Question 1

What is the opportunity cost of holding money?

Accepted Answer

The opportunity cost

Question 2

The definition of M2 includes

Accepted Answer

A)  M1. 
B)  time deposits. 
C)  savings deposits. 
D)  all of the above 
A)  M1. 
B)  time deposits. 
C)  savings deposits. 
D)  all of the above

Question 3

What is the structure of the Federal Reserve Bank System?

Accepted Answer

The key elements in the structure of the

Question 4

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Accepted Answer

The Federal Reserve, or Fed, is the U.S.

Question 5

Which of the following is NOT included in the M2 measure of money?

Accepted Answer

A)  time deposits 
B)  shares of the stocks of large companies 
C)  travelerʹs checks 
D)  checking deposits 
A)  time deposits 
B)  shares of the stocks of large companies 
C)  travelerʹs checks 
D)  checking deposits

Question 6

If a savings and loan ʺpools risk,ʺ which of the following must it do?

Accepted Answer

A)  take funds in from a large number of lenders 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  lend money to a large number of firms 
D)  Both answers A and C are correct. 
A)  take funds in from a large number of lenders 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  lend money to a large number of firms 
D)  Both answers A and C are correct.

Question 7

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

Accepted Answer

A)  $450 
B)  $3,000 
C)  $2,500 
D)  $500 
A)  $450 
B)  $3,000 
C)  $2,500 
D)  $500

Question 8

$$\begin{array} { | l | l | } 
\hline \text { Component } & \begin{array} { l } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \text { Currency } & 300 \
\hline \text { Checking deposits } & 600 \
\hline \text { Savings deposits } & 450 \
\hline \text { Traveler's checks } & 10 \
\hline \text { Time deposits } & 1,200 \
\hline \begin{array} { l } 
\text { Money market } \
\text { mutual } \
\text { funds }
\end{array} & 1,100 \
\hline \begin{array} { l } 
\text { Available credit on } \
\text { credit } \
\text { cards }
\end{array} & 900 \
\hline
\end{array}$$
-According to the table above, the value of M1 is _____________and the value of M2 is __________.

Accepted Answer

A)  $860 billion; $2,750 billion 
B)  $860 billion; $4,560 billion 
C)  $910 billion; $1,960 billion 
D)  $910 billion; $3,660 billion 
A)  $860 billion; $2,750 billion 
B)  $860 billion; $4,560 billion 
C)  $910 billion; $1,960 billion 
D)  $910 billion; $3,660 billion

Question 9

The Board of Governors is the

Accepted Answer

A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  50-member organization of state banking regulators of the Federal Reserve. 
C)  12-member monetary policy committee of the Federal Reserve. 
D)  7-member group that oversees the Federal Reserve. 
A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  50-member organization of state banking regulators of the Federal Reserve. 
C)  12-member monetary policy committee of the Federal Reserve. 
D)  7-member group that oversees the Federal Reserve.

Question 10

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 100 &\text { Deposits }&\$400\
\text { Loans } & 600 &\text { Net worth }&\$300\
\text { Total assets } & \$ 700&\text { Total assets }&\$700 \
\hline
\end{array}$
-The above table gives the initial balance sheet for Mini Bank. If the bank?s desired reserve ratio is 10 percent, how much does this bank have in excess reserves?

Accepted Answer

A)  $100 
B)  $40 
C)  $60 
D)  $10 
A)  $100 
B)  $40 
C)  $60 
D)  $10

Question 11

When part of the quantity of money is held in currency, then

Accepted Answer

A)  a currency drain occurs. 
B)  there is a higher level of excess reserves. 
C)  the Fed will find it beneficial to increase the discount rate. 
D)  the money multiplier will increase in value. 
A)  a currency drain occurs. 
B)  there is a higher level of excess reserves. 
C)  the Fed will find it beneficial to increase the discount rate. 
D)  the money multiplier will increase in value.

Question 12

The monetary base does NOT include

Accepted Answer

A)  Federal Reserve notes. 
B)  commercial banksʹ reserves. 
C)  checking accounts at commercial banks. 
D)  reserves of depository institutions. 
A)  Federal Reserve notes. 
B)  commercial banksʹ reserves. 
C)  checking accounts at commercial banks. 
D)  reserves of depository institutions.

Question 13

The table below shows data for Japan.
$$\begin{array} { | l | l | l | } 
\hline & 2008 & 2009 \
\hline \text { M1 growth rate } & 0.7 & 0.9 \
\hline \text { Inflation rate } & 0.4 & - 0.3 \
\hline
\end{array}$$
Assuming the rate of velocity change is constant, real GDP

Accepted Answer

A)  grew by -1.2 percent in 2009. 
B)  grew by 1.1 percent in 2008. 
C)  grew by 0.3 percent in 2008. 
D)  grew by 0.9 percent in 2009. 
A)  grew by -1.2 percent in 2009. 
B)  grew by 1.1 percent in 2008. 
C)  grew by 0.3 percent in 2008. 
D)  grew by 0.9 percent in 2009.

Question 14

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

Accepted Answer

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

Question 15

When the Fed buys U.S. government securities from a bank, the Fed

Accepted Answer

A)  decreases the monetary base and raises the federal funds rate. 
B)  increases the bankʹs reserves at the Fed. 
C)  obtains the money for the purchase from the U.S. Treasury. 
D)  loans the money needed to buy the securities to the bank. 
A)  decreases the monetary base and raises the federal funds rate. 
B)  increases the bankʹs reserves at the Fed. 
C)  obtains the money for the purchase from the U.S. Treasury. 
D)  loans the money needed to buy the securities to the bank.

Question 16

Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?

Accepted Answer

In the money market, the interaction bet

Question 17

The demand for money is_________ related to the nominal interest rate.

Accepted Answer

A)  negatively 
B)  positively 
C)  not related 
D)  None of the above answers is correct because the relationship between the demand for money and the interest rate varies with the inflation rate. 
A)  negatively 
B)  positively 
C)  not related 
D)  None of the above answers is correct because the relationship between the demand for money and the interest rate varies with the inflation rate.

Question 18

The Federal Open Market Committee

Accepted Answer

A)  consists of the Fed chairman and the 12 regional bank presidents. 
B)  meets every week to review the state of the economy. 
C)  is the main policy-making organ of the Federal Reserve. 
D)  is headed by the president of the New York Federal Reserve Bank. 
A)  consists of the Fed chairman and the 12 regional bank presidents. 
B)  meets every week to review the state of the economy. 
C)  is the main policy-making organ of the Federal Reserve. 
D)  is headed by the president of the New York Federal Reserve Bank.

Question 19

Suppose that the money multiplier is 3. If the monetary base increases by $1 million, the quantity of money will

Accepted Answer

A)  increase by $300,000. 
B)  decrease by $300,000. 
C)  decrease by $3 million. 
D)  increase by $3 million. 
A)  increase by $300,000. 
B)  decrease by $300,000. 
C)  decrease by $3 million. 
D)  increase by $3 million.

Question 20

The sum of Federal Reserve notes, coins, and depository institutionsʹ reserves is the .

Accepted Answer

A)  monetary base 
B)  reserves of the Fed 
C)  liabilities of the Fed 
D)  assets of the Fed 
A)  monetary base 
B)  reserves of the Fed 
C)  liabilities of the Fed 
D)  assets of the Fed

What is the opportunity cost of holding money?

The definition of M2 includes

What is the structure of the Federal Reserve Bank System?

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Which of the following is NOT included in the M2 measure of money?

If a savings and loan ʺpools risk,ʺ which of the following must it do?

Component Amount (billions of dollars) Currency 300 Checking deposits 600 Savings deposits 450 Traveler's checks 10 Time deposits 1,200 Money market mutual funds 1,100 Available credit on credit cards 900 -According to the table above, the value of M1 is ___and the value of M2 is .

The Board of Governors is the

When part of the quantity of money is held in currency, then

The monetary base does NOT include

The table below shows data for Japan. 2008 2009 M1 growth rate 0.7 0.9 Inflation rate 0.4 -0.3 Assuming the rate of velocity change is constant, real GDP

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

When the Fed buys U.S. government securities from a bank, the Fed

Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?

The demand for money is_________ related to the nominal interest rate.

The Federal Open Market Committee

Suppose that the money multiplier is 3. If the monetary base increases by $1 million, the quantity of money will

The sum of Federal Reserve notes, coins, and depository institutionsʹ reserves is the .

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

What is the opportunity cost of holding money?

The definition of M2 includes

What is the structure of the Federal Reserve Bank System?

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Which of the following is NOT included in the M2 measure of money?

If a savings and loan ʺpools risk,ʺ which of the following must it do?

The Board of Governors is the

When part of the quantity of money is held in currency, then

The monetary base does NOT include

The table below shows data for Japan. 2008 2009 M1 growth rate 0.7 0.9 Inflation rate 0.4 -0.3 Assuming the rate of velocity change is constant, real GDP

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

When the Fed buys U.S. government securities from a bank, the Fed

Suppose the quantity of money is greater than the quantity of money demanded. In the short run, what occurs to set the quantity of money equal to the quantity of money demanded?

The demand for money is_________ related to the nominal interest rate.

The Federal Open Market Committee

Suppose that the money multiplier is 3. If the monetary base increases by $1 million, the quantity of money will

The sum of Federal Reserve notes, coins, and depository institutionsʹ reserves is the .

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