Question 1

If the interest rate is above the equilibrium interest rate,then

Accepted Answer

A)  there is an excess demand for money. 
B)  the quantity of money demanded exceeds the quantity supplied. 
C)  people will sell bonds and the interest rate will fall. 
D)  people will buy bonds and the interest rate will fall. 
A)  there is an excess demand for money. 
B)  the quantity of money demanded exceeds the quantity supplied. 
C)  people will sell bonds and the interest rate will fall. 
D)  people will buy bonds and the interest rate will fall.

Question 2

The difference between actual reserves and required reserves is

Accepted Answer

A)  net worth. 
B)  excess reserves. 
C)  illegal reserves. 
D)  borrowings from the Fed. 
A)  net worth. 
B)  excess reserves. 
C)  illegal reserves. 
D)  borrowings from the Fed.

Question 3

Suppose Bank A holds $200 of reserves,has deposits of $1000,and the desired reserve ratio is 20 percent.How many deposits can Bank A create?

Accepted Answer

A)  zero, because Bank A has no excess reserves 
B)  $200 
C)  $850 
D)  $50 
A)  zero, because Bank A has no excess reserves 
B)  $200 
C)  $850 
D)  $50

Question 4

Are checks money?

Accepted Answer

Checks are instructions to transfer fund

Question 5

Which of the following does NOT describe a function of money?

Accepted Answer

A)  a unit of account 
B)  a hedge against inflation 
C)  a medium of exchange 
D)  a store of value 
A)  a unit of account 
B)  a hedge against inflation 
C)  a medium of exchange 
D)  a store of value

Question 6

The table below shows data for Indonesia between 2005 and 2006. $$\begin{array} { | l | c | c | } 
\hline & \mathbf { 2 0 0 5 } & \mathbf { 2 0 0 6 } \
\hline \text { Money growth rate } & 21.4 & 12.0 \
\hline \text { Real GDP growth rate } & 5.7 & 5.5 \
\hline
\end{array}$$
Assume the rate of velocity change is constant. According to the quantity theory of money,Indonesia's inflation rate

Accepted Answer

A)  is higher in 2005 than in 2006. 
B)  was 17.5 percent in 2006. 
C)  is 27.1 percent in 2005. 
D)  will increase over the 12 months. 
A)  is higher in 2005 than in 2006. 
B)  was 17.5 percent in 2006. 
C)  is 27.1 percent in 2005. 
D)  will increase over the 12 months.

Question 7

-In the above figure,suppose the economy is initially at point a.If the nominal interest rate increases,there is a movement to point such as

Accepted Answer

A)  b. 
B)  c. 
C)  d. 
D)  e. 
A)  b. 
B)  c. 
C)  d. 
D)  e.

Question 8

In September 2008,Regions Bank has $89 million in M1 deposits,$3 million in reserves and $81 million in loans. Regions Bank's desired reserve ratio is

Accepted Answer

A)  3.4 percent 
B)  3.7 percent 
C)  91 percent 
D)  29.67 percent 
A)  3.4 percent 
B)  3.7 percent 
C)  91 percent 
D)  29.67 percent

Question 9

The fraction of deposits that banks must keep on hand or at the Federal Reserve is called the

Accepted Answer

A)  discount rate. 
B)  required reserve ratio. 
C)  deposit multiplier. 
D)  money multiplier. 
A)  discount rate. 
B)  required reserve ratio. 
C)  deposit multiplier. 
D)  money multiplier.

Question 10

Depository institutions

Accepted Answer

A)  make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans. 
B)  make a profit according to how much the Federal Reserve pays them. 
C)  make their profit by charging the government for their services. 
D)  make zero profit but receive compensation by the government because their services are so valuable. 
A)  make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans. 
B)  make a profit according to how much the Federal Reserve pays them. 
C)  make their profit by charging the government for their services. 
D)  make zero profit but receive compensation by the government because their services are so valuable.

Question 11

In September 2007,Regions Bank held $3 million in reserves against M1 deposits and made $83 million in loans.Between September 2007 and September 2008,deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2008,it will

Accepted Answer

A)  increase its reserves. 
B)  definitely make more loans. 
C)  cannot make more loans. 
D)  decrease its reserves. 
A)  increase its reserves. 
B)  definitely make more loans. 
C)  cannot make more loans. 
D)  decrease its reserves.

Question 12

"Even though we can convert them into money,deposits at banks are not money." Is the previous statement correct or not?

Accepted Answer

The statement is incorrect.Som

Question 13

If the desired reserve ratio rises,the money multiplier

Accepted Answer

A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  probably changes but more information is needed to determine if it increases or decreases. 
A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  probably changes but more information is needed to determine if it increases or decreases.

Question 14

Liquidity is the

Accepted Answer

A)  speed with which the price of an asset changes as its intrinsic value changes. 
B)  inverse of the velocity of money. 
C)  same as the velocity of money. 
D)  ease with which an asset can be converted into money. 
A)  speed with which the price of an asset changes as its intrinsic value changes. 
B)  inverse of the velocity of money. 
C)  same as the velocity of money. 
D)  ease with which an asset can be converted into money.

Question 15

An open market operation involves

Accepted Answer

A)  the Federal Reserve's purchase or sale of securities. 
B)  the Federal Reserve's issuance of new stock. 
C)  changing federal income tax rates. 
D)  raising the debt limit of the United States. 
A)  the Federal Reserve's purchase or sale of securities. 
B)  the Federal Reserve's issuance of new stock. 
C)  changing federal income tax rates. 
D)  raising the debt limit of the United States.

Question 16

Liquidity ________.

Accepted Answer

A)  increases when a country owns gold 
B)  increases when a consumer has more credit cards 
C)  is how quickly an asset loses its worth 
D)  is the property of being instantly convertible into money 
A)  increases when a country owns gold 
B)  increases when a consumer has more credit cards 
C)  is how quickly an asset loses its worth 
D)  is the property of being instantly convertible into money

Question 17

Which of the following is NOT a policy tool of the Federal Reserve System?

Accepted Answer

A)  open market operations 
B)  the tax rate imposed on interest income 
C)  the interest rate charged by the Fed for loans to member banks 
D)  the amount of required reserves held by member banks 
A)  open market operations 
B)  the tax rate imposed on interest income 
C)  the interest rate charged by the Fed for loans to member banks 
D)  the amount of required reserves held by member banks

Question 18

When real GDP increases,people demand

Accepted Answer

A)  the same quantity of real money. 
B)  less real money. 
C)  more real money. 
D)  more money in nominal terms but less in real terms. 
A)  the same quantity of real money. 
B)  less real money. 
C)  more real money. 
D)  more money in nominal terms but less in real terms.

Question 19

-In the short run,when the Fed decreases the quantity of money

Accepted Answer

A)  bond prices fall and the interest rate rises. 
B)  bond prices rise and the interest rate falls. 
C)  the demand for money increases. 
D)  the supply of money curve shifts rightward. 
A)  bond prices fall and the interest rate rises. 
B)  bond prices rise and the interest rate falls. 
C)  the demand for money increases. 
D)  the supply of money curve shifts rightward.

Question 20

University National Bank Balance Sheet
Assets Liabilities
  
-The above table has the balance of the University National Bank.All figures are in millions of dollars.The desired reserve ratio is 20 percent.What is the value of excess reserves held by the University National Bank?

Accepted Answer

A)  $120 million 
B)  $232 million 
C)  $320 million 
D)  $760 million 
A)  $120 million 
B)  $232 million 
C)  $320 million 
D)  $760 million

If the interest rate is above the equilibrium interest rate,then

The difference between actual reserves and required reserves is

Suppose Bank A holds $200 of reserves,has deposits of $1000,and the desired reserve ratio is 20 percent.How many deposits can Bank A create?

Are checks money?

Which of the following does NOT describe a function of money?

The table below shows data for Indonesia between 2005 and 2006. Money growth rate 21.4 12.0 Real GDP growth rate 5.7 5.5 Assume the rate of velocity change is constant. According to the quantity theory of money,Indonesia's inflation rate

-In the above figure,suppose the economy is initially at point a.If the nominal interest rate increases,there is a movement to point such as

In September 2008,Regions Bank has $89 million in M1 deposits,$3 million in reserves and $81 million in loans. Regions Bank's desired reserve ratio is

The fraction of deposits that banks must keep on hand or at the Federal Reserve is called the

Depository institutions

In September 2007,Regions Bank held $3 million in reserves against M1 deposits and made $83 million in loans.Between September 2007 and September 2008,deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2008,it will

"Even though we can convert them into money,deposits at banks are not money." Is the previous statement correct or not?

If the desired reserve ratio rises,the money multiplier

Liquidity is the

An open market operation involves

Liquidity ________.

Which of the following is NOT a policy tool of the Federal Reserve System?

When real GDP increases,people demand

-In the short run,when the Fed decreases the quantity of money

University National Bank Balance Sheet Assets Liabilities -The above table has the balance of the University National Bank.All figures are in millions of dollars.The desired reserve ratio is 20 percent.What is the value of excess reserves held by the University National Bank?

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

If the interest rate is above the equilibrium interest rate,then

The difference between actual reserves and required reserves is

Suppose Bank A holds $200 of reserves,has deposits of $1000,and the desired reserve ratio is 20 percent.How many deposits can Bank A create?

Are checks money?

Which of the following does NOT describe a function of money?

The table below shows data for Indonesia between 2005 and 2006. Money growth rate 21.4 12.0 Real GDP growth rate 5.7 5.5 Assume the rate of velocity change is constant. According to the quantity theory of money,Indonesia's inflation rate

-In the above figure,suppose the economy is initially at point a.If the nominal interest rate increases,there is a movement to point such as

In September 2008,Regions Bank has $89 million in M1 deposits,$3 million in reserves and $81 million in loans. Regions Bank's desired reserve ratio is

The fraction of deposits that banks must keep on hand or at the Federal Reserve is called the

Depository institutions

In September 2007,Regions Bank held $3 million in reserves against M1 deposits and made $83 million in loans.Between September 2007 and September 2008,deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2008,it will

"Even though we can convert them into money,deposits at banks are not money." Is the previous statement correct or not?

If the desired reserve ratio rises,the money multiplier

Liquidity is the

An open market operation involves

Liquidity ________.

Which of the following is NOT a policy tool of the Federal Reserve System?

When real GDP increases,people demand

-In the short run,when the Fed decreases the quantity of money

University National Bank Balance Sheet Assets Liabilities -The above table has the balance of the University National Bank.All figures are in millions of dollars.The desired reserve ratio is 20 percent.What is the value of excess reserves held by the University National Bank?

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