Question 1

Credit cards are not part of the nationʹs money supply.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is NOT a function of money?

Accepted Answer

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

Question 3

A bank cannot create money unless its ___________.

Accepted Answer

A)  required reserves are greater than actual reserves 
B)  desired reserves are greater than actual reserves 
C)  excess reserves are zero 
D)  excess reserves equal deposits multiplied by the reserve ratio 
A)  required reserves are greater than actual reserves 
B)  desired reserves are greater than actual reserves 
C)  excess reserves are zero 
D)  excess reserves equal deposits multiplied by the reserve ratio

Question 4

Which of the following is money?

Accepted Answer

A)  checks in the checkbook 
B)  checking deposits 
C)  credit cards 
D)  All of the above are money. 
A)  checks in the checkbook 
B)  checking deposits 
C)  credit cards 
D)  All of the above are money.

Question 5

When the monetary base increases by $4 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

Accepted Answer

A)  40.0 
B)  2.5 
C)  0.4 
D)  none of the above 
A)  40.0 
B)  2.5 
C)  0.4 
D)  none of the above

Question 6

Regional Federal Reserve banks

Accepted Answer

A)  are run by the governors of the states in which they are located. 
B)  provide general banking services to the public. 
C)  are located in each of the 50 states. 
D)  None of the above answers is correct. 
A)  are run by the governors of the states in which they are located. 
B)  provide general banking services to the public. 
C)  are located in each of the 50 states. 
D)  None of the above answers is correct.

Question 7

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

Accepted Answer

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

Question 8

Which of the following is true regarding the required reserve ratio?

Accepted Answer

A)  The ratio is only enforced against banks that are operating in a risky manner. 
B)  The ratio determines the amount of excess reserves a bank must hold. 
C)  The ratio determines the legally required amount of reserves a bank must hold. 
D)  None of the above answers is correct. 
A)  The ratio is only enforced against banks that are operating in a risky manner. 
B)  The ratio determines the amount of excess reserves a bank must hold. 
C)  The ratio determines the legally required amount of reserves a bank must hold. 
D)  None of the above answers is correct.

Question 9

An asset category that caries the highest interest rate is

Accepted Answer

A)  cash in the bank vault. 
B)  savings deposits. 
C)  loans. 
D)  checkable deposit accounts. 
A)  cash in the bank vault. 
B)  savings deposits. 
C)  loans. 
D)  checkable deposit accounts.

Question 10

A bank can only make a loan if it has

Accepted Answer

A)  a creditworthy customer willing to pay a high interest rate. 
B)  permission from the Federal Reserve. 
C)  excess reserves. 
D)  reserves equal to its deposits. 
A)  a creditworthy customer willing to pay a high interest rate. 
B)  permission from the Federal Reserve. 
C)  excess reserves. 
D)  reserves equal to its deposits.

Question 11

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Accepted Answer

A)  money multiplier. 
B)  minimum rate. 
C)  discount rate. 
D)  required reserve ratio. 
A)  money multiplier. 
B)  minimum rate. 
C)  discount rate. 
D)  required reserve ratio.

Question 12

$$\begin{array} { | l | l | } 
\hline \text { Component } & \begin{array} { l } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \begin{array} { l } 
\text { Money market } \
\text { mutual fund } \
\text { deposits }
\end{array} & 4,400 \
\hline \text { Time deposits } & 1,237 \
\hline \text { Savings deposits } & 1,589 \
\hline \text { Checking deposits } & 752 \
\hline \text { Currency } & 609 \
\hline
\end{array}$$
-Based on the data in the table above, what is the value of M1?

Accepted Answer

A)  $1,361 billion 
B)  $2,950 billion 
C)  $752 billion 
D)  $609 billion 
A)  $1,361 billion 
B)  $2,950 billion 
C)  $752 billion 
D)  $609 billion

Question 13

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 30 &\text { Deposits }&\$1,000\\text { Loans }&\$970\
\text { Total } & \$ 1,000&\text { Total  }&\$1,000 \
\hline
\end{array}$
-The above table gives the initial balance sheet for Mega Bank. Mega Bank?s desired reserves equal its required reserves. Based on the initial balance sheet, what is the required reserve ratio for Mega Bank?

Accepted Answer

A)  30 percent 
B)  1.4 percent 
C)  3 percent 
D)  10 percent 
A)  30 percent 
B)  1.4 percent 
C)  3 percent 
D)  10 percent

Question 14

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Accepted Answer

A) True 
 B)False

Question 15

M2________ .

Accepted Answer

A)  is a broader measure of money than M1 
B)  does not include checking deposits held at credit unions 
C)  does not include travelerʹs checks 
D)  does not include currency 
A)  is a broader measure of money than M1 
B)  does not include checking deposits held at credit unions 
C)  does not include travelerʹs checks 
D)  does not include currency

Question 16

A bankʹs required reserves are calculated by multiplying .

Accepted Answer

A)  its deposits by the required reserve ratio 
B)  cash in its vault by the required reserve ratio 
C)  the sum of its deposits and cash in its vault by the reserve ratio 
D)  the gold in its vault by the reserve ratio 
A)  its deposits by the required reserve ratio 
B)  cash in its vault by the required reserve ratio 
C)  the sum of its deposits and cash in its vault by the reserve ratio 
D)  the gold in its vault by the reserve ratio

Question 17

The major role of a commercial bank is to

Accepted Answer

A)  restrain the growth of the quantity of money. 
B)  make mortgage loans. 
C)  sell shares and use the proceeds to buy stocks. 
D)  receive deposits and make loans. 
A)  restrain the growth of the quantity of money. 
B)  make mortgage loans. 
C)  sell shares and use the proceeds to buy stocks. 
D)  receive deposits and make loans.

Question 18

The main policy-making body of the Federal Reserve System is the

Accepted Answer

A)  Federal Reserve Banks. 
B)  Federal Open Market Committee. 
C)  member commercial banks. 
D)  Board of Governors. 
A)  Federal Reserve Banks. 
B)  Federal Open Market Committee. 
C)  member commercial banks. 
D)  Board of Governors.

Question 19

If the interest rate is above the equilibrium interest rate, then

Accepted Answer

A)  people will buy bonds and the interest rate will fall. 
B)  people will sell bonds and the interest rate will fall. 
C)  the quantity of money demanded exceeds the quantity supplied. 
D)  there is an excess demand for money. 
A)  people will buy bonds and the interest rate will fall. 
B)  people will sell bonds and the interest rate will fall. 
C)  the quantity of money demanded exceeds the quantity supplied. 
D)  there is an excess demand for money.

Question 20

The data show that money growth and inflation are

Accepted Answer

A)  not correlated. 
B)  independent phenomena. 
C)  negatively correlated. 
D)  positively correlated. 
A)  not correlated. 
B)  independent phenomena. 
C)  negatively correlated. 
D)  positively correlated.

Credit cards are not part of the nationʹs money supply.

Which of the following is NOT a function of money?

A bank cannot create money unless its ___________.

Which of the following is money?

When the monetary base increases by $4 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

Regional Federal Reserve banks

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

Which of the following is true regarding the required reserve ratio?

An asset category that caries the highest interest rate is

A bank can only make a loan if it has

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Component Amount (billions of dollars) Money market mutual fund deposits 4,400 Time deposits 1,237 Savings deposits 1,589 Checking deposits 752 Currency 609 -Based on the data in the table above, what is the value of M1?

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

M2________ .

A bankʹs required reserves are calculated by multiplying .

The major role of a commercial bank is to

The main policy-making body of the Federal Reserve System is the

If the interest rate is above the equilibrium interest rate, then

The data show that money growth and inflation are

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

Credit cards are not part of the nationʹs money supply.

Which of the following is NOT a function of money?

A bank cannot create money unless its ___________.

Which of the following is money?

When the monetary base increases by $4 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

Regional Federal Reserve banks

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

Which of the following is true regarding the required reserve ratio?

An asset category that caries the highest interest rate is

A bank can only make a loan if it has

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Component Amount (billions of dollars) Money market mutual fund deposits 4,400 Time deposits 1,237 Savings deposits 1,589 Checking deposits 752 Currency 609 -Based on the data in the table above, what is the value of M1?

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

M2________ .

A bankʹs required reserves are calculated by multiplying .

The major role of a commercial bank is to

The main policy-making body of the Federal Reserve System is the

If the interest rate is above the equilibrium interest rate, then

The data show that money growth and inflation are

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