Question 1

Bank reserves include
I. the cash in the bankʹs vault
II. the bankʹs deposits at the Federal Reserve

Accepted Answer

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

Question 2

The Federal Open Market Committee consists of the

Accepted Answer

A)  Federal Reserve branch bank presidents. 
B)  Federal Reserve chairman, the other six members of the Board of Governors, and the Federal Reserve branch bank presidents. 
C)  Federal Reserve chairman and the other six members of the Board of Governors. 
D)  Federal Reserve chairman and the Federal Reserve branch bank presidents. 
A)  Federal Reserve branch bank presidents. 
B)  Federal Reserve chairman, the other six members of the Board of Governors, and the Federal Reserve branch bank presidents. 
C)  Federal Reserve chairman and the other six members of the Board of Governors. 
D)  Federal Reserve chairman and the Federal Reserve branch bank presidents.

Question 3

Which of the following is included in M1?

Accepted Answer

A)  the $200 loan you arranged to purchase your textbooks 
B)  the $200 you charged on your credit card to purchase your textbooks 
C)  the $200 check you wrote to purchase your textbooks 
D)  the $200 in cash you used to purchase your textbooks 
A)  the $200 loan you arranged to purchase your textbooks 
B)  the $200 you charged on your credit card to purchase your textbooks 
C)  the $200 check you wrote to purchase your textbooks 
D)  the $200 in cash you used to purchase your textbooks

Question 4

Which of the following is NOT a monetary policy tool?

Accepted Answer

A)  open market operations 
B)  federal funds rate 
C)  required reserve ratio 
D)  last resort loans 
A)  open market operations 
B)  federal funds rate 
C)  required reserve ratio 
D)  last resort loans

Question 5

Which of the following does NOT describe a function of money?

Accepted Answer

A)  a unit of account 
B)  a medium of exchange 
C)  a store of value 
D)  a hedge against inflation 
A)  a unit of account 
B)  a medium of exchange 
C)  a store of value 
D)  a hedge against inflation

Question 6

The larger the publicʹs currency drain from the banking system, the

Accepted Answer

A)  smaller is the money multiplier. 
B)  larger is the monetary base. 
C)  larger is the money multiplier. 
D)  smaller is the monetary base. 
A)  smaller is the money multiplier. 
B)  larger is the monetary base. 
C)  larger is the money multiplier. 
D)  smaller is the monetary base.

Question 7

Required reserves for a commercial bank

Accepted Answer

A)  are only the money used by the bank tellers. 
B)  consist only of deposits at the Fed. 
C)  are only the reserves required to be held in the bankʹs vault. 
D)  are the reserves a bank is legally required to hold to back its deposits. 
A)  are only the money used by the bank tellers. 
B)  consist only of deposits at the Fed. 
C)  are only the reserves required to be held in the bankʹs vault. 
D)  are the reserves a bank is legally required to hold to back its deposits.

Question 8

If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

Accepted Answer

If the Fed sells $100 million of U.S. go

Question 9

According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in

Accepted Answer

A)  the velocity of circulation. 
B)  the price level. 
C)  the unemployment rate. 
D)  real GDP. 
A)  the velocity of circulation. 
B)  the price level. 
C)  the unemployment rate. 
D)  real GDP.

Question 10

Which of the following is NOT one of the Fedʹs monetary policy tools?

Accepted Answer

A)  last resort loans 
B)  buying and selling U.S. government securities 
C)  the income tax rate 
D)  the required reserve ratio 
A)  last resort loans 
B)  buying and selling U.S. government securities 
C)  the income tax rate 
D)  the required reserve ratio

Question 11

A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Accepted Answer

A)  $60,000. 
B)  $50,000. 
C)  $4,000. 
D)  $10,000. 
A)  $60,000. 
B)  $50,000. 
C)  $4,000. 
D)  $10,000.

Question 12

Depository institutions

Accepted Answer

A)  make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans. 
B)  make their profit by charging the government for their services. 
C)  make zero profit but receive compensation by the government because their services are so valuable. 
D)  make a profit according to how much the Federal Reserve pays them. 
A)  make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans. 
B)  make their profit by charging the government for their services. 
C)  make zero profit but receive compensation by the government because their services are so valuable. 
D)  make a profit according to how much the Federal Reserve pays them.

Question 13

If the desired reserve ratio rises, the money multiplier

Accepted Answer

A)  stays the same. 
B)  increases. 
C)  decreases. 
D)  probably changes but more information is needed to determine if it increases or decreases. 
A)  stays the same. 
B)  increases. 
C)  decreases. 
D)  probably changes but more information is needed to determine if it increases or decreases.

Question 14

The practice of borrowing short and lending long

Accepted Answer

A)  creates liquidity. 
B)  pools risk. 
C)  minimizes the cost of monitoring borrowers. 
D)  All of the above answers are correct. 
A)  creates liquidity. 
B)  pools risk. 
C)  minimizes the cost of monitoring borrowers. 
D)  All of the above answers are correct.

Question 15

The sale of government securities by the Fed leads to

Accepted Answer

A)  a contraction in bank lending. 
B)  an increase in the federal funds rate. 
C)  a decrease in bank reserves. 
D)  All of the above answers are correct. 
A)  a contraction in bank lending. 
B)  an increase in the federal funds rate. 
C)  a decrease in bank reserves. 
D)  All of the above answers are correct.

Question 16

Fisheria is a country in which the quantity theory of money operates. The country has a constant population, capital stock, and technology. In 2010, real GDP was $300 million, the quantity of money was $60, and the velocity of circulation of money was 10. In 2011, the price level rose by 20 percent.
a) What was the price level in 2010? The price level is measured by the GDP deflator, which is 100 in 2000. So the price level from the equation of exchange needs to be multiplied by 100 to convert it to the GDP deflator.)
b) What was real GDP in 2011?
c) What was the velocity of circulation in 2011?
d) What was the quantity of money in 2011?

Accepted Answer

a) The equation of exchange states that

Question 17

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent. If the bank is currently holding $200,000 in reserves, the excess reserves are equal to

Accepted Answer

A)  $120,000. 
B)  $40,000. 
C)  zero. 
D)  $20,000. 
A)  $120,000. 
B)  $40,000. 
C)  zero. 
D)  $20,000.

Question 18

The interest rate that the Fed charges when it makes a last resort loan is the ____________rate.

Accepted Answer

A)  discount 
B)  federal funds 
C)  reserve 
D)  short-term 
A)  discount 
B)  federal funds 
C)  reserve 
D)  short-term

Question 19

Currency outside of banks increases from $100 million to $200 million. This change is considered

Accepted Answer

A)  expansionary monetary policy. 
B)  a decrease in the monetary base. 
C)  contractionary monetary policy. 
D)  a currency drain. 
A)  expansionary monetary policy. 
B)  a decrease in the monetary base. 
C)  contractionary monetary policy. 
D)  a currency drain.

Question 20

Explain which of the following count as money.
a) a check in Annʹs checkbook
b) currency in Annʹs bank
c) currency in Annʹs purse
d) Annʹs checking deposit

Accepted Answer

Only parts c), currency in Annʹs purse,

Bank reserves include I. the cash in the bankʹs vault II. the bankʹs deposits at the Federal Reserve

The Federal Open Market Committee consists of the

Which of the following is included in M1?

Which of the following is NOT a monetary policy tool?

Which of the following does NOT describe a function of money?

The larger the publicʹs currency drain from the banking system, the

Required reserves for a commercial bank

If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in

Which of the following is NOT one of the Fedʹs monetary policy tools?

A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Depository institutions

If the desired reserve ratio rises, the money multiplier

The practice of borrowing short and lending long

The sale of government securities by the Fed leads to

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent. If the bank is currently holding $200,000 in reserves, the excess reserves are equal to

The interest rate that the Fed charges when it makes a last resort loan is the ____________rate.

Currency outside of banks increases from $100 million to $200 million. This change is considered

Explain which of the following count as money. a) a check in Annʹs checkbook b) currency in Annʹs bank c) currency in Annʹs purse d) Annʹs checking deposit

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

Bank reserves include I. the cash in the bankʹs vault II. the bankʹs deposits at the Federal Reserve

The Federal Open Market Committee consists of the

Which of the following is included in M1?

Which of the following is NOT a monetary policy tool?

Which of the following does NOT describe a function of money?

The larger the publicʹs currency drain from the banking system, the

Required reserves for a commercial bank

If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in

Which of the following is NOT one of the Fedʹs monetary policy tools?

A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Depository institutions

If the desired reserve ratio rises, the money multiplier

The practice of borrowing short and lending long

The sale of government securities by the Fed leads to

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent. If the bank is currently holding $200,000 in reserves, the excess reserves are equal to

The interest rate that the Fed charges when it makes a last resort loan is the ____________rate.

Currency outside of banks increases from $100 million to $200 million. This change is considered

Explain which of the following count as money. a) a check in Annʹs checkbook b) currency in Annʹs bank c) currency in Annʹs purse d) Annʹs checking deposit

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