that a bank gains $1 million in new deposits and reserves. Further suppose that the desired reserve ratio is 10 percent and the currency drain is 50 percent.

In September 2008, Regions Bank has $89 million in M1 deposits, $3 million in reserves and $81 million in loans. Regions Bankʹs desired reserve ratio is

The Federal Reserve System is the

Which of the following is NOT included in M1?

The difference between actual reserves and required reserves is

If an economy tried to use bananas as money, which function would bananas likely have the most difficult time fulfilling?

An increase in real GDP

The Federal Reserve is divided into 7 districts.

If M = $100, Y = $500 and P = $2, then V is equal to

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

Barter is an inefficient means of exchange because

After you finish your degree, suppose your salary is $52,000 per year. This is an example of using the function of money known as

If the Fed buys $100 in securities from a commercial bank, the

According to the quantity theory of money, in the long run

Barter is

A savings bank is a depository institution that __________.

Which of the following are part of a commercial bankʹs reserves? I. cash in the bankʹs vaults II. loans III. cash in checking accounts

Which function of money refers to the use of money to state the prices of goods and services?

The Fed buys $100 million of government securities from Bank A. What is the effect on Bank Aʹs balance sheet?

Commercial banks are able to create money by

Explain how a currency drain affects the size of the money multiplier. In your explanation, suppose that a bank gains $1 million in new deposits and reserves. Further suppose that the desired reserve ratio is 10 percent and the currency drain is 50 percent.

In September 2008, Regions Bank has $89 million in M1 deposits, $3 million in reserves and $81 million in loans. Regions Bankʹs desired reserve ratio is

The Federal Reserve System is the

Which of the following is NOT included in M1?

The difference between actual reserves and required reserves is

If an economy tried to use bananas as money, which function would bananas likely have the most difficult time fulfilling?

An increase in real GDP

The Federal Reserve is divided into 7 districts.

If M = $100, Y = $500 and P = $2, then V is equal to

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