Question 1

If the prices of goods and services are stated in terms of kilograms of salt,then salt is

Accepted Answer

A) a unit of account. 
B) a standard of deferred payment. 
C) a store of value. 
D) quasi-money. 
E) a medium of exchange. 
A) a unit of account. 
B) a standard of deferred payment. 
C) a store of value. 
D) quasi-money. 
E) a medium of exchange.

Question 2

Which one of the following is not a store of value?

Accepted Answer

A) credit cards 
B) personal chequable deposits 
C) fixed term deposits 
D) non-personal chequable deposits 
E) non-chequable deposits 
A) credit cards 
B) personal chequable deposits 
C) fixed term deposits 
D) non-personal chequable deposits 
E) non-chequable deposits

Question 3

Use the figure below to answer the following questions.
   
Figure 24.4.1
-Refer to Figure 24.4.1.Everything else remaining the same,which graph best shows an increase in real GDP?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (a)and (c) 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (a)and (c)

Question 4

When the nominal interest rate rises,the opportunity cost of holding money ________.

Accepted Answer

A) rises and people hold more money 
B) falls and people hold more money 
C) falls and people hold less money 
D) rises and people hold less money 
E) does not change 
A) rises and people hold more money 
B) falls and people hold more money 
C) falls and people hold less money 
D) rises and people hold less money 
E) does not change

Question 5

Quantecon is a country in which the quantity theory of money operates.The country has a constant population,capital stock,and technology.In year 1,real GDP was $400 million,the price level was 200,and the velocity of circulation was 20.
In year 2 the quantity of money was 20 percent higher than in year 1.
The quantity of money in year 1 was ________.
The quantity of money in year 2 was ________.
The price level in year 2 is ________.

Accepted Answer

A) $20 million;24 million;240 
B) $20 million;$24 million;220 
C) $40 million;$48 million;240 
D) $40 million;$48 million;220 
E) $80 million;$88 million;200 
A) $20 million;24 million;240 
B) $20 million;$24 million;220 
C) $40 million;$48 million;240 
D) $40 million;$48 million;220 
E) $80 million;$88 million;200

Question 6

Money can take the form of any one of the following except

Accepted Answer

A) a credit card. 
B) a chequing deposit. 
C) a savings deposit. 
D) Bank of Canada notes. 
E) coins. 
A) a credit card. 
B) a chequing deposit. 
C) a savings deposit. 
D) Bank of Canada notes. 
E) coins.

Question 7

Everything else remaining the same,an increase in real GDP

Accepted Answer

A) increases the demand for real money. 
B) decreases the demand for real money. 
C) does not change the demand for real money. 
D) increases the demand for real money up to a point, and then demand will automatically fall. 
E) decreases the demand for real money up to a point, and then demand will automatically rise. 
A) increases the demand for real money. 
B) decreases the demand for real money. 
C) does not change the demand for real money. 
D) increases the demand for real money up to a point, and then demand will automatically fall. 
E) decreases the demand for real money up to a point, and then demand will automatically rise.

Question 8

Which one of the following items is not included in the M1 definition of money?

Accepted Answer

A) currency outside banks. 
B) personal chequable deposits 
C) non-personal chequable deposits 
D) fixed term deposits 
E) Neither B nor D are part of M1. 
A) currency outside banks. 
B) personal chequable deposits 
C) non-personal chequable deposits 
D) fixed term deposits 
E) Neither B nor D are part of M1.

Question 9

Whenever actual reserves exceed desired reserves,the bank

Accepted Answer

A) can make new loans. 
B) will go out of business. 
C) needs to call in loans. 
D) will borrow funds from another bank. 
E) will raise the interest rate on its loans. 
A) can make new loans. 
B) will go out of business. 
C) needs to call in loans. 
D) will borrow funds from another bank. 
E) will raise the interest rate on its loans.

Question 10

Canada's M1 multiplier is ________ than Canada's M2 multiplier because the currency drain for M1 is ________ than for M2,and the desired reserve ratio for M1 is ________ than for M2.

Accepted Answer

A) smaller;larger;larger 
B) larger;smaller;larger 
C) larger;smaller;smaller 
D) smaller;larger;smaller 
E) smaller;smaller;smaller 
A) smaller;larger;larger 
B) larger;smaller;larger 
C) larger;smaller;smaller 
D) smaller;larger;smaller 
E) smaller;smaller;smaller

Question 11

The money multiplier can also be calculated as ________,where a is the currency drain ratio and b is the desired reserve ratio.

Accepted Answer

A) (a + b)÷ (1 + b) 
B) a ÷ (a + b) 
C) (1 + a)÷ (a + b) 
D) (a + b)÷ (1 + a) 
E) (1 + b)÷ (a + b) 
A) (a + b)÷ (1 + b) 
B) a ÷ (a + b) 
C) (1 + a)÷ (a + b) 
D) (a + b)÷ (1 + a) 
E) (1 + b)÷ (a + b)

Question 12

The quantity theory of money begins with the equation of exchange,MV = PY,and then adds the assumptions that

Accepted Answer

A) velocity varies inversely with the interest rate, and the price level is independent of the quantity of money. 
B) velocity and the price level are independent of the quantity of money. 
C) potential GDP and the quantity of money are independent of the price level. 
D) potential GDP and the price level are independent of the quantity of money. 
E) velocity and potential GDP are independent of the quantity of money. 
A) velocity varies inversely with the interest rate, and the price level is independent of the quantity of money. 
B) velocity and the price level are independent of the quantity of money. 
C) potential GDP and the quantity of money are independent of the price level. 
D) potential GDP and the price level are independent of the quantity of money. 
E) velocity and potential GDP are independent of the quantity of money.

Question 13

Real GDP is $2,560 billion,the price level is 125,and the velocity of circulation is 5.The quantity of money is

Accepted Answer

A) $2,048 billion. 
B) $625 billion. 
C) $20.48 billion. 
D) $400 billion. 
E) $640 billion. 
A) $2,048 billion. 
B) $625 billion. 
C) $20.48 billion. 
D) $400 billion. 
E) $640 billion.

Question 14

If you can find someone to swap what you have for what you want,then

Accepted Answer

A) money is necessary for the exchange to work. 
B) specialization is impossible in the society in which you live. 
C) there exists a double coincidence of wants. 
D) there exists a double system of money. 
E) there exists a monetary exchange system. 
A) money is necessary for the exchange to work. 
B) specialization is impossible in the society in which you live. 
C) there exists a double coincidence of wants. 
D) there exists a double system of money. 
E) there exists a monetary exchange system.

Question 15

According to the quantity theory of money,an increase in the quantity of money will increase the price level

Accepted Answer

A) but have no effect on real GDP or the velocity of circulation. 
B) and increase real GDP and the velocity of circulation. 
C) and increase real GDP but decrease the velocity of circulation. 
D) and decrease real GDP and increase the velocity of circulation. 
E) but have no effect on real GDP and will decrease the velocity of circulation. 
A) but have no effect on real GDP or the velocity of circulation. 
B) and increase real GDP and the velocity of circulation. 
C) and increase real GDP but decrease the velocity of circulation. 
D) and decrease real GDP and increase the velocity of circulation. 
E) but have no effect on real GDP and will decrease the velocity of circulation.

Exam 24: Money, the Price Level, and Inflation

If the prices of goods and services are stated in terms of kilograms of salt,then salt is

Which one of the following is not a store of value?

Use the figure below to answer the following questions. Figure 24.4.1 -Refer to Figure 24.4.1.Everything else remaining the same,which graph best shows an increase in real GDP?

When the nominal interest rate rises,the opportunity cost of holding money ________.

Money can take the form of any one of the following except

Everything else remaining the same,an increase in real GDP

Which one of the following items is not included in the M1 definition of money?

Whenever actual reserves exceed desired reserves,the bank

Canada's M1 multiplier is ________ than Canada's M2 multiplier because the currency drain for M1 is ________ than for M2,and the desired reserve ratio for M1 is ________ than for M2.

The money multiplier can also be calculated as ________,where a is the currency drain ratio and b is the desired reserve ratio.

The quantity theory of money begins with the equation of exchange,MV = PY,and then adds the assumptions that

Real GDP is $2,560 billion,the price level is 125,and the velocity of circulation is 5.The quantity of money is

If you can find someone to swap what you have for what you want,then

According to the quantity theory of money,an increase in the quantity of money will increase the price level

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

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

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Canada's M1 multiplier is than Canada's M2 multiplier because the currency drain for M1 is than for M2,and the desired reserve ratio for M1 is than for M2.