Exam 8: Money, the Price Level, and Inflation

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of a rise in the nominal interest rate?

When the nominal interest rate rises, the quantity of money demanded decreases because

Which of the following is NOT considered a function of money?

Which of the following correctly completes this statement? Money in the United States includes

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 these assets and liabilities that is in M1?

Credit cards are

When the quantity of money demanded is greater than the quantity of money supplied, people ________Bonds and the interest rate _______.

In comparing growth rates of money growth and inflation across countries, the long -run proposition of the quantity theory of money is supported.

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$ Reserves \ 500 Deposits \5 ,000 Loans \2 ,500 Total \ 1,000 Total \3 ,000 -The table above shows the balance sheet for Ralph?s Bank. If the desired reserve ratio is 15 percent, Ralph?s Bank has excess reserves of ___________.

What makes up M1? Is M1 larger or smaller than real GDP?

An individual wanting the most liquid asset possible will hold

The Federal Open Market Committee of the Federal Reserve System is responsible for

-The above figure has the demand for money curve. Suppose the Fed initially sets the quantity of money equal to $0.6 trillion. Draw the supply of money curve in the figure. What is the equilibrium interest rate? Now suppose the Fed increases the quantity of money to $0.9 trillion. Draw the new supply curve. What is the new equilibrium interest rate?

The quantity of money that people choose to hold depends on which of the following? I. The price level. II. Financial innovation. III. The exchange rate.

Friedmania is a country in which the quantity theory of money operates. The country has a constant population, capital stock, and technology so real GDP does not change. In 2010, real GDP was $500 million, the price level, measured by the GDP deflator, was 150 and the velocity of circulation of money was 10. Because the price level is measured by the GDP deflator, it must be divided by 100 before it is used in the equation of exchange.) In 2011, the quantity of money increased by 20 percent. a) What was the quantity of money in 2010? b) What was the velocity of circulation in 2011? c) What was the price level in 2010?

$\text { TBK Bank Balance Sheet A ssets }\quad\quad\quad\quad\quad \text { Liabilities }$ Reserves Deposits \2 ,000,000 Required \ 120 Total reserves \2 00,000 Loans 1,800,000 Total assets 2,000,000 Total assets 2,000,000 -Using the data in the above table, an open market operation in which the Fed purchased $100,000 of government securities from a bank would

Which of the following is NOT a policy tool of the Federal Reserve System?

Which of the following is an example of using money as a store of value?

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

The risk of making a loan is