Question 1

The quantity theory of money asserts that inflation is the result of growth in

Accepted Answer

A)  the natural rate of unemployment. 
B)  money wage rates. 
C)  the quantity of money. 
D)  potential GDP. 
A)  the natural rate of unemployment. 
B)  money wage rates. 
C)  the quantity of money. 
D)  potential GDP.

Question 2

When the interest rate falls in the money market, the quantity of money demanded__________ and the quantity of money supplied__________ .

Accepted Answer

A)  decreases; increases 
B)  increases; decreases 
C)  stays the same; decreases 
D)  increases; stays the same 
A)  decreases; increases 
B)  increases; decreases 
C)  stays the same; decreases 
D)  increases; stays the same

Question 3

The fact that money can be exchanged for goods reflects moneyʹs role as a

Accepted Answer

A)  cause of inflation. 
B)  store of value. 
C)  unit of account. 
D)  medium of exchange. 
A)  cause of inflation. 
B)  store of value. 
C)  unit of account. 
D)  medium of exchange.

Question 4

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in_______ .

Accepted Answer

A)  the growth rate of real GDP 
B)  the inflation level 
C)  the price level 
D)  the growth rate of potential GDP 
A)  the growth rate of real GDP 
B)  the inflation level 
C)  the price level 
D)  the growth rate of potential GDP

Question 5

The quantity theory of money argues that, in the long run, the percentage change in money will create an equal percentage change in

Accepted Answer

A)  potential GDP. 
B)  velocity. 
C)  the price level. 
D)  real GDP. 
A)  potential GDP. 
B)  velocity. 
C)  the price level. 
D)  real GDP.

Question 6

Which of the following is true?
I. Checks are considered money because they can be used as a medium of exchange.
II. Checks represent a transfer of money.

Accepted Answer

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

Question 7

The Federal Open Market Committee FOMC)

Accepted Answer

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

Question 8

The equation of exchange states that the quantity of money

Accepted Answer

A)  multiplied by nominal GDP equals the price level. 
B)  divided by nominal GDP equals real GDP. 
C)  multiplied by the velocity of circulation equals nominal GDP. 
D)  divided by price level equals real GDP. 
A)  multiplied by nominal GDP equals the price level. 
B)  divided by nominal GDP equals real GDP. 
C)  multiplied by the velocity of circulation equals nominal GDP. 
D)  divided by price level equals real GDP.

Question 9

Which of the following is NOT an asset of the Federal Reserve?

Accepted Answer

A)  loans to depository institutions 
B)  Federal Reserve notes 
C)  government securities 
D)  None of the above are correct because they are all assets of the Federal Reserve 
A)  loans to depository institutions 
B)  Federal Reserve notes 
C)  government securities 
D)  None of the above are correct because they are all assets of the Federal Reserve

Question 10

If Bank A holds $200 in reserves, deposits are $1000, and the desired reserve ratio is 15 percent, how much are excess reserves?

Accepted Answer

A)  zero, because banks never hold excess reserves 
B)  $150 
C)  $200 
D)  $50 
A)  zero, because banks never hold excess reserves 
B)  $150 
C)  $200 
D)  $50

Question 11

Define money and list its functions.

Accepted Answer

Money is any commodity or toke

Question 12

If the price level rises, the quantity of

Accepted Answer

A)  real money people demand increases. 
B)  nominal money people demand increases. 
C)  nominal money people demand decreases. 
D)  real money people demand decreases. 
A)  real money people demand increases. 
B)  nominal money people demand increases. 
C)  nominal money people demand decreases. 
D)  real money people demand decreases.

Question 13

Which of the following is the most liquid?

Accepted Answer

A)  the U.S. dollars that your professor used this morning to buy breakfast. 
B)  the pencil or pen in your hand right now. 
C)  gold. 
D)  your credit card. 
A)  the U.S. dollars that your professor used this morning to buy breakfast. 
B)  the pencil or pen in your hand right now. 
C)  gold. 
D)  your credit card.

Question 14

The quantity theory asserts that real GDP is

Accepted Answer

A)  equal to nominal GDP multiplied by the quantity of money. 
B)  never different from potential GDP. 
C)  equal to nominal GDP divided by the quantity of money. 
D)  not influenced by the quantity of money. 
A)  equal to nominal GDP multiplied by the quantity of money. 
B)  never different from potential GDP. 
C)  equal to nominal GDP divided by the quantity of money. 
D)  not influenced by the quantity of money.

Question 15

The opportunity cost of holding money is the

Accepted Answer

A)  level of wage and rental income. 
B)  ease with which an asset can be converted into a means of payment. 
C)  price of goods and services. 
D)  nominal interest rate on assets other than money. 
A)  level of wage and rental income. 
B)  ease with which an asset can be converted into a means of payment. 
C)  price of goods and services. 
D)  nominal interest rate on assets other than money.

Question 16

ʺBanks hold 100 percent of their customersʹ deposits as reserves.ʺ Is the previous statement correct or not?

Accepted Answer

The statement is incorrect. If

Question 17

Controlling the quantity of money and interest rates to influence aggregate economic activity is called

Accepted Answer

A)  fiscal policy. 
B)  bank antitrust policy. 
C)  foreign policy. 
D)  monetary policy. 
A)  fiscal policy. 
B)  bank antitrust policy. 
C)  foreign policy. 
D)  monetary policy.

Question 18

If nominal GDP = $15 trillion and the quantity of money is $3 trillion, what is the velocity of circulation?

Accepted Answer

A)  8 
B)  5 
C)  16 
D)  2 
A)  8 
B)  5 
C)  16 
D)  2

Question 19

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

Accepted Answer

A)  5 
B)  0.2 
C)  20.0 
D)  none of the above 
A)  5 
B)  0.2 
C)  20.0 
D)  none of the above

Question 20

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 500 &\text { Deposits }&\$5,000\\text { Loans }&\$2,500\
\text { Total } & \$ 1,000&\text { Total  }&\$3,000 \
\hline
\end{array}$
-The table shows the balance sheet for Ralph?s Bank. If the desired reserve ratio is 15 percent, the maximum additional amount that Ralph?s Bank can loan is equal to___________ .

Accepted Answer

A)  $3,000 
B)  $2,500 
C)  $50 
D)  $500 
A)  $3,000 
B)  $2,500 
C)  $50 
D)  $500

The quantity theory of money asserts that inflation is the result of growth in

When the interest rate falls in the money market, the quantity of money demanded and the quantity of money supplied .

The fact that money can be exchanged for goods reflects moneyʹs role as a

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in_______ .

The quantity theory of money argues that, in the long run, the percentage change in money will create an equal percentage change in

Which of the following is true? I. Checks are considered money because they can be used as a medium of exchange. II. Checks represent a transfer of money.

The Federal Open Market Committee FOMC)

The equation of exchange states that the quantity of money

Which of the following is NOT an asset of the Federal Reserve?

If Bank A holds $200 in reserves, deposits are $1000, and the desired reserve ratio is 15 percent, how much are excess reserves?

Define money and list its functions.

If the price level rises, the quantity of

Which of the following is the most liquid?

The quantity theory asserts that real GDP is

The opportunity cost of holding money is the

ʺBanks hold 100 percent of their customersʹ deposits as reserves.ʺ Is the previous statement correct or not?

Controlling the quantity of money and interest rates to influence aggregate economic activity is called

If nominal GDP = $15 trillion and the quantity of money is $3 trillion, what is the velocity of circulation?

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

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

The quantity theory of money asserts that inflation is the result of growth in

When the interest rate falls in the money market, the quantity of money demanded__________ and the quantity of money supplied__________ .

The fact that money can be exchanged for goods reflects moneyʹs role as a

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in_______ .

The quantity theory of money argues that, in the long run, the percentage change in money will create an equal percentage change in

Which of the following is true? I. Checks are considered money because they can be used as a medium of exchange. II. Checks represent a transfer of money.

The Federal Open Market Committee FOMC)

The equation of exchange states that the quantity of money

Which of the following is NOT an asset of the Federal Reserve?

If Bank A holds $200 in reserves, deposits are $1000, and the desired reserve ratio is 15 percent, how much are excess reserves?

Define money and list its functions.

If the price level rises, the quantity of

Which of the following is the most liquid?

The quantity theory asserts that real GDP is

The opportunity cost of holding money is the

ʺBanks hold 100 percent of their customersʹ deposits as reserves.ʺ Is the previous statement correct or not?

Controlling the quantity of money and interest rates to influence aggregate economic activity is called

If nominal GDP = $15 trillion and the quantity of money is $3 trillion, what is the velocity of circulation?

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

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 the interest rate falls in the money market, the quantity of money demanded and the quantity of money supplied .