Question 1

When a depository institution pools risk, it

Accepted Answer

A)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
B)  buys short and lends long. 
C)  makes loans to just one firm. 
D)  borrows reserves from the Federal Reserve. 
A)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
B)  buys short and lends long. 
C)  makes loans to just one firm. 
D)  borrows reserves from the Federal Reserve.

Question 2

Does the Federal Reserve conduct both the nationʹs monetary policy and its fiscal policy?

Accepted Answer

The Federal Reserve does not c

Question 3

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Accepted Answer

A)  The Federal Reserve Banks 
B)  The Board of Governors 
C)  The Federal Government 
D)  The Federal Open Market Committee 
A)  The Federal Reserve Banks 
B)  The Board of Governors 
C)  The Federal Government 
D)  The Federal Open Market Committee

Question 4

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Accepted Answer

A)  an unit of account. 
B)  a store of value. 
C)  a medium of exchange. 
D)  none of the above 
A)  an unit of account. 
B)  a store of value. 
C)  a medium of exchange. 
D)  none of the above

Question 5

Depository institution create liquidity when they

Accepted Answer

A)  buy assets that are liquid. 
B)  have liabilities that are illiquid. 
C)  borrow long and lend short. 
D)  borrow short and lend long. 
A)  buy assets that are liquid. 
B)  have liabilities that are illiquid. 
C)  borrow long and lend short. 
D)  borrow short and lend long.

Question 6

Changing which of the following is a Federal Reserve monetary policy tool?

Accepted Answer

A)  excess reserve ratios. 
B)  gold and foreign reserve ratios 
C)  desired reserve ratios. 
D)  required reserve ratios. 
A)  excess reserve ratios. 
B)  gold and foreign reserve ratios 
C)  desired reserve ratios. 
D)  required reserve ratios.

Question 7

Liquidity is the

Accepted Answer

A)  ease with which an asset can be converted into money. 
B)  inverse of the velocity of money. 
C)  speed with which the price of an asset changes as its intrinsic value changes. 
D)  same as the velocity of money. 
A)  ease with which an asset can be converted into money. 
B)  inverse of the velocity of money. 
C)  speed with which the price of an asset changes as its intrinsic value changes. 
D)  same as the velocity of money.

Question 8

Assuming velocity is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 9

If real GDP decreases, the demand for money curve will shift

Accepted Answer

A)  leftward and the interest rate will fall. 
B)  rightward and the interest rate will rise. 
C)  rightward and the interest rate will fall. 
D)  leftward and the interest rate will rise. 
A)  leftward and the interest rate will fall. 
B)  rightward and the interest rate will rise. 
C)  rightward and the interest rate will fall. 
D)  leftward and the interest rate will rise.

Question 10

Looking at historical evidence from 1990 to 2005 for the United States and other countries, which of the following are true?
I. There is a correlation between the growth rate of the quantity theory of money and the growth rate of real GDP.
II. There is a correlation between the growth rate of the quantity theory of money and the inflation rate.

Accepted Answer

A)  Only II is true. 
B)  Only I is true. 
C)  Both I and II are true. 
D)  Neither I or II is true. 
A)  Only II is true. 
B)  Only I is true. 
C)  Both I and II are true. 
D)  Neither I or II is true.

Question 11

ʺBy definition, all parts of M2 are money.ʺ Is the previous statement correct or not? Explain your answer.

Accepted Answer

The statement is incorrect. Many of the

Question 12

The main policy-making organization of the Federal Reserve System is the .

Accepted Answer

A)  U.S. Treasury 
B)  monetary commission 
C)  Federal Open Market Committee 
D)  U.S. Mint 
A)  U.S. Treasury 
B)  monetary commission 
C)  Federal Open Market Committee 
D)  U.S. Mint

Question 13

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits,
$500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Accepted Answer

Reserves include the bankʹs de

Question 14

Suppose that a bank begins with $500 million in deposits and $100 million in reserves and is just meeting its desired reserve ratio. Now suppose a decrease in the required reserve ratio lowers the desired reserve ratio to 10 percent. After the fall in the desired reserve ratio but before the bank makes any changes, the bankʹs excess reserves are

Accepted Answer

A)  $400 million. 
B)  $50 million. 
C)  0. 
D)  $450 million. 
A)  $400 million. 
B)  $50 million. 
C)  0. 
D)  $450 million.

Question 15

If an economy has no money, then all transactions must be conducted through the use of .

Accepted Answer

A)  tobacco or wampum 
B)  debit cards 
C)  barter 
D)  credit cards 
A)  tobacco or wampum 
B)  debit cards 
C)  barter 
D)  credit cards

Question 16

Which of the following counts as part of money?

Accepted Answer

A)  $10,000 of corporate bonds 
B)  $10,000 of gold bars 
C)  $10,000 in a checking account 
D)  $10,000 of government bonds 
A)  $10,000 of corporate bonds 
B)  $10,000 of gold bars 
C)  $10,000 in a checking account 
D)  $10,000 of government bonds

Question 17

Commercial banks do not

Accepted Answer

A)  make loans to creditworthy individuals and businesses. 
B)  determine what assets are money. 
C)  accept deposits from their customers. 
D)  buy U.S. government Treasury bills. 
A)  make loans to creditworthy individuals and businesses. 
B)  determine what assets are money. 
C)  accept deposits from their customers. 
D)  buy U.S. government Treasury bills.

Question 18

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is _________.

Accepted Answer

A)  $6 million 
B)  $9 million 
C)  $27 million 
D)  $3 million 
A)  $6 million 
B)  $9 million 
C)  $27 million 
D)  $3 million

Question 19

Which of the following is an example of money functioning as a unit of account?

Accepted Answer

A)  Your writing a check at Target to pay for new clothes. 
B)  Bank of America charging 7 percent on an auto loan. 
C)  eBay using PayPal as a method of payment. 
D)  Pepsi charging $1 for a can of soda. 
A)  Your writing a check at Target to pay for new clothes. 
B)  Bank of America charging 7 percent on an auto loan. 
C)  eBay using PayPal as a method of payment. 
D)  Pepsi charging $1 for a can of soda.

Question 20

Checking deposits are included in

Accepted Answer

A)  M1 and M2. 
B)  M2 only. 
C)  neither M1 nor M2. 
D)  M1 only. 
A)  M1 and M2. 
B)  M2 only. 
C)  neither M1 nor M2. 
D)  M1 only.

When a depository institution pools risk, it

Does the Federal Reserve conduct both the nationʹs monetary policy and its fiscal policy?

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Depository institution create liquidity when they

Changing which of the following is a Federal Reserve monetary policy tool?

Liquidity is the

Assuming velocity is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

If real GDP decreases, the demand for money curve will shift

ʺBy definition, all parts of M2 are money.ʺ Is the previous statement correct or not? Explain your answer.

The main policy-making organization of the Federal Reserve System is the .

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

If an economy has no money, then all transactions must be conducted through the use of .

Which of the following counts as part of money?

Commercial banks do not

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is _________.

Which of the following is an example of money functioning as a unit of account?

Checking deposits are included in

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

When a depository institution pools risk, it

Does the Federal Reserve conduct both the nationʹs monetary policy and its fiscal policy?

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Depository institution create liquidity when they

Changing which of the following is a Federal Reserve monetary policy tool?

Liquidity is the

Assuming velocity is constant, a 10 percent increase in the quantity of money leads to a 10 percent increase in nominal GDP in both the short run and the long run.

If real GDP decreases, the demand for money curve will shift

ʺBy definition, all parts of M2 are money.ʺ Is the previous statement correct or not? Explain your answer.

The main policy-making organization of the Federal Reserve System is the .

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

If an economy has no money, then all transactions must be conducted through the use of .

Which of the following counts as part of money?

Commercial banks do not

The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is _________.

Which of the following is an example of money functioning as a unit of account?

Checking deposits are included in

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