Exam 8: Money, The Price Level, and Inflation

Suppose you cash in a Certificate of Deposit (a small time deposit) to acquire the traveler's checks you'll need for your vacation.What happens to M1 and M2?

Suppose the money growth rate is 3 percent,velocity is constant,and real GDP is growing at 2 percent. What is the inflation rate?

If the Fed buys $100 in securities from a commercial bank,the

Banks create money whenever they

The quantity theory of money argues that,in the long run,the percentage change in money will create an equal percentage change in

As a means of payment,the functions of money are

All the following statements about the Federal Reserve are true EXCEPT it ________.

"When the Fed buys securities from a bank,the quantity of money eventually decreases by a fraction of the initial change in the monetary base." Is the previous statement correct or incorrect? Explain your answer.

How does a currency drain affect the money multiplier?

If velocity is 6 and the quantity of money is $2 trillion,what is nominal GDP?

The FOMC is the agency that insures deposits up to $250,000.

A small commercial bank has $10,000 in actual reserves,$60,000 in deposits,and has a 10 percent desired reserve ratio.Its excess reserves are

What factors affect the demand for money?

The quantity of money in an economy is $9 million,and the velocity of circulation is 3.Nominal GDP in this economy is ________.

The quantity of money that people choose to hold depends on which of the following? I. The price level. II. Financial innovation. III. The exchange rate.

Which of the following is NOT included in the M1 definition of money?

Friedmania is a country in which the quantity theory of money operates.The country has a constant population,capital stock,and technology so real GDP does not change.In 2010,real GDP was $500 million,the price level,measured by the GDP deflator,was 150 and the velocity of circulation of money was 10.(Because the price level is measured by the GDP deflator,it must be divided by 100 before it is used in the equation of exchange.) In 2011,the quantity of money increased by 20 percent. a) What was the quantity of money in 2010? b) What was the velocity of circulation in 2011? c) What was the price level in 2010?

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent.What is the amount of new loans the bank can make?

Which of the following decreases the demand for money?

When you buy a hamburger for lunch,you are using money as a