Question 1

Depository institutions do all of the following EXCEPT

Accepted Answer

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

Question 2

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

Accepted Answer

A)  $17.25 billion in reserves. 
B)  $17.25 billion in excess reserves. 
C)  $1,725 billion in currency. 
D)  $534.75 in reserves. 
A)  $17.25 billion in reserves. 
B)  $17.25 billion in excess reserves. 
C)  $1,725 billion in currency. 
D)  $534.75 in reserves.

Question 3

The discount rate is the interest rate

Accepted Answer

A)  paid on time deposits. 
B)  paid on funds that depository institutions borrow from the Federal Reserve. 
C)  that banks charge their ʺbestʺ customers. 
D)  paid on funds banks borrow from other banks. 
A)  paid on time deposits. 
B)  paid on funds that depository institutions borrow from the Federal Reserve. 
C)  that banks charge their ʺbestʺ customers. 
D)  paid on funds banks borrow from other banks.

Question 4

What is the FOMC? Who are the members of the FOMC? What policy does the FOMC decide?

Accepted Answer

The FOMC is the Federal Open Market Comm

Question 5

For a commercial bank, the term ʺreservesʺ refers to

Accepted Answer

A)  the cash in its vaults and its deposits at the Federal Reserve. 
B)  a bankerʹs concern ʺreservationʺ) in making loans to an individual without a job. 
C)  the net interest that it earns on loans. 
D)  the profit that the bank retains at the end of the year. 
A)  the cash in its vaults and its deposits at the Federal Reserve. 
B)  a bankerʹs concern ʺreservationʺ) in making loans to an individual without a job. 
C)  the net interest that it earns on loans. 
D)  the profit that the bank retains at the end of the year.

Question 6

The U.S. historical evidence

Accepted Answer

A)  demonstrates that there is no correlation between the money growth rate and inflation. 
B)  shows that a higher inflation rate causes an increase in the money growth rate. 
C)  does not support the quantity theory of money. 
D)  generally supports the quantity theory of money in the long run. 
A)  demonstrates that there is no correlation between the money growth rate and inflation. 
B)  shows that a higher inflation rate causes an increase in the money growth rate. 
C)  does not support the quantity theory of money. 
D)  generally supports the quantity theory of money in the long run.

Question 7

Checks__________ money and credit cards _____________money.

Accepted Answer

A)  are not; are 
B)  are; are 
C)  are; are not 
D)  are not; are not 
A)  are not; are 
B)  are; are 
C)  are; are not 
D)  are not; are not

Question 8

Which of the following is a service of depository institutions?

Accepted Answer

A)  decreasing the liquidity drain in the banking system 
B)  monitoring the Federal Reserve 
C)  loaning funds to other depository institutions at the discount rate 
D)  creating liquidity 
A)  decreasing the liquidity drain in the banking system 
B)  monitoring the Federal Reserve 
C)  loaning funds to other depository institutions at the discount rate 
D)  creating liquidity

Question 9

The equation of exchange states that the price level is equal to

Accepted Answer

A)  velocity of circulation multiplied by the quantity of money divided by real GDP. 
B)  the velocity of circulation. 
C)  the quantity of money. 
D)  real GDP multiplied by the velocity of circulation divided by nominal GDP. 
A)  velocity of circulation multiplied by the quantity of money divided by real GDP. 
B)  the velocity of circulation. 
C)  the quantity of money. 
D)  real GDP multiplied by the velocity of circulation divided by nominal GDP.

Question 10

-In the above figure, if the interest rate is 8 percent,

Accepted Answer

A)  people buy stocks, because stocks are more liquid than currency. 
B)  people buy bonds and the interest rate falls. 
C)  the Fed increases the quantity of money. 
D)  people sell bonds so as to convert them into money. 
A)  people buy stocks, because stocks are more liquid than currency. 
B)  people buy bonds and the interest rate falls. 
C)  the Fed increases the quantity of money. 
D)  people sell bonds so as to convert them into money.

Question 11

The unit of account

Accepted Answer

A)  is an accounting of the total units of goods and services produced in an economy. 
B)  is an agreed measure for stating the prices of goods and services in an economy. 
C)  is a type of accounting of how many currency units there are in an economy. 
D)  is a type of value stored within all assets. 
A)  is an accounting of the total units of goods and services produced in an economy. 
B)  is an agreed measure for stating the prices of goods and services in an economy. 
C)  is a type of accounting of how many currency units there are in an economy. 
D)  is a type of value stored within all assets.

Question 12

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 400 &\text { Deposits }&\$1,200\\text { Loans }&\$800\
\text { Total } & \$ 1,200&\text { Total  }&\$1,200 \
\hline
\end{array}$
-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. After FBN Bank loans the maximum amount it can, the loans have been spent, and the proceeds have been deposited in other banks, FBN Bank has excess reserves of

Accepted Answer

A)  $300 million. 
B)  $200 million. 
C)  $0. 
D)  $100 million. 
A)  $300 million. 
B)  $200 million. 
C)  $0. 
D)  $100 million.

Question 13

Checks are

Accepted Answer

A)  only part of M2 but not part of M1. 
B)  part of M1 but not part of M2. 
C)  not money. 
D)  the largest component of the money supply. 
A)  only part of M2 but not part of M1. 
B)  part of M1 but not part of M2. 
C)  not money. 
D)  the largest component of the money supply.

Question 14

The nation is divided into _________Federal Reserve districts, each having a Federal Reserve Bank.

Accepted Answer

A)  12 
B)  10 
C)  52 
D)  7 
A)  12 
B)  10 
C)  52 
D)  7

Question 15

According to the quantity theory of money, inflation causes an increase in the money supply.

Accepted Answer

A) True 
 B)False

Question 16

The demand for money curve shifts rightward if

Accepted Answer

A)  the real interest rate decreases. 
B)  the nominal interest rate increases. 
C)  real GDP increases. 
D)  the price level increases. 
A)  the real interest rate decreases. 
B)  the nominal interest rate increases. 
C)  real GDP increases. 
D)  the price level increases.

Question 17

In the list of assets below, which is the most liquid?

Accepted Answer

A)  a one-ounce gold coin 
B)  $500 worth of Ford Motors bonds 
C)  $500 worth of Ford Motors common stock 
D)  a $500 travelerʹs check 
A)  a one-ounce gold coin 
B)  $500 worth of Ford Motors bonds 
C)  $500 worth of Ford Motors common stock 
D)  a $500 travelerʹs check

Question 18

When the Fed lowers the federal funds rate, it leads to

Accepted Answer

A)  a decrease in demand deposits. 
B)  the Fed selling government securities. 
C)  a decrease in the quantity of money. 
D)  an increase in lending by banks. 
A)  a decrease in demand deposits. 
B)  the Fed selling government securities. 
C)  a decrease in the quantity of money. 
D)  an increase in lending by banks.

Question 19

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

Accepted Answer

The bank has no excess reserve

Question 20

An increase in the nominal interest rate creates a_________ the money demand curve, and an increase in real GDP creates a _______the money demand curve.

Accepted Answer

A)  rightward shift of; movement up along 
B)  leftward shift of; rightward shift of 
C)  movement up along; rightward shift of 
D)  movement down along; leftward shift of 
A)  rightward shift of; movement up along 
B)  leftward shift of; rightward shift of 
C)  movement up along; rightward shift of 
D)  movement down along; leftward shift of

Depository institutions do all of the following EXCEPT

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

The discount rate is the interest rate

What is the FOMC? Who are the members of the FOMC? What policy does the FOMC decide?

For a commercial bank, the term ʺreservesʺ refers to

The U.S. historical evidence

Checks money and credit cards ___money.

Which of the following is a service of depository institutions?

The equation of exchange states that the price level is equal to

-In the above figure, if the interest rate is 8 percent,

The unit of account

Checks are

The nation is divided into _________Federal Reserve districts, each having a Federal Reserve Bank.

According to the quantity theory of money, inflation causes an increase in the money supply.

The demand for money curve shifts rightward if

In the list of assets below, which is the most liquid?

When the Fed lowers the federal funds rate, it leads to

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

An increase in the nominal interest rate creates a___ the money demand curve, and an increase in real GDP creates a _the money demand curve.

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

Depository institutions do all of the following EXCEPT

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

The discount rate is the interest rate

What is the FOMC? Who are the members of the FOMC? What policy does the FOMC decide?

For a commercial bank, the term ʺreservesʺ refers to

The U.S. historical evidence

Checks__________ money and credit cards _____________money.

Which of the following is a service of depository institutions?

The equation of exchange states that the price level is equal to

-In the above figure, if the interest rate is 8 percent,

The unit of account

Checks are

The nation is divided into _________Federal Reserve districts, each having a Federal Reserve Bank.

According to the quantity theory of money, inflation causes an increase in the money supply.

The demand for money curve shifts rightward if

In the list of assets below, which is the most liquid?

When the Fed lowers the federal funds rate, it leads to

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

An increase in the nominal interest rate creates a_________ the money demand curve, and an increase in real GDP creates a _______the money demand curve.

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

Checks money and credit cards ___money.

An increase in the nominal interest rate creates a___ the money demand curve, and an increase in real GDP creates a _the money demand curve.