Exam 8: Money, The Price Level, and Inflation

Interest rate (percent per year) Quantity of money demanded (trillions of 2005 dollars) 3 2.0 4 1.5 5 1.0 6 0.5 -The above table has the demand for money schedule. a) If the Fed sets the quantity of money equal to $1.0 trillion,what is the equilibrium interest rate? b) If the Fed wants the interest rate to be 4 percent,what must it do?

If a customer deposits $10,000 in currency into a checking account,the bank's total reserves ________.

According to the quantity theory of money,

Of the following,the riskiest assets held by commercial banks are

-Use the figure above to answer this question.Suppose the economy is operating at point a.A move to ________ could be explained by ________.

Suppose prices are quoted in dollars and transactions are conducted in pesos.The peso serves as a

TBK Bank Balance Sheet Assets Liabilities Reserves Deposits \1 20 \ 600 Loans Net worth 580 100 Total assets Total liabilities \ 700 \ 700 -The above table presents the balance sheet of the TBK commercial bank.What is this bank's actual reserve ratio?

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

You withdraw $2,000 from your account.Your bank has a desired reserve ratio of 20 percent.This transaction,by itself,will directly reduce

A medium of exchange is

The sum of Federal Reserve notes,coins,and depository institutions' reserves is the ________.

What is the relationship between money growth and inflation across countries? Does your answer support the quantity theory of money?

Explain how a currency drain affects the size of the money multiplier.In your explanation,suppose that a bank gains $1 million in new deposits and reserves.Further suppose that the desired reserve ratio is 10 percent and the currency drain is 50 percent.

The sale of government securities by the Fed leads to

M1 is usually larger than M2.

If you hold $25 in cash,have $150 in a checking account,and have $250 in a savings account,how much of M2 do you have?

Which function of money refers to the use of money to solve the problem of a need for a double coincidence of wants?

When the Fed buys one million dollars in government securities from a commercial bank,

Assets Liabilities Reserves \ 500 Deposits Loans \ 3,000 Total assets Total \ 1,000 \ 3,000 -The table above shows the balance sheet for Ralph's Bank.If the desired reserve ratio is 15 percent,Ralph's Bank has desired reserves of ________.

When the Fed lowers the federal funds rate,it can lead to