Question 1

In Zealand, banksʹ desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals_____________ .

Accepted Answer

A)  5.0 
B)  3.0 
C)  3.33 
D)  2.18 
A)  5.0 
B)  3.0 
C)  3.33 
D)  2.18

Question 2

In the short run, when the Fed increases the quantity of money

Accepted Answer

A)  the supply of money curve shifts leftward. 
B)  bond prices rise and the interest rate falls. 
C)  bond prices fall and the interest rate rises. 
D)  the demand for money increases. 
A)  the supply of money curve shifts leftward. 
B)  bond prices rise and the interest rate falls. 
C)  bond prices fall and the interest rate rises. 
D)  the demand for money increases.

Question 3

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 100 &\text { Deposits }&\$400\
\text { Loans } & 600 &\text { Net worth }&\$300\
\text { Total assets } & \$ 700&\text { Total assets }&\$700 \
\hline
\end{array}$
-The above table gives the initial balance sheet for Mini Bank. Mini Bank?s actual reserve ratio equals ___________.

Accepted Answer

A)  20 percent 
B)  14.3 percent 
C)  33.3 percent 
D)  25 percent 
A)  20 percent 
B)  14.3 percent 
C)  33.3 percent 
D)  25 percent

Question 4

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 400 &\text { Deposits }&\$1,200\\text { Loans }&\$800\
\text { Total } & \$ 1,200&\text { Total  }&\$1,200 \
\hline
\end{array}$
-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. If the desired reserve ratio equals 10 percent, FBN Bank has excess reserves of

Accepted Answer

A)  $100 million. 
B)  $0. 
C)  $200 million. 
D)  $280 million. 
A)  $100 million. 
B)  $0. 
C)  $200 million. 
D)  $280 million.

Question 5

There is a movement along the demand for money curve if

Accepted Answer

A)  the nominal interest rate rises. 
B)  the price level increases. 
C)  banking customers use ATM machines more. 
D)  there is an economic expansion so that real GDP increases. 
A)  the nominal interest rate rises. 
B)  the price level increases. 
C)  banking customers use ATM machines more. 
D)  there is an economic expansion so that real GDP increases.

Question 6

Moneyʹs function as a medium of exchange means that

Accepted Answer

A)  money can be used to store wealth. 
B)  money requires a double coincidence of wants. 
C)  money serves as an acceptable means of payment. 
D)  money is a common denominator for expressing the prices of goods and services. 
A)  money can be used to store wealth. 
B)  money requires a double coincidence of wants. 
C)  money serves as an acceptable means of payment. 
D)  money is a common denominator for expressing the prices of goods and services.

Question 7

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in real GDP?

Accepted Answer

A)  The demand for money curve would shift rightward to MD2. 
B)  The demand for money curve would shift leftward to MD0. 
C)  There would be a movement downward along the demand for money curve MD1. 
D)  There would be a movement upward along the demand for money curve MD1. 
A)  The demand for money curve would shift rightward to MD2. 
B)  The demand for money curve would shift leftward to MD0. 
C)  There would be a movement downward along the demand for money curve MD1. 
D)  There would be a movement upward along the demand for money curve MD1.

Question 8

How are the nominal and real demands for money related to changes in the price level?

Accepted Answer

When the price level rises the nominal d

Question 9

The FOMC is the agency that insures deposits up to $250,000.

Accepted Answer

A) True 
 B)False

Question 10

In the long run, when the Fed increases the quantity of money the

Accepted Answer

A)  nothing real changes. 
B)  price level falls. 
C)  nominal interest rate falls. 
D)  real interest rate rises. 
A)  nothing real changes. 
B)  price level falls. 
C)  nominal interest rate falls. 
D)  real interest rate rises.

Question 11

When bank deposits increase from $1 million to $2 million, banksʹ required reserves increase from $100,000 to $200,000. The required reserve ratio is _____________.

Accepted Answer

A)  0.25 
B)  1.00 
C)  10.0 
D)  0.10 
A)  0.25 
B)  1.00 
C)  10.0 
D)  0.10

Question 12

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

Accepted Answer

A)  decrease by $8 million. 
B)  increase by $500,000. 
C)  increase by $8 million. 
D)  decrease by $500,000. 
A)  decrease by $8 million. 
B)  increase by $500,000. 
C)  increase by $8 million. 
D)  decrease by $500,000.

Question 13

A decrease in the nominal interest rate _________the opportunity cost of holding money.

Accepted Answer

A)  increases 
B)  can increase or decrease 
C)  decreases 
D)  None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money. 
A)  increases 
B)  can increase or decrease 
C)  decreases 
D)  None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money.

Question 14

Reserves are_________ .

Accepted Answer

A)  cash in a bankʹs vault plus its gold at Federal Reserve banks 
B)  cash in a bankʹs vault plus the cash carried by its customers 
C)  gold in a bankʹs vault plus its gold at Federal Reserve banks 
D)  cash in a bankʹs vault plus its deposits at Federal Reserve banks 
A)  cash in a bankʹs vault plus its gold at Federal Reserve banks 
B)  cash in a bankʹs vault plus the cash carried by its customers 
C)  gold in a bankʹs vault plus its gold at Federal Reserve banks 
D)  cash in a bankʹs vault plus its deposits at Federal Reserve banks

Question 15

When the Fed is_________ it is _________.

Accepted Answer

A)  regulating the nationʹs financial institutions; conducting monetary policy 
B)  issuing government bonds; conducting monetary policy 
C)  adjusting the amount of money in circulation; issuing government bonds 
D)  adjusting the amount of money in circulation; conducting monetary policy 
A)  regulating the nationʹs financial institutions; conducting monetary policy 
B)  issuing government bonds; conducting monetary policy 
C)  adjusting the amount of money in circulation; issuing government bonds 
D)  adjusting the amount of money in circulation; conducting monetary policy

Question 16

If an increase in the monetary base of $8 billion increases the quantity of money by $64 billion, then the money multiplier is equal to______________ .

Accepted Answer

A)  $8 billion 
B)  $64 billion 
C)  1/8 
D)  8 
A)  $8 billion 
B)  $64 billion 
C)  1/8 
D)  8

Question 17

If V = 5, P = $3, and Y = 50, then the quantity of money equals

Accepted Answer

A)  $300. 
B)  $150. 
C)  $10. 
D)  $30. 
A)  $300. 
B)  $150. 
C)  $10. 
D)  $30.

Question 18

A bankʹs reserves include

Accepted Answer

A)  its common stock holdings, the cash in its vault, and any deposits at a Federal Reserve bank. 
B)  the cash in its vault plus its deposits held at a Federal Reserve bank. 
C)  the cash in its vault plus any gold held for the bank at Fort Knox. 
D)  the cash in its vault plus the value of its depositorsʹ accounts. 
A)  its common stock holdings, the cash in its vault, and any deposits at a Federal Reserve bank. 
B)  the cash in its vault plus its deposits held at a Federal Reserve bank. 
C)  the cash in its vault plus any gold held for the bank at Fort Knox. 
D)  the cash in its vault plus the value of its depositorsʹ accounts.

Question 19

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

Accepted Answer

A)  The University National Bank has $10 million less in excess reserves. 
B)  The University National Bank has $10 million more in securities. 
C)  The Fed will pay by decreasing the University National Bankʹs deposit account with the Fed by $10 million. 
D)  The Fed will pay by increasing the University National Bankʹs deposit account with the Fed by $10 million. 
A)  The University National Bank has $10 million less in excess reserves. 
B)  The University National Bank has $10 million more in securities. 
C)  The Fed will pay by decreasing the University National Bankʹs deposit account with the Fed by $10 million. 
D)  The Fed will pay by increasing the University National Bankʹs deposit account with the Fed by $10 million.

Question 20

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 400 &\text { Deposits }&\$1,200\\text { Loans }&\$800\
\text { Total } & \$ 1,200&\text { Total  }&\$1,200 \
\hline
\end{array}$
-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. If the desired reserve ratio on deposits is 10 percent, FBN Bank can loan an additional

Accepted Answer

A)  $100 million. 
B)  $280 million. 
C)  $0. 
D)  $200 million. 
A)  $100 million. 
B)  $280 million. 
C)  $0. 
D)  $200 million.

In Zealand, banksʹ desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals_____________ .

In the short run, when the Fed increases the quantity of money

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$ Reserves \ 100 Deposits \4 00 Loans 600 Net worth \3 00 Total assets \ 700 Total assets \7 00 -The above table gives the initial balance sheet for Mini Bank. Mini Bank?s actual reserve ratio equals ___________.

There is a movement along the demand for money curve if

Moneyʹs function as a medium of exchange means that

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in real GDP?

How are the nominal and real demands for money related to changes in the price level?

The FOMC is the agency that insures deposits up to $250,000.

In the long run, when the Fed increases the quantity of money the

When bank deposits increase from $1 million to $2 million, banksʹ required reserves increase from $100,000 to $200,000. The required reserve ratio is _____________.

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

A decrease in the nominal interest rate _________the opportunity cost of holding money.

Reserves are_________ .

When the Fed is_ it is _.

If an increase in the monetary base of $8 billion increases the quantity of money by $64 billion, then the money multiplier is equal to______________ .

If V = 5, P = $3, and Y = 50, then the quantity of money equals

A bankʹs reserves include

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

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 Zealand, banksʹ desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals_____________ .

In the short run, when the Fed increases the quantity of money

There is a movement along the demand for money curve if

Moneyʹs function as a medium of exchange means that

-In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in real GDP?

How are the nominal and real demands for money related to changes in the price level?

The FOMC is the agency that insures deposits up to $250,000.

In the long run, when the Fed increases the quantity of money the

When bank deposits increase from $1 million to $2 million, banksʹ required reserves increase from $100,000 to $200,000. The required reserve ratio is _____________.

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

A decrease in the nominal interest rate _________the opportunity cost of holding money.

Reserves are_________ .

When the Fed is_________ it is _________.

If an increase in the monetary base of $8 billion increases the quantity of money by $64 billion, then the money multiplier is equal to______________ .

If V = 5, P = $3, and Y = 50, then the quantity of money equals

A bankʹs reserves include

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

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

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of an increase in real GDP?

When the Fed is_ it is _.