Question 1

According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in

Accepted Answer

A)  velocity. 
B)  the price level. 
C)  real national income. 
D)  real GDP. 
A)  velocity. 
B)  the price level. 
C)  real national income. 
D)  real GDP.

Question 2

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Accepted Answer

A)  standard of deferred payment. 
B)  unit of account. 
C)  store of value. 
D)  medium of exchange. 
A)  standard of deferred payment. 
B)  unit of account. 
C)  store of value. 
D)  medium of exchange.

Question 3

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 4

Barter occurs when you exchange

Accepted Answer

A)  goods for money. 
B)  one money, such as U.S. dollars, for another money, such as Japanese yen. 
C)  money for goods. 
D)  goods for other goods. 
A)  goods for money. 
B)  one money, such as U.S. dollars, for another money, such as Japanese yen. 
C)  money for goods. 
D)  goods for other goods.

Question 5

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

Accepted Answer

A)  zero, because Bank A has no excess reserves 
B)  $850 
C)  $200 
D)  $50 
A)  zero, because Bank A has no excess reserves 
B)  $850 
C)  $200 
D)  $50

Question 6

The monetary base is

Accepted Answer

A)  depository institutionsʹ deposits at the Federal Reserve minus Federal Reserve notes. 
B)  the sum of Federal Reserve notes, coins, and depository institutionsʹ deposits at the Federal Reserve. 
C)  Federal Reserve notes minus depository institutionsʹ deposits at the Federal Reserve. 
D)  the money borrowed by banks from other banks. 
A)  depository institutionsʹ deposits at the Federal Reserve minus Federal Reserve notes. 
B)  the sum of Federal Reserve notes, coins, and depository institutionsʹ deposits at the Federal Reserve. 
C)  Federal Reserve notes minus depository institutionsʹ deposits at the Federal Reserve. 
D)  the money borrowed by banks from other banks.

Question 7

If the Fed sells securities to commercial banks, there is no money multiplier effect.

Accepted Answer

A) True 
 B)False

Question 8

-In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as

Accepted Answer

A)  d. 
B)  e. 
C)  b. 
D)  c. 
A)  d. 
B)  e. 
C)  b. 
D)  c.

Question 9

Excess reserves are

Accepted Answer

A)  liquidity funds minus actual reserves. 
B)  actual reserves minus desired reserves. 
C)  desired reserves minus actual reserves. 
D)  required reserves minus actual reserves. 
A)  liquidity funds minus actual reserves. 
B)  actual reserves minus desired reserves. 
C)  desired reserves minus actual reserves. 
D)  required reserves minus actual reserves.

Question 10

Are checks money?

Accepted Answer

Checks are instructions to transfer fund

Question 11

The Board of Governors of the Federal Reserve System is

Accepted Answer

A)  elected by the public. 
B)  elected by members of the American Banking Association. 
C)  appointed by the President of the United States and confirmed by the U.S. Senate. 
D)  appointed by the Congress. 
A)  elected by the public. 
B)  elected by members of the American Banking Association. 
C)  appointed by the President of the United States and confirmed by the U.S. Senate. 
D)  appointed by the Congress.

Question 12

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of
$100 can make additional loans of

Accepted Answer

A)  $0. 
B)  $400. 
C)  $80. 
D)  $20. 
A)  $0. 
B)  $400. 
C)  $80. 
D)  $20.

Question 13

Which of the following is a primary function of money?

Accepted Answer

A)  to serve as a unit of account 
B)  to reduce the burden of excessive imports 
C)  to serve as an encouragement to work 
D)  to raise funds for the government 
A)  to serve as a unit of account 
B)  to reduce the burden of excessive imports 
C)  to serve as an encouragement to work 
D)  to raise funds for the government

Question 14

List and discuss the four economic functions that depository institutions provide their customers.

Accepted Answer

Depository institutions create liquidity

Question 15

Credit cards are

Accepted Answer

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

Question 16

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A?

Accepted Answer

A)  $50 
B)  $850 
C)  $200 
D)  zero, because Bank A has no excess reserves 
A)  $50 
B)  $850 
C)  $200 
D)  zero, because Bank A has no excess reserves

Question 17

How does an increase in real GDP affect the demand for money curve?

Accepted Answer

An increase in real

Question 18

An increase in the nominal interest rate

Accepted Answer

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

Question 19

In an open market purchase, the Fed _________government securities, which __________bank reserves.

Accepted Answer

A)  sells, increases 
B)  sells, decreases 
C)  buys, decreases 
D)  buys, increases 
A)  sells, increases 
B)  sells, decreases 
C)  buys, decreases 
D)  buys, increases

Question 20

A highly liquid asset

Accepted Answer

A)  can be converted into a means of payment easily without loss of value. 
B)  is highly leveraged. 
C)  generally has a very limited market for its resale. 
D)  has high transaction costs associated with its sale. 
A)  can be converted into a means of payment easily without loss of value. 
B)  is highly leveraged. 
C)  generally has a very limited market for its resale. 
D)  has high transaction costs associated with its sale.

According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

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

Barter occurs when you exchange

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

The monetary base is

If the Fed sells securities to commercial banks, there is no money multiplier effect.

-In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as

Excess reserves are

Are checks money?

The Board of Governors of the Federal Reserve System is

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Which of the following is a primary function of money?

List and discuss the four economic functions that depository institutions provide their customers.

Credit cards are

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A?

How does an increase in real GDP affect the demand for money curve?

An increase in the nominal interest rate

In an open market purchase, the Fed _government securities, which __bank reserves.

A highly liquid asset

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

According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

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

Barter occurs when you exchange

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

The monetary base is

If the Fed sells securities to commercial banks, there is no money multiplier effect.

-In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as

Excess reserves are

Are checks money?

The Board of Governors of the Federal Reserve System is

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Which of the following is a primary function of money?

List and discuss the four economic functions that depository institutions provide their customers.

Credit cards are

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A?

How does an increase in real GDP affect the demand for money curve?

An increase in the nominal interest rate

In an open market purchase, the Fed _________government securities, which __________bank reserves.

A highly liquid asset

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

In an open market purchase, the Fed _government securities, which __bank reserves.