Question 1

If the currency drain increases,how can the Fed adjust the monetary base to offset the effect on the quantity of money?

Accepted Answer

If the currency drain increases,the size

Question 2

Excess reserves are

Accepted Answer

A)  desired reserves minus actual reserves. 
B)  required reserves minus actual reserves. 
C)  liquidity funds minus actual reserves. 
D)  actual reserves minus desired reserves. 
A)  desired reserves minus actual reserves. 
B)  required reserves minus actual reserves. 
C)  liquidity funds minus actual reserves. 
D)  actual reserves minus desired reserves.

Question 3

Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy?

Accepted Answer

A)  Federal Open Market Committee 
B)  Board of Governors 
C)  the Federal Reserve Banks 
D)  depository institutions such as commercial banks 
A)  Federal Open Market Committee 
B)  Board of Governors 
C)  the Federal Reserve Banks 
D)  depository institutions such as commercial banks

Question 4

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Accepted Answer

A) True 
 B)False

Question 5

Depository institutions undertake all the following activities except they do not ________.

Accepted Answer

A)  print money 
B)  minimize the cost of monitoring borrowers 
C)  pool risk 
D)  create liquidity 
A)  print money 
B)  minimize the cost of monitoring borrowers 
C)  pool risk 
D)  create liquidity

Question 6

Which of the following are part of a commercial bank's reserves?
I. cash in the bank's vaults
II. loans
III. cash in checking accounts

Accepted Answer

A)  I only 
B)  I and II 
C)  I and III 
D)  I, II and III 
A)  I only 
B)  I and II 
C)  I and III 
D)  I, II and III

Question 7

The practice of borrowing short and lending long

Accepted Answer

A)  pools risk. 
B)  minimizes the cost of monitoring borrowers. 
C)  creates liquidity. 
D)  All of the above answers are correct. 
A)  pools risk. 
B)  minimizes the cost of monitoring borrowers. 
C)  creates liquidity. 
D)  All of the above answers are correct.

Question 8

When the Fed wants to undertake open market operations,it

Accepted Answer

A)  can require all commercial banks to buy from or sell to it. 
B)  can require all member banks to buy from or sell to it. 
C)  buys or sells securities. 
D)  buys securities from or sells securities to the federal government. 
A)  can require all commercial banks to buy from or sell to it. 
B)  can require all member banks to buy from or sell to it. 
C)  buys or sells securities. 
D)  buys securities from or sells securities to the federal government.

Question 9

If nominal GDP is $12 trillion,the price level is 120,and the quantity of money is $4 trillion,what is the velocity of circulation?

Accepted Answer

A)  3 
B)  2.5 
C)  30 
D)  25 
A)  3 
B)  2.5 
C)  30 
D)  25

Question 10

-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 bond prices will rise. 
B)  less money than the quantity supplied and bond prices will fall. 
C)  more money than the quantity supplied and bond prices will fall. 
D)  more money than the quantity supplied and bond prices will rise. 
A)  less money than the quantity supplied and bond prices will rise. 
B)  less money than the quantity supplied and bond prices will fall. 
C)  more money than the quantity supplied and bond prices will fall. 
D)  more money than the quantity supplied and bond prices will rise.

Question 11

How does an increase in real GDP affect the demand for money curve?

Accepted Answer

An increase in real

Question 12

The table below shows data (in millions) for Sun Trust Banks in September 2007 and September 2008. $$\begin{array} { | c | c | c | } 
\hline & 2007 & 2008 \
\hline \text { Loans } & \$ 83 & \$ 78 \
\hline \text { Reserves } & \$ 4 & \$ 5 \
\hline \text { Deposits } & \$ 114 & \$ 95 \
\hline
\end{array}$$
The data show that Sun Trust

Accepted Answer

A)  increased its reserve ratio to 5.3 percent over the 12 months. 
B)  increased its reserve ratio to 6.4 percent over the 12 months. 
C)  has fewer excess reserves in 2008. 
D)  faced a higher currency drain ratio in 2008. 
A)  increased its reserve ratio to 5.3 percent over the 12 months. 
B)  increased its reserve ratio to 6.4 percent over the 12 months. 
C)  has fewer excess reserves in 2008. 
D)  faced a higher currency drain ratio in 2008.

Question 13

The monetary base is

Accepted Answer

A)  the sum of Federal Reserve notes, coins, and depository institutions' deposits at the Federal Reserve. 
B)  Federal Reserve notes minus depository institutions' deposits at the Federal Reserve. 
C)  depository institutions' deposits at the Federal Reserve minus Federal Reserve notes. 
D)  the money borrowed by banks from other banks. 
A)  the sum of Federal Reserve notes, coins, and depository institutions' deposits at the Federal Reserve. 
B)  Federal Reserve notes minus depository institutions' deposits at the Federal Reserve. 
C)  depository institutions' deposits at the Federal Reserve minus Federal Reserve notes. 
D)  the money borrowed by banks from other banks.

Question 14

An increase in the currency drain

Accepted Answer

A)  leads to an increase in excess reserves. 
B)  decreases the size of the money multiplier. 
C)  results in an increase in deposits. 
D)  results in an increase in required reserves. 
A)  leads to an increase in excess reserves. 
B)  decreases the size of the money multiplier. 
C)  results in an increase in deposits. 
D)  results in an increase in required reserves.

Question 15

The Bank of Japan is Japan's central bank.As part of its duties,the Bank of Japan would

Accepted Answer

A)  provide banking services to Japan's citizens and firms. 
B)  provide banking services to foreigners. 
C)  control the quantity of money in circulation in Japan. 
D)  change tax rates. 
A)  provide banking services to Japan's citizens and firms. 
B)  provide banking services to foreigners. 
C)  control the quantity of money in circulation in Japan. 
D)  change tax rates.

Question 16

The commercial banks in Fundland have
 $$\begin{array} { l l } 
\text { Reserves } & \$ 500 \text { million } \
\text { Loans } & \$ 3,500 \text { million } \
\text { Deposits } & \$ 4,000 \text { million } \
\text { Total assets } & \$ 5,000 \text { million }
\end{array}$$ 
The banks hold no excess reserves.
a) Calculate the banks' desired reserve ratio.
b) An immigrant arrives in Fundland with $10 million,which she deposits in a bank.How much does the immigrant's bank lend initially?

Accepted Answer

a)With no excess reserves,the desired re

Question 17

According to the quantity theory of money,money growth and inflation are

Accepted Answer

A)  positively correlated. 
B)  negatively correlated. 
C)  independent, that is, not correlated. 
D)  positively if the inflation rate is positive and negatively correlated if the inflation rate is negative. 
A)  positively correlated. 
B)  negatively correlated. 
C)  independent, that is, not correlated. 
D)  positively if the inflation rate is positive and negatively correlated if the inflation rate is negative.

Question 18

$$\begin{array} { | c | c| } 
\hline  { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Currency } & 300 \
\hline \text { Checking deposits } & 600 \
\hline \text { Savings deposits } & 450 \
\hline \text { Traveler's checks } & 10 \
\hline \text { Time deposits } & 1,200 \
\hline \begin{array} { l } 
\text { Money market mutual } \
\text { funds }
\end{array} & 1,100 \
\hline \begin{array} { l } 
\text { Available credit on credit } \
\text { cards }
\end{array} & 900 \
\hline
\end{array}$$
-According to the table above,the value of M1 is ________ and the value of M2 is ________.

Accepted Answer

A)  $860 billion; $2,750 billion 
B)  $910 billion; $1,960 billion 
C)  $860 billion; $4,560 billion 
D)  $910 billion; $3,660 billion 
A)  $860 billion; $2,750 billion 
B)  $910 billion; $1,960 billion 
C)  $860 billion; $4,560 billion 
D)  $910 billion; $3,660 billion

Question 19

A depository institution creates liquidity and pools risk.

Accepted Answer

A) True 
 B)False

Question 20

If an economy tried to use bananas as money,which function would bananas likely have the most difficult time fulfilling?

Accepted Answer

A)  a store of value 
B)  a unit of account 
C)  a medium of exchange 
D)  a means of payment 
A)  a store of value 
B)  a unit of account 
C)  a medium of exchange 
D)  a means of payment

If the currency drain increases,how can the Fed adjust the monetary base to offset the effect on the quantity of money?

Excess reserves are

Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy?

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Depository institutions undertake all the following activities except they do not ________.

Which of the following are part of a commercial bank's reserves? I. cash in the bank's vaults II. loans III. cash in checking accounts

The practice of borrowing short and lending long

When the Fed wants to undertake open market operations,it

If nominal GDP is $12 trillion,the price level is 120,and the quantity of money is $4 trillion,what is the velocity of circulation?

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

How does an increase in real GDP affect the demand for money curve?

The table below shows data (in millions) for Sun Trust Banks in September 2007 and September 2008. 2007 2008 Loans \ 83 \ 78 Reserves \ 4 \ 5 Deposits \ 114 \ 95 The data show that Sun Trust

The monetary base is

An increase in the currency drain

The Bank of Japan is Japan's central bank.As part of its duties,the Bank of Japan would

According to the quantity theory of money,money growth and inflation are

Component Amount (billions of dollars) Currency 300 Checking deposits 600 Savings deposits 450 Traveler's checks 10 Time deposits 1,200 Money market mutual funds 1,100 Available credit on credit cards 900 -According to the table above,the value of M1 is and the value of M2 is .

A depository institution creates liquidity and pools risk.

If an economy tried to use bananas as money,which function would bananas likely have the most difficult time fulfilling?

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 currency drain increases,how can the Fed adjust the monetary base to offset the effect on the quantity of money?

Excess reserves are

Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy?

International data supports the quantity theory of money conclusion that high money growth rates are associated with inflation.

Depository institutions undertake all the following activities except they do not ________.

Which of the following are part of a commercial bank's reserves? I. cash in the bank's vaults II. loans III. cash in checking accounts

The practice of borrowing short and lending long

When the Fed wants to undertake open market operations,it

If nominal GDP is $12 trillion,the price level is 120,and the quantity of money is $4 trillion,what is the velocity of circulation?

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

How does an increase in real GDP affect the demand for money curve?

The table below shows data (in millions) for Sun Trust Banks in September 2007 and September 2008. 2007 2008 Loans \ 83 \ 78 Reserves \ 4 \ 5 Deposits \ 114 \ 95 The data show that Sun Trust

The monetary base is

An increase in the currency drain

The Bank of Japan is Japan's central bank.As part of its duties,the Bank of Japan would

According to the quantity theory of money,money growth and inflation are

Component Amount (billions of dollars) Currency 300 Checking deposits 600 Savings deposits 450 Traveler's checks 10 Time deposits 1,200 Money market mutual funds 1,100 Available credit on credit cards 900 -According to the table above,the value of M1 is ________ and the value of M2 is ________.

A depository institution creates liquidity and pools risk.

If an economy tried to use bananas as money,which function would bananas likely have the most difficult time fulfilling?

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

Component Amount (billions of dollars) Currency 300 Checking deposits 600 Savings deposits 450 Traveler's checks 10 Time deposits 1,200 Money market mutual funds 1,100 Available credit on credit cards 900 -According to the table above,the value of M1 is and the value of M2 is .