Exam 11: The Monetary System

Sheena gets her paycheck on the first day of every month and spends it over the month to purchase various goods and services.What are the functions that money is performing in this case?

The Federal Reserve is relatively independent.Which U.S.institution largely controls the Federal Reserve?

Consider an economy that only produces wooden chairs.In 2012,the economy produced 100 wooden chairs priced at $10 each.The nominal GDP of the economy for the year 2012 is ________.

If real wages fall,________.

The Federal Reserve Bank ________.

If the growth rates of nominal GDP and real GDP in an economy are 6 percent and 2 percent,respectively,the inflation rate in the economy must be ________.

When Tara visited Canada recently,she made sure she had some Canadian currency on hand in order to buy things.In this sense,she was using the currency as a ________.

The rate at which a price index decreases is referred to as the ________.

The quantity theory of money implies that the growth rate of ________.

Consider an economy where the growth rate of real GDP is 6 percent and the annual rate of inflation is 2 percent.If the quantity theory of money holds,the growth rate of money supply in the economy will be ________.

What makes a U.S.$100 bill valuable?

Which of the following holds the reserves of private banks in the United States?

Hyperinflationary episodes are always related to extremely rapid growth of ________.

Germany decided to fund deficit spending in the early 1920s by printing more and more currency.This method of obtaining revenue is called ________ and it resulted in ________ for Germany.

Suppose that we produce a graph with the annual inflation rate on the y-axis and the growth rate of the money supply minus the growth rate of real GDP on the x-axis.We plot the averages of each of these quantities over the past 50 years on the graph.If the quantity theory of money is approximately correct,then ________.

In the Federal Funds Market model,the y-axis shows the ________,while the x-axis shows the ________.

Suppose the U.S.economy is recovering from a long recession.How will this affect the demand curve for reserves and the federal funds rate? Explain with a diagram.

What can the central bank of Autarkia do to lower the rate that banks charge one another for overnight loans? How will this affect the economy if it is facing a downturn?

Inflation refers to the rate of increase of ________.

Suppose that General Motors is deciding whether to build a new large automobile plant.It intends to borrow money to finance the new plant.Which of the following is NOT known to General Motors when it decides whether to build the new plant?