Question 1

The quantity theory of money predicts that in the ________,a 10 percent increase in the quantity of money leads to a 10 percent increase in ________.

Accepted Answer

A)  long run; real GDP 
B)  short run; velocity 
C)  long run; velocity 
D)  long run; price level 
A)  long run; real GDP 
B)  short run; velocity 
C)  long run; velocity 
D)  long run; price level

Question 2

The commercial banks on Sunny Island have checking deposits of $4 million,reserves of $600,000,and loans of $2.4 million.The desired reserve ratio is 10 percent.The banks have ________ of desired reserves and ________ of excess reserves.

Accepted Answer

A)  $600,000; $0 
B)  $400,000; $200,000 
C)  $400,000; $600,000 
D)  $600,000; $200,000 
A)  $600,000; $0 
B)  $400,000; $200,000 
C)  $400,000; $600,000 
D)  $600,000; $200,000

Question 3

The Second National Bank of Townville has $400,000 in checking deposits,$125,000 in savings deposits,$500,000 in loans,$20,000 in its reserve account at the Fed,and $5,000 of currency in its vault.What is the amount of its reserves?

Accepted Answer

Reserves include the bank's de

Question 4

The opportunity cost of holding money refers to

Accepted Answer

A)  the service fees charged to withdraw currency from an ATM. 
B)  the price level. 
C)  the interest that could have been earned if the money balances had been changed into an interest-bearing asset. 
D)  the pleasure that would have been received if the money balances had been used to buy a good or service. 
A)  the service fees charged to withdraw currency from an ATM. 
B)  the price level. 
C)  the interest that could have been earned if the money balances had been changed into an interest-bearing asset. 
D)  the pleasure that would have been received if the money balances had been used to buy a good or service.

Question 5

If the Fed sells securities to commercial banks,there is no money multiplier effect.

Accepted Answer

A) True 
 B)False

Question 6

An open market operation occurs when the ________ buys or sells securities ________.

Accepted Answer

A)  Federal Reserve System; from or to the federal government 
B)  Federal Reserve System; in the open market 
C)  a commercial bank; from or to the federal government 
D)  a commercial bank; from or to the public 
A)  Federal Reserve System; from or to the federal government 
B)  Federal Reserve System; in the open market 
C)  a commercial bank; from or to the federal government 
D)  a commercial bank; from or to the public

Question 7

The Federal Reserve is divided into 7 districts.

Accepted Answer

A) True 
 B)False

Question 8

If the price level rises,the quantity of

Accepted Answer

A)  nominal money people demand increases. 
B)  real money people demand increases. 
C)  nominal money people demand decreases. 
D)  real money people demand decreases. 
A)  nominal money people demand increases. 
B)  real money people demand increases. 
C)  nominal money people demand decreases. 
D)  real money people demand decreases.

Question 9

When the nominal interest rate rises,the quantity of money demanded decreases because

Accepted Answer

A)  people will buy fewer goods and hold less money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people move funds from interest-bearing assets into money. 
D)  people shift funds from money holdings to interest-bearing assets. 
A)  people will buy fewer goods and hold less money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people move funds from interest-bearing assets into money. 
D)  people shift funds from money holdings to interest-bearing assets.

Question 10

If nominal GDP = $15 trillion and the quantity of money is $3 trillion,what is the velocity of circulation?

Accepted Answer

A)  16 
B)  8 
C)  5 
D)  2 
A)  16 
B)  8 
C)  5 
D)  2

Question 11

Which of the following allow banks to minimize the cost to a business of borrowing?
I. Borrowing long and lending short.
II. Raising funds from a large number of depositors.
III. Creating money by lending all their reserves.

Accepted Answer

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

Question 12

An increase in real GDP

Accepted Answer

A)  shifts the demand for money curve rightward. 
B)  shifts the demand for money curve leftward. 
C)  leads to an upward movement along the demand for money curve. 
D)  leads to a downward movement along the demand for money curve. 
A)  shifts the demand for money curve rightward. 
B)  shifts the demand for money curve leftward. 
C)  leads to an upward movement along the demand for money curve. 
D)  leads to a downward movement along the demand for money curve.

Question 13

Required reserves for a commercial bank

Accepted Answer

A)  are the reserves a bank is legally required to hold to back its deposits. 
B)  are only the reserves required to be held in the bank's vault. 
C)  are only the money used by the bank tellers. 
D)  consist only of deposits at the Fed. 
A)  are the reserves a bank is legally required to hold to back its deposits. 
B)  are only the reserves required to be held in the bank's vault. 
C)  are only the money used by the bank tellers. 
D)  consist only of deposits at the Fed.

Question 14

The main policy-making organization of the Federal Reserve System is the ________.

Accepted Answer

A)  U.S. Mint 
B)  U.S. Treasury 
C)  Joint Congressional Committee on Monetary Policy 
D)  Federal Open Market Committee 
A)  U.S. Mint 
B)  U.S. Treasury 
C)  Joint Congressional Committee on Monetary Policy 
D)  Federal Open Market Committee

Question 15

Currency held outside the banking system is included

Accepted Answer

A)  in M1 but not M2. 
B)  in M2 but not M1. 
C)  in both M1 and M2. 
D)  in neither M1 nor M2. 
A)  in M1 but not M2. 
B)  in M2 but not M1. 
C)  in both M1 and M2. 
D)  in neither M1 nor M2.

Question 16

According to the quantity theory of money,what is the effect of an increase in the quantity of money?

Accepted Answer

According to the quantity theo

Question 17

According to the quantity theory of money,in the long run,an increase in the quantity of money results in an equal percentage increase in ________.

Accepted Answer

A)  the price level 
B)  the growth rate of real GDP 
C)  the inflation level 
D)  the growth rate of potential GDP 
A)  the price level 
B)  the growth rate of real GDP 
C)  the inflation level 
D)  the growth rate of potential GDP

Question 18

The required reserve ratio

Accepted Answer

A)  is the amount of money that banks require borrowers to reserve in their accounts. 
B)  is the fraction of a bank's total deposits that are required to be held in reserve. 
C)  increases when withdrawals from a bank are made. 
D)  is higher for banks that make riskier loans. 
A)  is the amount of money that banks require borrowers to reserve in their accounts. 
B)  is the fraction of a bank's total deposits that are required to be held in reserve. 
C)  increases when withdrawals from a bank are made. 
D)  is higher for banks that make riskier loans.

Question 19

Reserves are ________.

Accepted Answer

A)  gold in a bank's vault plus its gold at Federal Reserve banks 
B)  cash in a bank's vault plus its deposits at Federal Reserve banks 
C)  cash in a bank's vault plus its gold at Federal Reserve banks 
D)  cash in a bank's vault plus the cash carried by its customers 
A)  gold in a bank's vault plus its gold at Federal Reserve banks 
B)  cash in a bank's vault plus its deposits at Federal Reserve banks 
C)  cash in a bank's vault plus its gold at Federal Reserve banks 
D)  cash in a bank's vault plus the cash carried by its customers

Question 20

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Accepted Answer

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

The quantity theory of money predicts that in the ,a 10 percent increase in the quantity of money leads to a 10 percent increase in .

The commercial banks on Sunny Island have checking deposits of $4 million,reserves of $600,000,and loans of $2.4 million.The desired reserve ratio is 10 percent.The banks have of desired reserves and of excess reserves.

The Second National Bank of Townville has $400,000 in checking deposits,$125,000 in savings deposits,$500,000 in loans,$20,000 in its reserve account at the Fed,and $5,000 of currency in its vault.What is the amount of its reserves?

The opportunity cost of holding money refers to

If the Fed sells securities to commercial banks,there is no money multiplier effect.

An open market operation occurs when the buys or sells securities .

The Federal Reserve is divided into 7 districts.

If the price level rises,the quantity of

When the nominal interest rate rises,the quantity of money demanded decreases because

If nominal GDP = $15 trillion and the quantity of money is $3 trillion,what is the velocity of circulation?

Which of the following allow banks to minimize the cost to a business of borrowing? I. Borrowing long and lending short. II. Raising funds from a large number of depositors. III. Creating money by lending all their reserves.

An increase in real GDP

Required reserves for a commercial bank

The main policy-making organization of the Federal Reserve System is the ________.

Currency held outside the banking system is included

According to the quantity theory of money,what is the effect of an increase in the quantity of money?

According to the quantity theory of money,in the long run,an increase in the quantity of money results in an equal percentage increase in ________.

The required reserve ratio

Reserves are ________.

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

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

The quantity theory of money predicts that in the ________,a 10 percent increase in the quantity of money leads to a 10 percent increase in ________.

The commercial banks on Sunny Island have checking deposits of $4 million,reserves of $600,000,and loans of $2.4 million.The desired reserve ratio is 10 percent.The banks have ________ of desired reserves and ________ of excess reserves.

The Second National Bank of Townville has $400,000 in checking deposits,$125,000 in savings deposits,$500,000 in loans,$20,000 in its reserve account at the Fed,and $5,000 of currency in its vault.What is the amount of its reserves?

The opportunity cost of holding money refers to

If the Fed sells securities to commercial banks,there is no money multiplier effect.

An open market operation occurs when the ________ buys or sells securities ________.

The Federal Reserve is divided into 7 districts.

If the price level rises,the quantity of

When the nominal interest rate rises,the quantity of money demanded decreases because

If nominal GDP = $15 trillion and the quantity of money is $3 trillion,what is the velocity of circulation?

Which of the following allow banks to minimize the cost to a business of borrowing? I. Borrowing long and lending short. II. Raising funds from a large number of depositors. III. Creating money by lending all their reserves.

An increase in real GDP

Required reserves for a commercial bank

The main policy-making organization of the Federal Reserve System is the ________.

Currency held outside the banking system is included

According to the quantity theory of money,what is the effect of an increase in the quantity of money?

According to the quantity theory of money,in the long run,an increase in the quantity of money results in an equal percentage increase in ________.

The required reserve ratio

Reserves are ________.

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

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

The quantity theory of money predicts that in the ,a 10 percent increase in the quantity of money leads to a 10 percent increase in .

The commercial banks on Sunny Island have checking deposits of $4 million,reserves of $600,000,and loans of $2.4 million.The desired reserve ratio is 10 percent.The banks have of desired reserves and of excess reserves.

An open market operation occurs when the buys or sells securities .