Question 1

________ refers to funds available for immediate payment.

Accepted Answer

A)  Physical capital 
B)  Liquidity 
C)  Term deposit 
D)  Fiat money 
A)  Physical capital 
B)  Liquidity 
C)  Term deposit 
D)  Fiat money

Question 2

In an economy,investment is most likely to be dependent on ________.

Accepted Answer

A)  the short-term real interest rate 
B)  the long-term real interest rate 
C)  the short-term nominal interest rate 
D)  the long-term nominal interest rate 
A)  the short-term real interest rate 
B)  the long-term real interest rate 
C)  the short-term nominal interest rate 
D)  the long-term nominal interest rate

Question 3

Which of the following statements best defines hyperinflation?

Accepted Answer

A)  The annual rate of inflation in an economy is negative. 
B)  The annual rate of inflation in an economy is zero. 
C)  Inflation in an economy results in prices doubling within 3 years. 
D)  Inflation in an economy results in prices doubling within 1 year. 
A)  The annual rate of inflation in an economy is negative. 
B)  The annual rate of inflation in an economy is zero. 
C)  Inflation in an economy results in prices doubling within 3 years. 
D)  Inflation in an economy results in prices doubling within 1 year.

Question 4

The quantity theory of money assumes that two things grow at the same rate.Which two things?

Accepted Answer

A)  Real GDP and nominal GDP 
B)  Nominal GDP and prices 
C)  The money supply and nominal GDP 
D)  Real GDP and the money supply 
A)  Real GDP and nominal GDP 
B)  Nominal GDP and prices 
C)  The money supply and nominal GDP 
D)  Real GDP and the money supply

Question 5

Daniel lives in Fiji.He learns that the Fijian dollar is an example of fiat money.This means that the Fijian dollar ________.

Accepted Answer

A)  is worth exactly 1 U.S. dollar 
B)  fluctuates in value against other countries' currencies 
C)  can be exchanged at a fixed rate for a physical commodity like gold or silver 
D)  is not backed by a physical commodity like gold or silver 
A)  is worth exactly 1 U.S. dollar 
B)  fluctuates in value against other countries' currencies 
C)  can be exchanged at a fixed rate for a physical commodity like gold or silver 
D)  is not backed by a physical commodity like gold or silver

Question 6

According to the quantity theory of money,when the gap between the growth rate of money supply and the growth rate of real GDP widens,________.

Accepted Answer

A)  the inflation rate increases 
B)  the inflation rate decreases 
C)  real interest rates increase 
D)  nominal interest rates decrease 
A)  the inflation rate increases 
B)  the inflation rate decreases 
C)  real interest rates increase 
D)  nominal interest rates decrease

Question 7

Hyperinflation results when ________.

Accepted Answer

A)  the money supply grows very slowly 
B)  the money supply grows very rapidly 
C)  real GDP grows very slowly 
D)  real GDP grows very rapidly 
A)  the money supply grows very slowly 
B)  the money supply grows very rapidly 
C)  real GDP grows very slowly 
D)  real GDP grows very rapidly

Question 8

Data confirm that the quantity theory of money ________.

Accepted Answer

A)  holds in the long run 
B)  holds only in the short run 
C)  holds both in the long run and the short run 
D)  does not hold in either the short run or the long run 
A)  holds in the long run 
B)  holds only in the short run 
C)  holds both in the long run and the short run 
D)  does not hold in either the short run or the long run

Question 9

The U.S.Federal Reserve system was founded ________.

Accepted Answer

A)  before the Great Depression 
B)  after the Great Depression but before World War II 
C)  after World War II but before 1980 
D)  since 1980 
A)  before the Great Depression 
B)  after the Great Depression but before World War II 
C)  after World War II but before 1980 
D)  since 1980

Question 10

The growth rate of a country's money supply in a particular year was 8.5 percent.What was the growth rate of real GDP if the inflation rate in the same year was 4 percent?

Accepted Answer

According to the quantity theory of mone

Question 11

Scenario: Bookland is a country that produces only books. In 1990, Bookland produced 10,000 books at a market price of $10 each. In 1991, Bookland produced 11,000 books at a market price of $12 each.
-Refer to the scenario above.Nominal GDP growth in Bookland from 1990 to 1991 was closest to ________.

Accepted Answer

A)  10 percent 
B)  20 percent 
C)  30 percent 
D)  40 percent 
A)  10 percent 
B)  20 percent 
C)  30 percent 
D)  40 percent

Question 12

Which is the Federal Reserve more concerned about,the inflation rate or the money supply?

Accepted Answer

A)  The Fed is more concerned about the inflation rate. 
B)  The Fed is more concerned about the money supply. 
C)  The Fed is equally concerned about the inflation rate and the money supply. 
D)  The Fed is more concerned about the inflation rate during expansions and the money supply during recessions. 
A)  The Fed is more concerned about the inflation rate. 
B)  The Fed is more concerned about the money supply. 
C)  The Fed is equally concerned about the inflation rate and the money supply. 
D)  The Fed is more concerned about the inflation rate during expansions and the money supply during recessions.

Question 13

Which of the following statements correctly identifies a reason inflation can be used as a countercyclical policy tool?

Accepted Answer

A)  Inflation reduces money costs and hence stimulates an economy during slowdowns. 
B)  Inflation increases consumer demand, which is necessary for combating slowdowns. 
C)  Inflation sometimes increases the demand for workers, which increases output and helps combat slowdowns. 
D)  Inflation increases consumer confidence, which is an absolute necessity to counter act business cycles. 
A)  Inflation reduces money costs and hence stimulates an economy during slowdowns. 
B)  Inflation increases consumer demand, which is necessary for combating slowdowns. 
C)  Inflation sometimes increases the demand for workers, which increases output and helps combat slowdowns. 
D)  Inflation increases consumer confidence, which is an absolute necessity to counter act business cycles.

Question 14

What is the main difference between the type of money that was used before the invention of the printing press and today?

Accepted Answer

In the days before the invention of the

Question 15

Which of the following equations is correct?

Accepted Answer

A)  Realized real interest rate = Nominal interest rate ‒ Realized nominal interest rate. 
B)  Realized real interest rate = Nominal interest rate + Realized inflation rate. 
C)  Realized real interest rate = Nominal interest rate ‒ Realized inflation rate. 
D)  Realized real interest rate = Realized inflation rate. 
A)  Realized real interest rate = Nominal interest rate ‒ Realized nominal interest rate. 
B)  Realized real interest rate = Nominal interest rate + Realized inflation rate. 
C)  Realized real interest rate = Nominal interest rate ‒ Realized inflation rate. 
D)  Realized real interest rate = Realized inflation rate.

Question 16

The Federal Reserve conducts "stress tests" to determine what?

Accepted Answer

A)  Whether the portfolio of assets a private bank holds is too risky 
B)  Whether the economy could withstand a substantial negative shock 
C)  Whether a bank is qualified to accept deposits 
D)  Whether bank regulators at the Federal Reserve have been subject to regulatory capture 
A)  Whether the portfolio of assets a private bank holds is too risky 
B)  Whether the economy could withstand a substantial negative shock 
C)  Whether a bank is qualified to accept deposits 
D)  Whether bank regulators at the Federal Reserve have been subject to regulatory capture

Question 17

How does inflation act as a tax?

Accepted Answer

Printing a lot of money in a short time

Question 18

Which of the following equations correctly links the growth rate of real GDP,the growth rate of nominal GDP,and the inflation rate?

Accepted Answer

A)  Growth rate of real GDP = Growth rate of nominal GDP + Inflation rate. 
B)  Growth rate of real GDP + Growth rate of nominal GDP = Inflation rate. 
C)  Growth rate of real GDP - Growth rate of nominal GDP = Inflation rate. 
D)  Growth rate of real GDP = Growth rate of nominal GDP - Inflation rate. 
A)  Growth rate of real GDP = Growth rate of nominal GDP + Inflation rate. 
B)  Growth rate of real GDP + Growth rate of nominal GDP = Inflation rate. 
C)  Growth rate of real GDP - Growth rate of nominal GDP = Inflation rate. 
D)  Growth rate of real GDP = Growth rate of nominal GDP - Inflation rate.

Question 19

Consider two countries: Country A and Country B.If the gap between the growth rate of money supply and growth rate of real GDP is larger in Country A than in Country B,then,according to the quantity theory of money,________.

Accepted Answer

A)  the inflation rate will be higher in Country A 
B)  the inflation rate will be lower in Country A 
C)  real interest rates will be higher in Country A 
D)  nominal interest rates will be lower in Country A 
A)  the inflation rate will be higher in Country A 
B)  the inflation rate will be lower in Country A 
C)  real interest rates will be higher in Country A 
D)  nominal interest rates will be lower in Country A

Question 20

Changes in the federal funds rate ________.

Accepted Answer

A)  have no effect on the long-term expected interest rate 
B)  change the long-term expected interest rates in the same direction 
C)  change the long-term expected interest rates in the opposite direction 
D)  can change the long-term expected interest rate in any direction, depending on the magnitude of the change in the federal funds rate 
A)  have no effect on the long-term expected interest rate 
B)  change the long-term expected interest rates in the same direction 
C)  change the long-term expected interest rates in the opposite direction 
D)  can change the long-term expected interest rate in any direction, depending on the magnitude of the change in the federal funds rate

________ refers to funds available for immediate payment.

In an economy,investment is most likely to be dependent on ________.

Which of the following statements best defines hyperinflation?

The quantity theory of money assumes that two things grow at the same rate.Which two things?

Daniel lives in Fiji.He learns that the Fijian dollar is an example of fiat money.This means that the Fijian dollar ________.

According to the quantity theory of money,when the gap between the growth rate of money supply and the growth rate of real GDP widens,________.

Hyperinflation results when ________.

Data confirm that the quantity theory of money ________.

The U.S.Federal Reserve system was founded ________.

The growth rate of a country's money supply in a particular year was 8.5 percent.What was the growth rate of real GDP if the inflation rate in the same year was 4 percent?

Which is the Federal Reserve more concerned about,the inflation rate or the money supply?

Which of the following statements correctly identifies a reason inflation can be used as a countercyclical policy tool?

What is the main difference between the type of money that was used before the invention of the printing press and today?

Which of the following equations is correct?

The Federal Reserve conducts "stress tests" to determine what?

How does inflation act as a tax?

Which of the following equations correctly links the growth rate of real GDP,the growth rate of nominal GDP,and the inflation rate?

Consider two countries: Country A and Country B.If the gap between the growth rate of money supply and growth rate of real GDP is larger in Country A than in Country B,then,according to the quantity theory of money,________.

Changes in the federal funds rate ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Open Economy Macroeconomics

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Exam 11: The Monetary System

________ refers to funds available for immediate payment.

In an economy,investment is most likely to be dependent on ________.

Which of the following statements best defines hyperinflation?

The quantity theory of money assumes that two things grow at the same rate.Which two things?

Daniel lives in Fiji.He learns that the Fijian dollar is an example of fiat money.This means that the Fijian dollar ________.

According to the quantity theory of money,when the gap between the growth rate of money supply and the growth rate of real GDP widens,________.

Hyperinflation results when ________.

Data confirm that the quantity theory of money ________.

The U.S.Federal Reserve system was founded ________.

The growth rate of a country's money supply in a particular year was 8.5 percent.What was the growth rate of real GDP if the inflation rate in the same year was 4 percent?

Which is the Federal Reserve more concerned about,the inflation rate or the money supply?

Which of the following statements correctly identifies a reason inflation can be used as a countercyclical policy tool?

What is the main difference between the type of money that was used before the invention of the printing press and today?

Which of the following equations is correct?

The Federal Reserve conducts "stress tests" to determine what?

How does inflation act as a tax?

Which of the following equations correctly links the growth rate of real GDP,the growth rate of nominal GDP,and the inflation rate?

Consider two countries: Country A and Country B.If the gap between the growth rate of money supply and growth rate of real GDP is larger in Country A than in Country B,then,according to the quantity theory of money,________.

Changes in the federal funds rate ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters