Question 1

Which of the following is the most liquid asset?

Accepted Answer

A)  land 
B)  a government bond 
C)  a share of stock 
D)  money 
A)  land 
B)  a government bond 
C)  a share of stock 
D)  money

Question 2

Which of the following institutions is NOT a depository institution?

Accepted Answer

A)  a thrift institution, such as a savings and loan association 
B)  the U.S. Treasury 
C)  a money market mutual fund 
D)  a commercial bank 
A)  a thrift institution, such as a savings and loan association 
B)  the U.S. Treasury 
C)  a money market mutual fund 
D)  a commercial bank

Question 3

-Use the figure above to answer this question. Suppose the economy is operating at point a. A move to __________could be explained by_________ .

Accepted Answer

A)  point c; an increase in the nominal interest rate 
B)  point d; an increase in real GDP 
C)  point b; an increase in real GDP 
D)  point e; a decrease in the nominal interest rate 
A)  point c; an increase in the nominal interest rate 
B)  point d; an increase in real GDP 
C)  point b; an increase in real GDP 
D)  point e; a decrease in the nominal interest rate

Question 4

When the Fed sells government securities to a bank, how are the Fedʹs assets affected?

Accepted Answer

A)  The amount of the Fedʹs government securities decreases. 
B)  The amount of reserves held at the Fed increases. 
C)  The amount of the Fedʹs government securities increases. 
D)  The amount of reserves held at the Fed decreases. 
A)  The amount of the Fedʹs government securities decreases. 
B)  The amount of reserves held at the Fed increases. 
C)  The amount of the Fedʹs government securities increases. 
D)  The amount of reserves held at the Fed decreases.

Question 5

Which of the following is NOT money?

Accepted Answer

A)  checks in the checkbook 
B)  checking deposits 
C)  currency 
D)  All of the above are money. 
A)  checks in the checkbook 
B)  checking deposits 
C)  currency 
D)  All of the above are money.

Question 6

What factors affect the demand for money?

Accepted Answer

Four factors influence the demand for mo

Question 7

The demand for money curve shifts rightward if

Accepted Answer

A)  the price level falls. 
B)  real GDP increases. 
C)  financial innovation creates new substitutes for cash. 
D)  the nominal interest rate falls. 
A)  the price level falls. 
B)  real GDP increases. 
C)  financial innovation creates new substitutes for cash. 
D)  the nominal interest rate falls.

Question 8

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

Accepted Answer

A)  3 percent 
B)  1 percent 
C)  5 percent 
D)  6 percent 
A)  3 percent 
B)  1 percent 
C)  5 percent 
D)  6 percent

Question 9

The Federal Open Market Committee FOMC)

Accepted Answer

A)  oversees all transactions on the stock market. 
B)  lends to the least credit-worthy customers who otherwise canʹt get loans. 
C)  determines the governmentʹs tax policy. 
D)  determines the Fedʹs monetary policy. 
A)  oversees all transactions on the stock market. 
B)  lends to the least credit-worthy customers who otherwise canʹt get loans. 
C)  determines the governmentʹs tax policy. 
D)  determines the Fedʹs monetary policy.

Question 10

The largest component of M2 is

Accepted Answer

A)  savings deposits 
B)  travelers checks 
C)  money market mutual funds 
D)  currency 
A)  savings deposits 
B)  travelers checks 
C)  money market mutual funds 
D)  currency

Question 11

The opportunity cost of holding money increases when

Accepted Answer

A)  the purchasing power of money rises. 
B)  the price level falls. 
C)  the nominal interest rate rises. 
D)  consumersʹ real incomes increase. 
A)  the purchasing power of money rises. 
B)  the price level falls. 
C)  the nominal interest rate rises. 
D)  consumersʹ real incomes increase.

Question 12

The quantity theory of money asserts that an increase in the quantity of money

Accepted Answer

A)  by n percent will lead to an increase in the price level by n + 1 percent. 
B)  will lead to an equal percentage increase in real GDP. 
C)  will lead to an equal percentage increase in the price level. 
D)  will decrease the price level by an offsetting amount. 
A)  by n percent will lead to an increase in the price level by n + 1 percent. 
B)  will lead to an equal percentage increase in real GDP. 
C)  will lead to an equal percentage increase in the price level. 
D)  will decrease the price level by an offsetting amount.

Question 13

Which of the following is correct? The demand for money

Accepted Answer

A)  decreases as the price level increases. 
B)  increases as real GDP increases. 
C)  increases when the nominal interest rate rises. 
D)  depends on the quantity of money. 
A)  decreases as the price level increases. 
B)  increases as real GDP increases. 
C)  increases when the nominal interest rate rises. 
D)  depends on the quantity of money.

Question 14

In a barter system, we would see

Accepted Answer

A)  wide-spread depository institutions. 
B)  goods traded directly for other goods and services. 
C)  many different units of money. 
D)  money and goods exchanged for each other. 
A)  wide-spread depository institutions. 
B)  goods traded directly for other goods and services. 
C)  many different units of money. 
D)  money and goods exchanged for each other.

Question 15

ʺCredit cards are considered money because they serve to purchase goods and services.ʺ Is the previous statement true or false?

Accepted Answer

The statement is false. Credit cards are

Question 16

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}
\hline \text { Reserves } & \$ 400 &\text { Deposits }&\$1,200\\text { Loans }&\$800\
\text { Total } & \$ 1,200&\text { Total  }&\$1,200 \
\hline
\end{array}$
-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 has desired reserves of

Accepted Answer

A)  $120 million. 
B)  $700 million. 
C)  $0. 
D)  $100 million. 
A)  $120 million. 
B)  $700 million. 
C)  $0. 
D)  $100 million.

Question 17

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of excess reserves for this bank? Show your work.

Accepted Answer

Excess reserves equal the actual reserve

Question 18

The definition of M2 includes
I. M1.
II. money market mutual funds.
III. currency held outside of banks.

Accepted Answer

A)  II and III only 
B)  I and III only 
C)  I, II, and III 
D)  I and II only 
A)  II and III only 
B)  I and III only 
C)  I, II, and III 
D)  I and II only

Question 19

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

Accepted Answer

A)  savings deposits 
B)  checkable deposits 
C)  money market mutual fund balances 
D)  currency held by banks 
A)  savings deposits 
B)  checkable deposits 
C)  money market mutual fund balances 
D)  currency held by banks

Question 20

Which of the following is considered a depository institution?
I. the U.S. Treasury
II. a commercial bank like Citibank
III. a credit union for federal government employees

Accepted Answer

A)  I and II 
B)  I, II and III 
C)  II and III 
D)  I only 
A)  I and II 
B)  I, II and III 
C)  II and III 
D)  I only

Which of the following is the most liquid asset?

Which of the following institutions is NOT a depository institution?

-Use the figure above to answer this question. Suppose the economy is operating at point a. A move to __could be explained by_ .

When the Fed sells government securities to a bank, how are the Fedʹs assets affected?

Which of the following is NOT money?

What factors affect the demand for money?

The demand for money curve shifts rightward if

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

The Federal Open Market Committee FOMC)

The largest component of M2 is

The opportunity cost of holding money increases when

The quantity theory of money asserts that an increase in the quantity of money

Which of the following is correct? The demand for money

In a barter system, we would see

ʺCredit cards are considered money because they serve to purchase goods and services.ʺ Is the previous statement true or false?

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of excess reserves for this bank? Show your work.

The definition of M2 includes I. M1. II. money market mutual funds. III. currency held outside of banks.

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

Which of the following is considered a depository institution? I. the U.S. Treasury II. a commercial bank like Citibank III. a credit union for federal government employees

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

Which of the following is the most liquid asset?

Which of the following institutions is NOT a depository institution?

-Use the figure above to answer this question. Suppose the economy is operating at point a. A move to __________could be explained by_________ .

When the Fed sells government securities to a bank, how are the Fedʹs assets affected?

Which of the following is NOT money?

What factors affect the demand for money?

The demand for money curve shifts rightward if

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

The Federal Open Market Committee FOMC)

The largest component of M2 is

The opportunity cost of holding money increases when

The quantity theory of money asserts that an increase in the quantity of money

Which of the following is correct? The demand for money

In a barter system, we would see

ʺCredit cards are considered money because they serve to purchase goods and services.ʺ Is the previous statement true or false?

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of excess reserves for this bank? Show your work.

The definition of M2 includes I. M1. II. money market mutual funds. III. currency held outside of banks.

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

Which of the following is considered a depository institution? I. the U.S. Treasury II. a commercial bank like Citibank III. a credit union for federal government employees

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

-Use the figure above to answer this question. Suppose the economy is operating at point a. A move to __could be explained by_ .