Question 1

-In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess

Accepted Answer

A)  demand for money and bond prices will rise. 
B)  demand for money and bond prices will fall. 
C)  quantity of money and bond prices will fall. 
D)  quantity of money and bond prices will rise. 
A)  demand for money and bond prices will rise. 
B)  demand for money and bond prices will fall. 
C)  quantity of money and bond prices will fall. 
D)  quantity of money and bond prices will rise.

Question 2

Which of the following affects the amount of money a person is willing to hold?

Accepted Answer

A)  The interest rate that you earn on your savings account increases. 
B)  The price level rises from 103 to 107. 
C)  The use of credit cards increases. 
D)  All of the above are correct. 
A)  The interest rate that you earn on your savings account increases. 
B)  The price level rises from 103 to 107. 
C)  The use of credit cards increases. 
D)  All of the above are correct.

Question 3

$\text { University National Bank Balance Sheet Assets}\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad & \$ 320 &\text { Deposits }&\$440\
\text { Loans }&\$120\
\text { Total assets } & \$ 440&\text { Total liabilities }&\$440 \
\hline
\end{array}$
-The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What is the value of excess reserves held by the University National Bank?

Accepted Answer

A)  $120 million 
B)  $760 million 
C)  $232 million 
D)  $320 million 
A)  $120 million 
B)  $760 million 
C)  $232 million 
D)  $320 million

Question 4

Liquidity is the same as

Accepted Answer

A)  diversification of an investorʹs store of value. 
B)  easy conversion of money to an asset, allowing for loss of value. 
C)  easy conversion of an asset to a means of payment, allowing for loss of value. 
D)  easy conversion of an asset to a means of payment, with little or no loss of value. 
A)  diversification of an investorʹs store of value. 
B)  easy conversion of money to an asset, allowing for loss of value. 
C)  easy conversion of an asset to a means of payment, allowing for loss of value. 
D)  easy conversion of an asset to a means of payment, with little or no loss of value.

Question 5

Depository institutions do all the following EXCEPT

Accepted Answer

A)  create required reserve ratios. 
B)  minimize the cost of obtaining funds. 
C)  create liquidity. 
D)  pool risks. 
A)  create required reserve ratios. 
B)  minimize the cost of obtaining funds. 
C)  create liquidity. 
D)  pool risks.

Question 6

When price levels rise, the quantity of nominal money demanded will __________and the quantity of real money demanded will _________.

Accepted Answer

A)  increase; increase 
B)  increase; stay the same 
C)  increase; decrease 
D)  decrease; increase 
A)  increase; increase 
B)  increase; stay the same 
C)  increase; decrease 
D)  decrease; increase

Question 7

Credit cards are NOT money because they

Accepted Answer

A)  are ID cards that make borrowing easier. 
B)  have a value in exchange but little intrinsic value. 
C)  are not issued by the government. 
D)  do not serve as a unit of account. 
A)  are ID cards that make borrowing easier. 
B)  have a value in exchange but little intrinsic value. 
C)  are not issued by the government. 
D)  do not serve as a unit of account.

Question 8

The Federal Reserve System

Accepted Answer

A)  conducts the nationʹs monetary policy. 
B)  regulates the nationʹs financial institutions. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct. 
A)  conducts the nationʹs monetary policy. 
B)  regulates the nationʹs financial institutions. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct.

Question 9

A decrease in the quantity of reserves supplied to commercial banks could be the result of

Accepted Answer

A)  the sale of government securities by the Federal Reserve. 
B)  an increase in the exchange rate. 
C)  a decrease in the governmentʹs budget deficit. 
D)  a decision by U.S. households to hold less currency. 
A)  the sale of government securities by the Federal Reserve. 
B)  an increase in the exchange rate. 
C)  a decrease in the governmentʹs budget deficit. 
D)  a decision by U.S. households to hold less currency.

Question 10

Which of the following is true regarding money market mutual funds?
I. Money market mutual funds buy highly liquid assets like Treasury bills.
II. Shareholders can obtain loans from money market mutual funds.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 11

$\begin{array}{|c|c|}
\hline \begin{array}{c}
\text { Interest rate } \
\text { (percent per year) }
\end{array} & \begin{array}{c}
\text { Uantity of money } \
\text { demanded (trillions } \
\text { of } 2005 \text { dollars) }
\end{array} \\hline 8 & 0.7 \
\hline 6 & 0.9 \
\hline 4 & 1.1 \
\hline 2 & 1.3 \
\hline
\end{array}$
-The above table has the demand for money schedule.
a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate?
b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part a).

Accepted Answer

a) The equilibrium interest rate is 4 pe

Question 12

The velocity of circulation is

Accepted Answer

A)  constant. 
B)  the average number of times a dollar of money is used in a year to buy goods and services in GDP. 
C)  the rate of change of the GDP deflator. 
D)  the changes in the purchasing power of money over a given time period. 
A)  constant. 
B)  the average number of times a dollar of money is used in a year to buy goods and services in GDP. 
C)  the rate of change of the GDP deflator. 
D)  the changes in the purchasing power of money over a given time period.

Question 13

Credit cards are

Accepted Answer

A)  not money because they are not made of paper. 
B)  not money. 
C)  money but are not a large part of the money supply. 
D)  money and are the largest part of the money supply. 
A)  not money because they are not made of paper. 
B)  not money. 
C)  money but are not a large part of the money supply. 
D)  money and are the largest part of the money supply.

Question 14

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 30 &\text { Deposits }&\$1,000\\text { Loans }&\$970\
\text { Total } & \$ 1,000&\text { Total  }&\$1,000 \
\hline
\end{array}$
-The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney?s deposit, but before any other actions occur, MegaBank will have excess reserves of

Accepted Answer

A)  $15.00. 
B)  $50.00. 
C)  $48.50. 
D)  $33.00. 
A)  $15.00. 
B)  $50.00. 
C)  $48.50. 
D)  $33.00.

Question 15

Which of the following equations represents the equation of exchange?

Accepted Answer

A)  MV = PY 
B)  MY = PV 
C)  PM = VY 
D)  M = VP/Y 
A)  MV = PY 
B)  MY = PV 
C)  PM = VY 
D)  M = VP/Y

Question 16

A depository institution receives deposits from lenders and makes loans to borrowers.

Accepted Answer

A) True 
 B)False

Question 17

When you buy a hamburger for lunch, you are using money as a

Accepted Answer

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

Question 18

In the money market, if the interest rate exceeds the equilibrium interest, there is a surplus of money. How is the surplus eliminated?

Accepted Answer

A)  Banks will lend out the surplus, lowering interest rates. 
B)  The high interest rate increases the demand for money, eliminating the surplus. 
C)  People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. 
D)  The Federal Reserve will destroy currency, reducing the quantity of money. 
A)  Banks will lend out the surplus, lowering interest rates. 
B)  The high interest rate increases the demand for money, eliminating the surplus. 
C)  People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. 
D)  The Federal Reserve will destroy currency, reducing the quantity of money.

Question 19

Reserve requirements are the

Accepted Answer

A)  rules covering the types of assets that banks may purchase. 
B)  minimum percentages of deposits that banks must hold as reserves. 
C)  minimum amount of an ownerʹs financial resources that must be placed in a depository institution. 
D)  rules covering the types of deposits that banks may offer. 
A)  rules covering the types of assets that banks may purchase. 
B)  minimum percentages of deposits that banks must hold as reserves. 
C)  minimum amount of an ownerʹs financial resources that must be placed in a depository institution. 
D)  rules covering the types of deposits that banks may offer.

Question 20

Modern U.S. commercial banks perform all of the following functions EXCEPT

Accepted Answer

A)  make loans to households and business firms. 
B)  issue paper currency. 
C)  accept checking deposits. 
D)  accept savings deposits. 
A)  make loans to households and business firms. 
B)  issue paper currency. 
C)  accept checking deposits. 
D)  accept savings deposits.

-In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess

Which of the following affects the amount of money a person is willing to hold?

Liquidity is the same as

Depository institutions do all the following EXCEPT

When price levels rise, the quantity of nominal money demanded will __and the quantity of real money demanded will _.

Credit cards are NOT money because they

The Federal Reserve System

A decrease in the quantity of reserves supplied to commercial banks could be the result of

Which of the following is true regarding money market mutual funds? I. Money market mutual funds buy highly liquid assets like Treasury bills. II. Shareholders can obtain loans from money market mutual funds.

The velocity of circulation is

Credit cards are

Which of the following equations represents the equation of exchange?

A depository institution receives deposits from lenders and makes loans to borrowers.

When you buy a hamburger for lunch, you are using money as a

In the money market, if the interest rate exceeds the equilibrium interest, there is a surplus of money. How is the surplus eliminated?

Reserve requirements are the

Modern U.S. commercial banks perform all of the following functions EXCEPT

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

-In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess

Which of the following affects the amount of money a person is willing to hold?

Liquidity is the same as

Depository institutions do all the following EXCEPT

When price levels rise, the quantity of nominal money demanded will __________and the quantity of real money demanded will _________.

Credit cards are NOT money because they

The Federal Reserve System

A decrease in the quantity of reserves supplied to commercial banks could be the result of

Which of the following is true regarding money market mutual funds? I. Money market mutual funds buy highly liquid assets like Treasury bills. II. Shareholders can obtain loans from money market mutual funds.

The velocity of circulation is

Credit cards are

Which of the following equations represents the equation of exchange?

A depository institution receives deposits from lenders and makes loans to borrowers.

When you buy a hamburger for lunch, you are using money as a

In the money market, if the interest rate exceeds the equilibrium interest, there is a surplus of money. How is the surplus eliminated?

Reserve requirements are the

Modern U.S. commercial banks perform all of the following functions EXCEPT

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

When price levels rise, the quantity of nominal money demanded will __and the quantity of real money demanded will _.