Question 1

Money's function as a medium of exchange means that

Accepted Answer

A)  money is a common denominator for expressing the prices of goods and services. 
B)  money can be used to store wealth. 
C)  money serves as an acceptable means of payment. 
D)  money requires a double coincidence of wants. 
A)  money is a common denominator for expressing the prices of goods and services. 
B)  money can be used to store wealth. 
C)  money serves as an acceptable means of payment. 
D)  money requires a double coincidence of wants.

Question 2

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion.It must be the case that

Accepted Answer

A)  the economy is suffering from inflation. 
B)  the average price paid for a "typical" good is $5. 
C)  there will be a shortage of money balances in the economy. 
D)  the velocity of circulation is 5. 
A)  the economy is suffering from inflation. 
B)  the average price paid for a "typical" good is $5. 
C)  there will be a shortage of money balances in the economy. 
D)  the velocity of circulation is 5.

Question 3

Money as a medium of exchange I. facilitates the exchange of goods.
II) reduces or eliminates the need for barter.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 4

Which of the following affects the amount of money a person is willing to hold?

Accepted Answer

A)  The use of credit cards increases. 
B)  The price level rises from 103 to 107. 
C)  The interest rate that you earn on your savings account increases. 
D)  All of the above are correct. 
A)  The use of credit cards increases. 
B)  The price level rises from 103 to 107. 
C)  The interest rate that you earn on your savings account increases. 
D)  All of the above are correct.

Question 5

-In the short run,which of the following actions raise the interest rate?

Accepted Answer

A)  a decrease in the demand for money 
B)  an increase in bond prices 
C)  an increase in the quantity of money 
D)  an increase in the demand for money 
A)  a decrease in the demand for money 
B)  an increase in bond prices 
C)  an increase in the quantity of money 
D)  an increase in the demand for money

Question 6

Money ________.

Accepted Answer

A)  is always composed of coins and paper 
B)  loses its value as it becomes older 
C)  requires a double coincidence of wants 
D)  is any commodity that is generally acceptable as a means of payment 
A)  is always composed of coins and paper 
B)  loses its value as it becomes older 
C)  requires a double coincidence of wants 
D)  is any commodity that is generally acceptable as a means of payment

Question 7

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  none of the above 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  none of the above

Question 8

________ real GDP increases the demand for money and ________ the nominal interest rate decreases the quantity of money demanded.

Accepted Answer

A)  Increasing; increasing 
B)  Increasing; decreasing 
C)  Decreasing; increasing 
D)  Decreasing; decreasing 
A)  Increasing; increasing 
B)  Increasing; decreasing 
C)  Decreasing; increasing 
D)  Decreasing; decreasing

Question 9

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

Accepted Answer

A)  The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. 
B)  The University National Bank has $10 million more in securities. 
C)  The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. 
D)  The University National Bank has $10 million less in excess reserves. 
A)  The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. 
B)  The University National Bank has $10 million more in securities. 
C)  The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. 
D)  The University National Bank has $10 million less in excess reserves.

Question 10

The Federal Open Market Committee (FOMC)

Accepted Answer

A)  determines the government's tax policy. 
B)  determines the Fed's monetary policy. 
C)  oversees all transactions on the stock market. 
D)  lends to the least credit-worthy customers who otherwise can't get loans. 
A)  determines the government's tax policy. 
B)  determines the Fed's monetary policy. 
C)  oversees all transactions on the stock market. 
D)  lends to the least credit-worthy customers who otherwise can't get loans.

Question 11

Explain the process by which the banking system creates money.

Accepted Answer

When a bank gains excess reserves,it use

Question 12

According to the quantity theory of money,changes in the price level are the result of changes in the

Accepted Answer

A)  prime interest rate. 
B)  real interest rate. 
C)  quantity of money. 
D)  velocity of circulation. 
A)  prime interest rate. 
B)  real interest rate. 
C)  quantity of money. 
D)  velocity of circulation.

Question 13

Barter is an inefficient means of exchange because

Accepted Answer

A)  barter transactions require a double coincidence of wants. 
B)  barter only occurs in relatively primitive economies. 
C)  demand will not necessarily equal supply. 
D)  in a barter transaction only one party needs to want what the other party has to sell. 
A)  barter transactions require a double coincidence of wants. 
B)  barter only occurs in relatively primitive economies. 
C)  demand will not necessarily equal supply. 
D)  in a barter transaction only one party needs to want what the other party has to sell.

Question 14

The Federal Open Market Committee consists of the

Accepted Answer

A)  Federal Reserve chairman and the other six members of the Board of Governors. 
B)  Federal Reserve branch bank presidents. 
C)  Federal Reserve chairman and the Federal Reserve branch bank presidents. 
D)  Federal Reserve chairman, the other six members of the Board of Governors, and five of the Federal Reserve branch bank presidents. 
A)  Federal Reserve chairman and the other six members of the Board of Governors. 
B)  Federal Reserve branch bank presidents. 
C)  Federal Reserve chairman and the Federal Reserve branch bank presidents. 
D)  Federal Reserve chairman, the other six members of the Board of Governors, and five of the Federal Reserve branch bank presidents.

Question 15

The banking system in the United States creates money through the combination of excess reserves and

Accepted Answer

A)  banks loaning excess reserves. 
B)  commodity money. 
C)  banks' assets being more than their liabilities. 
D)  stringent Federal Reserve regulations. 
A)  banks loaning excess reserves. 
B)  commodity money. 
C)  banks' assets being more than their liabilities. 
D)  stringent Federal Reserve regulations.

Question 16

In an open market purchase,the Fed ________ government securities,which ________ bank reserves.

Accepted Answer

A)  buys, increases 
B)  buys, decreases 
C)  sells, increases 
D)  sells, decreases 
A)  buys, increases 
B)  buys, decreases 
C)  sells, increases 
D)  sells, decreases

Question 17

A bank has no excess reserves.Then it receives a new deposit for $100,000.If it has a desired reserve ratio of 20 percent,by how much can it increase its loans?

Accepted Answer

A)  $20,000 
B)  $80,000 
C)  $400,000 
D)  $500,000 
A)  $20,000 
B)  $80,000 
C)  $400,000 
D)  $500,000

Question 18

Checking deposits are

Accepted Answer

A)  not part of money. 
B)  part of money. 
C)  small in volume relative to currency in circulation. 
D)  quite different from checking accounts. 
A)  not part of money. 
B)  part of money. 
C)  small in volume relative to currency in circulation. 
D)  quite different from checking accounts.

Question 19

-In the figure above,if the interest rate is 4 percent,there is a $0.1 trillion excess

Accepted Answer

A)  quantity of money and the interest rate will rise. 
B)  quantity of money and the interest rate will fall. 
C)  demand for money and the interest rate will fall. 
D)  demand for money and the interest rate will rise. 
A)  quantity of money and the interest rate will rise. 
B)  quantity of money and the interest rate will fall. 
C)  demand for money and the interest rate will fall. 
D)  demand for money and the interest rate will rise.

Question 20

Which of the following is NOT included in the M2 definition of money?

Accepted Answer

A)  currency held by banks 
B)  money market mutual fund balances 
C)  savings deposits 
D)  checkable deposits 
A)  currency held by banks 
B)  money market mutual fund balances 
C)  savings deposits 
D)  checkable deposits

Money's function as a medium of exchange means that

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion.It must be the case that

Money as a medium of exchange I. facilitates the exchange of goods. II) reduces or eliminates the need for barter.

Which of the following affects the amount of money a person is willing to hold?

-In the short run,which of the following actions raise the interest rate?

Money ________.

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

real GDP increases the demand for money and the nominal interest rate decreases the quantity of money demanded.

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

The Federal Open Market Committee (FOMC)

Explain the process by which the banking system creates money.

According to the quantity theory of money,changes in the price level are the result of changes in the

Barter is an inefficient means of exchange because

The Federal Open Market Committee consists of the

The banking system in the United States creates money through the combination of excess reserves and

In an open market purchase,the Fed government securities,which bank reserves.

A bank has no excess reserves.Then it receives a new deposit for $100,000.If it has a desired reserve ratio of 20 percent,by how much can it increase its loans?

Checking deposits are

-In the figure above,if the interest rate is 4 percent,there is a $0.1 trillion excess

Which of the following is NOT included in the M2 definition of 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

Money's function as a medium of exchange means that

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion.It must be the case that

Money as a medium of exchange I. facilitates the exchange of goods. II) reduces or eliminates the need for barter.

Which of the following affects the amount of money a person is willing to hold?

-In the short run,which of the following actions raise the interest rate?

Money ________.

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

________ real GDP increases the demand for money and ________ the nominal interest rate decreases the quantity of money demanded.

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

The Federal Open Market Committee (FOMC)

Explain the process by which the banking system creates money.

According to the quantity theory of money,changes in the price level are the result of changes in the

Barter is an inefficient means of exchange because

The Federal Open Market Committee consists of the

The banking system in the United States creates money through the combination of excess reserves and

In an open market purchase,the Fed ________ government securities,which ________ bank reserves.

A bank has no excess reserves.Then it receives a new deposit for $100,000.If it has a desired reserve ratio of 20 percent,by how much can it increase its loans?

Checking deposits are

-In the figure above,if the interest rate is 4 percent,there is a $0.1 trillion excess

Which of the following is NOT included in the M2 definition of 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

real GDP increases the demand for money and the nominal interest rate decreases the quantity of money demanded.

In an open market purchase,the Fed government securities,which bank reserves.