Question 1

If a percentage decrease in money supply is followed by a proportional percentage decrease in prices and output, this means that:

Accepted Answer

A)  the velocity of money is constant. 
B)  the economy is in a recession. 
C)  the velocity of money has fallen. 
D)  real GDP is constant. 
E)  the economy is not at maximum capacity 
A)  the velocity of money is constant. 
B)  the economy is in a recession. 
C)  the velocity of money has fallen. 
D)  real GDP is constant. 
E)  the economy is not at maximum capacity

Question 2

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.?Figure 13.3
  
-Refer to Figure 13.3. Other things equal, if real GDP is equal to $900 billion, then:

Accepted Answer

A)  the money demand curve will be to the left of the one shown in the figure above. 
B)  the quantity of money demanded will be less than $400 billion and can be illustrated by a downward movement along the money demand curve. 
C)  the quantity of money demanded will be greater than $400 billion and can be illustrated by an upward movement along the money demand curve. 
D)  the investment demand curve will be to the left of the one illustrated in Panel (
A)  of the figure. 
E)  the money demand curve will be to the right of the one illustrated in Panel (
A)  of the figure. 
A)  the money demand curve will be to the left of the one shown in the figure above. 
B)  the quantity of money demanded will be less than $400 billion and can be illustrated by a downward movement along the money demand curve. 
C)  the quantity of money demanded will be greater than $400 billion and can be illustrated by an upward movement along the money demand curve. 
D)  the investment demand curve will be to the left of the one illustrated in Panel (
A)  of the figure. 
E)  the money demand curve will be to the right of the one illustrated in Panel (
A)  of the figure.

Question 3

Suppose Fed's purchase of government bonds results in a $120,000 increase in the excess reserves of a particular bank. What would be the applicable reserve requirement for the whole banking system to be able to expand the money supply by $600,000?

Accepted Answer

A)  10 percent 
B)  12 percent 
C)  16 percent 
D)  20 percent 
E)  25 percent 
A)  10 percent 
B)  12 percent 
C)  16 percent 
D)  20 percent 
E)  25 percent

Question 4

An increase in nominal income will result in:

Accepted Answer

A)  a decrease in money market equilibrium. 
B)  an excess demand for bonds. 
C)  an increase in bond prices. 
D)  an excess supply of money. 
E)  a higher interest rate. 
A)  a decrease in money market equilibrium. 
B)  an excess demand for bonds. 
C)  an increase in bond prices. 
D)  an excess supply of money. 
E)  a higher interest rate.

Question 5

The Federal Reserve System was created in 1913, through the Federal Reserve Act, by the:

Accepted Answer

A)  U.S. President. 
B)  Judiciary. 
C)  Congress. 
D)  International Monetary Fund. 
E)  State governments. 
A)  U.S. President. 
B)  Judiciary. 
C)  Congress. 
D)  International Monetary Fund. 
E)  State governments.

Question 6

Who is the second most powerful person in the U.S.?

Accepted Answer

A)  The Fed chairman 
B)  The Vice President 
C)  The Secretary of State 
D)  The speaker of the House of Representatives 
E)  The Attorney General 
A)  The Fed chairman 
B)  The Vice President 
C)  The Secretary of State 
D)  The speaker of the House of Representatives 
E)  The Attorney General

Question 7

The Federal Reserve (Fed) was created by the Congress as an independent agency.

Accepted Answer

A) True 
 B)False

Question 8

The interest rate that banks pay for borrowing overnight from other banks is called:

Accepted Answer

A)  bank rate. 
B)  target rate. 
C)  federal funds rate. 
D)  real interest rate. 
E)  prime lending rate. 
A)  bank rate. 
B)  target rate. 
C)  federal funds rate. 
D)  real interest rate. 
E)  prime lending rate.

Question 9

The interest rate represents the opportunity cost of holding non-monetary assets.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following government agencies oversees monetary policy in the U.S.?

Accepted Answer

A)  The Federal Reserve System 
B)  Congress 
C)  The Treasury Department 
D)  The Federal Trade Commission 
E)  The Department of Commerce 
A)  The Federal Reserve System 
B)  Congress 
C)  The Treasury Department 
D)  The Federal Trade Commission 
E)  The Department of Commerce

Question 11

For how long is the chairman of the board of governors of the Fed appointed and by whom?

Accepted Answer

A)  Appointed for two years by all the other governors 
B)  Appointed for two years by the governor of the New York district branch 
C)  Appointed for two years by the president of the United States 
D)  Appointed for four years by all the other governors 
E)  Appointed for four years by the president of the United States 
A)  Appointed for two years by all the other governors 
B)  Appointed for two years by the governor of the New York district branch 
C)  Appointed for two years by the president of the United States 
D)  Appointed for four years by all the other governors 
E)  Appointed for four years by the president of the United States

Question 12

Which of following policies of the Congress was aimed to place the Fed above politics and maintain continuity in the policymaking process?

Accepted Answer

A)  The President elects the entire Board of Governors. 
B)  The Federal Reserve district banks elects the Board of Governors. 
C)  The Congress elects a board member every five years. 
D)  One board member's term expires every second year. 
E)  Only bankers are allowed to be appointed as board members. 
A)  The President elects the entire Board of Governors. 
B)  The Federal Reserve district banks elects the Board of Governors. 
C)  The Congress elects a board member every five years. 
D)  One board member's term expires every second year. 
E)  Only bankers are allowed to be appointed as board members.

Question 13

Assume that banks lend out all their excess reserves. Currently, the legal reserves that banks must hold equal $11.5 billion. If the Federal Reserve decreases its reserve requirement from 10 percent to 5 percent, then there is potential for the whole banking system to raise the money supply by:

Accepted Answer

A)  $11.5 billion. 
B)  $230 billion. 
C)  $115 billion. 
D)  $57.5 billion. 
E)  $575 billion. 
A)  $11.5 billion. 
B)  $230 billion. 
C)  $115 billion. 
D)  $57.5 billion. 
E)  $575 billion.

Question 14

If the aggregate supply curve is positively sloped, an increase in the money supply will result in an increase in both equilibrium national income and the equilibrium price level.

Accepted Answer

A) True 
 B)False

Question 15

-Refer to Table 13.1. Given a reserve requirement of 8 percent, what is the increase in required reserves when the government purchases $400 worth of government securities?

Accepted Answer

A)  $400 
B)  $224 
C)  $32 
D)  $256 
E)  $5,000 
A)  $400 
B)  $224 
C)  $32 
D)  $256 
E)  $5,000

Question 16

Suppose that a sharp downturn in the price of a country's prime manufacturing product results in a terrible recession and a massive decline in the general income level of the citizens. Other things constant, what would be the recession's most probable effect on money demand in the country?

Accepted Answer

A)  People will hold more money for any purpose, resulting in a decline in money demand. 
B)  Local M1 money demand will rise. 
C)  The transactions demand for money will fall such that the quantity of money demanded will be lower at any given interest rate level. 
D)  The speculative demand for money will fall, causing a downward movement along the money demand curve. 
E)  The precautionary demand for money will increase, causing an upward shift in the money demand curve. 
A)  People will hold more money for any purpose, resulting in a decline in money demand. 
B)  Local M1 money demand will rise. 
C)  The transactions demand for money will fall such that the quantity of money demanded will be lower at any given interest rate level. 
D)  The speculative demand for money will fall, causing a downward movement along the money demand curve. 
E)  The precautionary demand for money will increase, causing an upward shift in the money demand curve.

Question 17

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.?Figure 13.3
  
-Refer to Figure 13.3. Starting from the equilibrium illustrated in the graphs, if the Federal Reserve purchases government bonds in the open market, then:

Accepted Answer

A)  investment spending will decline. 
B)  bond prices will decline. 
C)  equilibrium real GDP will fall. 
D)  interest rates will fall. 
E)  money demand will decline. 
A)  investment spending will decline. 
B)  bond prices will decline. 
C)  equilibrium real GDP will fall. 
D)  interest rates will fall. 
E)  money demand will decline.

Question 18

When a bank's excess reserves are zero:

Accepted Answer

A)  its required reserves exceed its legal reserves. 
B)  its liabilities exceed its assets. 
C)  its liabilities must be lower than its assets. 
D)  its required reserves equal its legal reserves. 
E)  it cannot meet its reserve requirement. 
A)  its required reserves exceed its legal reserves. 
B)  its liabilities exceed its assets. 
C)  its liabilities must be lower than its assets. 
D)  its required reserves equal its legal reserves. 
E)  it cannot meet its reserve requirement.

Question 19

As the velocity of money rises, the amount of money being held by individuals also rises.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the ultimate goal of monetary policy?

Accepted Answer

A)  Complete removal of income inequality 
B)  Economic growth with price stability 
C)  Free trade 
D)  Balanced budget 
E)  Economic welfare 
A)  Complete removal of income inequality 
B)  Economic growth with price stability 
C)  Free trade 
D)  Balanced budget 
E)  Economic welfare

If a percentage decrease in money supply is followed by a proportional percentage decrease in prices and output, this means that:

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.?Figure 13.3 -Refer to Figure 13.3. Other things equal, if real GDP is equal to $900 billion, then:

Suppose Fed's purchase of government bonds results in a $120,000 increase in the excess reserves of a particular bank. What would be the applicable reserve requirement for the whole banking system to be able to expand the money supply by $600,000?

An increase in nominal income will result in:

The Federal Reserve System was created in 1913, through the Federal Reserve Act, by the:

Who is the second most powerful person in the U.S.?

The Federal Reserve (Fed) was created by the Congress as an independent agency.

The interest rate that banks pay for borrowing overnight from other banks is called:

The interest rate represents the opportunity cost of holding non-monetary assets.

Which of the following government agencies oversees monetary policy in the U.S.?

For how long is the chairman of the board of governors of the Fed appointed and by whom?

Which of following policies of the Congress was aimed to place the Fed above politics and maintain continuity in the policymaking process?

Assume that banks lend out all their excess reserves. Currently, the legal reserves that banks must hold equal $11.5 billion. If the Federal Reserve decreases its reserve requirement from 10 percent to 5 percent, then there is potential for the whole banking system to raise the money supply by:

If the aggregate supply curve is positively sloped, an increase in the money supply will result in an increase in both equilibrium national income and the equilibrium price level.

-Refer to Table 13.1. Given a reserve requirement of 8 percent, what is the increase in required reserves when the government purchases $400 worth of government securities?

Suppose that a sharp downturn in the price of a country's prime manufacturing product results in a terrible recession and a massive decline in the general income level of the citizens. Other things constant, what would be the recession's most probable effect on money demand in the country?

When a bank's excess reserves are zero:

As the velocity of money rises, the amount of money being held by individuals also rises.

Which of the following is the ultimate goal of monetary policy?

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

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Exam 13: Monetary Policy

If a percentage decrease in money supply is followed by a proportional percentage decrease in prices and output, this means that:

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.?Figure 13.3 -Refer to Figure 13.3. Other things equal, if real GDP is equal to $900 billion, then:

Suppose Fed's purchase of government bonds results in a $120,000 increase in the excess reserves of a particular bank. What would be the applicable reserve requirement for the whole banking system to be able to expand the money supply by $600,000?

An increase in nominal income will result in:

The Federal Reserve System was created in 1913, through the Federal Reserve Act, by the:

Who is the second most powerful person in the U.S.?

The Federal Reserve (Fed) was created by the Congress as an independent agency.

The interest rate that banks pay for borrowing overnight from other banks is called:

The interest rate represents the opportunity cost of holding non-monetary assets.

Which of the following government agencies oversees monetary policy in the U.S.?

For how long is the chairman of the board of governors of the Fed appointed and by whom?

Which of following policies of the Congress was aimed to place the Fed above politics and maintain continuity in the policymaking process?

Assume that banks lend out all their excess reserves. Currently, the legal reserves that banks must hold equal $11.5 billion. If the Federal Reserve decreases its reserve requirement from 10 percent to 5 percent, then there is potential for the whole banking system to raise the money supply by:

If the aggregate supply curve is positively sloped, an increase in the money supply will result in an increase in both equilibrium national income and the equilibrium price level.

-Refer to Table 13.1. Given a reserve requirement of 8 percent, what is the increase in required reserves when the government purchases $400 worth of government securities?

Suppose that a sharp downturn in the price of a country's prime manufacturing product results in a terrible recession and a massive decline in the general income level of the citizens. Other things constant, what would be the recession's most probable effect on money demand in the country?

When a bank's excess reserves are zero:

As the velocity of money rises, the amount of money being held by individuals also rises.

Which of the following is the ultimate goal of monetary policy?

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters