Question 1

Pooling of risk occurs when depository institutions

Accepted Answer

A)  make assets more liquid. 
B)  specialize in loaning only to good borrowers. 
C)  bring lenders together. 
D)  lend to a variety of different borrowers. 
A)  make assets more liquid. 
B)  specialize in loaning only to good borrowers. 
C)  bring lenders together. 
D)  lend to a variety of different borrowers.

Question 2

The "double coincidence of wants" problem is

Accepted Answer

A)  resolved under a system of barter. 
B)  always present in all economic systems. 
C)  resolved by the use of money. 
D)  created by the use of money. 
A)  resolved under a system of barter. 
B)  always present in all economic systems. 
C)  resolved by the use of money. 
D)  created by the use of money.

Question 3

An increase in the nominal interest rate

Accepted Answer

A)  shifts the demand for money curve rightward. 
B)  shifts the demand for money curve leftward. 
C)  leads to an upward movement along the demand for money curve. 
D)  leads to a downward movement along the demand for money curve. 
A)  shifts the demand for money curve rightward. 
B)  shifts the demand for money curve leftward. 
C)  leads to an upward movement along the demand for money curve. 
D)  leads to a downward movement along the demand for money curve.

Question 4

Credit cards are

Accepted Answer

A)  money but are not a large part of the money supply. 
B)  not money. 
C)  money and are the largest part of the money supply. 
D)  not money because they are not made of paper. 
A)  money but are not a large part of the money supply. 
B)  not money. 
C)  money and are the largest part of the money supply. 
D)  not money because they are not made of paper.

Question 5

The balance owed on credit cards in the United States in 2009 was $866 billion. When consumers pay off this balance in full,

Accepted Answer

A)  M1 will decrease by $866 billion. 
B)  M1 will remain unchanged but M2 will decrease by $866 billion. 
C)  neither M1 nor M2 will change. 
D)  M1 will increase by $866 billion. 
A)  M1 will decrease by $866 billion. 
B)  M1 will remain unchanged but M2 will decrease by $866 billion. 
C)  neither M1 nor M2 will change. 
D)  M1 will increase by $866 billion.

Question 6

A decrease in the nominal interest rate ________ the opportunity cost of holding money.

Accepted Answer

A)  increases 
B)  decreases 
C)  can increase or decrease 
D)  None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money. 
A)  increases 
B)  decreases 
C)  can increase or decrease 
D)  None of the above answers is correct because the nominal interest rate does not affect the opportunity cost of holding money.

Question 7

The demand for money is ________ related to the nominal interest rate.

Accepted Answer

A)  positively 
B)  negatively 
C)  not 
D)  None of the above answers is correct because the relationship between the demand for money and the nominal interest rate changes with the inflation rate. 
A)  positively 
B)  negatively 
C)  not 
D)  None of the above answers is correct because the relationship between the demand for money and the nominal interest rate changes with the inflation rate.

Question 8

-In the figure above,if the interest rate is 8 percent,people demand $0.1 trillion

Accepted Answer

A)  less money than the quantity supplied and the interest rate will rise. 
B)  less money than the quantity supplied and the interest rate will fall. 
C)  more money than the quantity supplied and the interest rate will fall. 
D)  more money than the quantity supplied and the interest rate will rise. 
A)  less money than the quantity supplied and the interest rate will rise. 
B)  less money than the quantity supplied and the interest rate will fall. 
C)  more money than the quantity supplied and the interest rate will fall. 
D)  more money than the quantity supplied and the interest rate will rise.

Question 9

The real quantity of money is

Accepted Answer

A)  inversely related to GDP. 
B)  measured in current dollars. 
C)  inversely related to the price level. 
D)  measured in constant dollars. 
A)  inversely related to GDP. 
B)  measured in current dollars. 
C)  inversely related to the price level. 
D)  measured in constant dollars.

Question 10

The discount rate is the interest rate

Accepted Answer

A)  paid on time deposits. 
B)  paid on funds banks borrow from other banks. 
C)  paid on funds that depository institutions borrow from the Federal Reserve. 
D)  that banks charge their "best" customers. 
A)  paid on time deposits. 
B)  paid on funds banks borrow from other banks. 
C)  paid on funds that depository institutions borrow from the Federal Reserve. 
D)  that banks charge their "best" customers.

Question 11

List the Fed's main policy tools and briefly explain each one.

Accepted Answer

The Fed's main policy tools are: require

Question 12

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 less money. 
C)  falls and people hold more money. 
D)  rises and people hold less money. 
A)  rises and people hold more money. 
B)  falls and people hold less money. 
C)  falls and people hold more money. 
D)  rises and people hold less money.

Question 13

$$\begin{array} { | l | l | } 
\hline { \text { Assets } } &{ \text { Liabilities } } \
\hline \text { Reserves } & \text { Deposits } \
\$100& \$ 400 \
\text { Loans } & \text { Net Worth } \
\$ 600 & \$ 300 \
\text { Total } & \text { Total } \
\$ 700 & \$ 700 \
\hline
\end{array}$$
-The above table gives the initial balance sheet for Mini Bank.Mini Bank's actual reserve ratio equals ________.

Accepted Answer

A)  25 percent 
B)  14.3 percent 
C)  33.3 percent 
D)  20 percent 
A)  25 percent 
B)  14.3 percent 
C)  33.3 percent 
D)  20 percent

Question 14

An individual wanting the most liquid asset possible will hold

Accepted Answer

A)  currency. 
B)  a savings account. 
C)  gold. 
D)  U.S. government bonds. 
A)  currency. 
B)  a savings account. 
C)  gold. 
D)  U.S. government bonds.

Question 15

The money multiplier is

Accepted Answer

A)  the amount by which a change in the quantity of money is multiplied to determine the change in the monetary base. 
B)  the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money. 
C)  equal to bank reserves divided by the change in the monetary base. 
D)  equal to bank reserves divided by the change the quantity of money. 
A)  the amount by which a change in the quantity of money is multiplied to determine the change in the monetary base. 
B)  the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money. 
C)  equal to bank reserves divided by the change in the monetary base. 
D)  equal to bank reserves divided by the change the quantity of money.

Question 16

The Board of Governors is the

Accepted Answer

A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  7-member group that oversees the Federal Reserve. 
C)  12-member monetary policy committee of the Federal Reserve. 
D)  50-member organization of state banking regulators of the Federal Reserve. 
A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  7-member group that oversees the Federal Reserve. 
C)  12-member monetary policy committee of the Federal Reserve. 
D)  50-member organization of state banking regulators of the Federal Reserve.

Question 17

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

Accepted Answer

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

Question 18

Which of the following is included in M1?

Accepted Answer

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

Question 19

Checks ________ money and checking deposits ________ money.

Accepted Answer

A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not 
A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not

Question 20

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

Pooling of risk occurs when depository institutions

The "double coincidence of wants" problem is

An increase in the nominal interest rate

Credit cards are

The balance owed on credit cards in the United States in 2009 was $866 billion. When consumers pay off this balance in full,

A decrease in the nominal interest rate ________ the opportunity cost of holding money.

The demand for money is ________ related to the nominal interest rate.

-In the figure above,if the interest rate is 8 percent,people demand $0.1 trillion

The real quantity of money is

The discount rate is the interest rate

List the Fed's main policy tools and briefly explain each one.

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

Assets Liabilities Reserves Deposits \1 00 \ 400 Loans Net Worth \ 600 \ 300 Total Total \ 700 \ 700 -The above table gives the initial balance sheet for Mini Bank.Mini Bank's actual reserve ratio equals ________.

An individual wanting the most liquid asset possible will hold

The money multiplier is

The Board of Governors is the

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

Which of the following is included in M1?

Checks money and checking deposits money.

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

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 8: Money, The Price Level, and Inflation

Pooling of risk occurs when depository institutions

The "double coincidence of wants" problem is

An increase in the nominal interest rate

Credit cards are

The balance owed on credit cards in the United States in 2009 was $866 billion. When consumers pay off this balance in full,

A decrease in the nominal interest rate ________ the opportunity cost of holding money.

The demand for money is ________ related to the nominal interest rate.

-In the figure above,if the interest rate is 8 percent,people demand $0.1 trillion

The real quantity of money is

The discount rate is the interest rate

List the Fed's main policy tools and briefly explain each one.

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

Assets Liabilities Reserves Deposits \1 00 \ 400 Loans Net Worth \ 600 \ 300 Total Total \ 700 \ 700 -The above table gives the initial balance sheet for Mini Bank.Mini Bank's actual reserve ratio equals ________.

An individual wanting the most liquid asset possible will hold

The money multiplier is

The Board of Governors is the

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

Which of the following is included in M1?

Checks ________ money and checking deposits ________ money.

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

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Checks money and checking deposits money.