Question 1

Which of the following is correct?
The demand for money

Accepted Answer

A)  increases as real GDP increases. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  increases when the nominal interest rate rises. 
A)  increases as real GDP increases. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  increases when the nominal interest rate rises.

Question 2

A depository institution is a firm that takes deposits from ________ and makes loans to ________.

Accepted Answer

A)  households and firms; other households and firms 
B)  firms; households 
C)  households; firms 
D)  firms; other firms 
A)  households and firms; other households and firms 
B)  firms; households 
C)  households; firms 
D)  firms; other firms

Question 3

-In the above figure,if the interest rate is 4 percent,people

Accepted Answer

A)  sell bonds so as to convert them into money. 
B)  buy bonds so as to have a better store of value. 
C)  petition the Fed to tighten the quantity of money. 
D)  buy stocks, because stocks are more liquid than currency. 
A)  sell bonds so as to convert them into money. 
B)  buy bonds so as to have a better store of value. 
C)  petition the Fed to tighten the quantity of money. 
D)  buy stocks, because stocks are more liquid than currency.

Question 4

Which of the following applies to money when it serves as a store of value?
I. Money is a store of value because it is an agreed measure for stating goods' prices.
II. The more stable money's value,the better it serves as a store of value.
III. When money serves as a store of value,it requires a double coincidence of wants.

Accepted Answer

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

Question 5

When bank deposits increase from $1 million to $2 million,banks' required reserves increase from $100,000 to $200,000.The required reserve ratio is ________.

Accepted Answer

A)  10.0 
B)  0.10 
C)  1.00 
D)  0.25 
A)  10.0 
B)  0.10 
C)  1.00 
D)  0.25

Question 6

The opportunity cost of holding money is

Accepted Answer

A)  the price level. 
B)  real GDP. 
C)  the inverse of the price level multiplied by the nominal interest rate. 
D)  the nominal interest rate. 
A)  the price level. 
B)  real GDP. 
C)  the inverse of the price level multiplied by the nominal interest rate. 
D)  the nominal interest rate.

Question 7

The money supply,as measured by M1,consists almost entirely of currency.

Accepted Answer

A) True 
 B)False

Question 8

The velocity of circulation is

Accepted Answer

A)  the rate of change of the GDP deflator. 
B)  the average number of times a dollar of money is used in a year to buy goods and services in GDP. 
C)  the changes in the purchasing power of money over a given time period. 
D)  constant. 
A)  the rate of change of the GDP deflator. 
B)  the average number of times a dollar of money is used in a year to buy goods and services in GDP. 
C)  the changes in the purchasing power of money over a given time period. 
D)  constant.

Question 9

The majority of money is created when

Accepted Answer

A)  banks make loans 
B)  new coins are minted 
C)  the federal government borrows from the public 
D)  the Fed sells bonds 
A)  banks make loans 
B)  new coins are minted 
C)  the federal government borrows from the public 
D)  the Fed sells bonds

Question 10

$\begin{array}{|l|c|}
\hline {\text { Component }} & \begin{array}{c}
\text { Amount } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Money market mutual } & 4,400 \
\hline \text { fund deposits } & 1,237 \
\hline \text { Time deposits } & 1,589 \
\hline \text { Savings deposits } & 752 \
\hline \text { Checking deposits } & 609\
\hline 
\end{array}$
-Based on the data in the table above,what is the value of M2?

Accepted Answer

A)  $2,950 billion 
B)  $4,187 billion 
C)  $4,400 billion 
D)  $8,587 billion 
A)  $2,950 billion 
B)  $4,187 billion 
C)  $4,400 billion 
D)  $8,587 billion

Question 11

The Federal Open Market Committee

Accepted Answer

A)  consists of the Fed chairman and the 12 regional bank presidents. 
B)  is the main policy-making organ of the Federal Reserve. 
C)  is headed by the president of the New York Federal Reserve Bank. 
D)  meets every week to review the state of the economy. 
A)  consists of the Fed chairman and the 12 regional bank presidents. 
B)  is the main policy-making organ of the Federal Reserve. 
C)  is headed by the president of the New York Federal Reserve Bank. 
D)  meets every week to review the state of the economy.

Question 12

Nominal GDP,PY,is $7.5 trillion.The quantity of money is $3 trillion.The velocity of circulation is

Accepted Answer

A)  22.5. 
B)  10.5. 
C)  2.5. 
D)  3. 
A)  22.5. 
B)  10.5. 
C)  2.5. 
D)  3.

Question 13

Depository institutions do all the following EXCEPT

Accepted Answer

A)  minimize the cost of obtaining funds. 
B)  create liquidity. 
C)  pool risks. 
D)  create required reserve ratios. 
A)  minimize the cost of obtaining funds. 
B)  create liquidity. 
C)  pool risks. 
D)  create required reserve ratios.

Question 14

Commercial banks are able to create money by

Accepted Answer

A)  printing Federal Reserve Notes. 
B)  making loans. 
C)  making customers pay back their loans. 
D)  exchanging their reserves at the Fed for vault cash. 
A)  printing Federal Reserve Notes. 
B)  making loans. 
C)  making customers pay back their loans. 
D)  exchanging their reserves at the Fed for vault cash.

Question 15

The definition of M2 includes I. M1.
II) money market mutual funds.
III) currency held outside of banks.

Accepted Answer

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

Question 16

When you toss your spare quarters into a jar so you can use them later at the laundromat,you are using money in its function as a

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  record keeping device. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  record keeping device.

Question 17

Money market mutual funds invest in

Accepted Answer

A)  residential mortgages. 
B)  commercial real estate. 
C)  long-term government securities. 
D)  highly liquid assets. 
A)  residential mortgages. 
B)  commercial real estate. 
C)  long-term government securities. 
D)  highly liquid assets.

Question 18

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

Accepted Answer

The Federal Reserve System divides the n

Question 19

Which of the following applies to an object serving as a store of value?
I. If an object can be held and exchanged later for a good or service,it serves as a store of value.
II. The less stable an object's value,the better it serves as a store of value.
III. A work of art can serve as a store of value.

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 20

The increased use of automatic teller machines has decreased the demand for money.

Accepted Answer

A) True 
 B)False

Which of the following is correct? The demand for money

A depository institution is a firm that takes deposits from and makes loans to .

-In the above figure,if the interest rate is 4 percent,people

When bank deposits increase from $1 million to $2 million,banks' required reserves increase from $100,000 to $200,000.The required reserve ratio is ________.

The opportunity cost of holding money is

The money supply,as measured by M1,consists almost entirely of currency.

The velocity of circulation is

The majority of money is created when

Component Amount (billions of dollars) Money market mutual 4,400 fund deposits 1,237 Time deposits 1,589 Savings deposits 752 Checking deposits 609 -Based on the data in the table above,what is the value of M2?

The Federal Open Market Committee

Nominal GDP,PY,is $7.5 trillion.The quantity of money is $3 trillion.The velocity of circulation is

Depository institutions do all the following EXCEPT

Commercial banks are able to create money by

The definition of M2 includes I. M1. II) money market mutual funds. III) currency held outside of banks.

When you toss your spare quarters into a jar so you can use them later at the laundromat,you are using money in its function as a

Money market mutual funds invest in

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

The increased use of automatic teller machines has decreased the demand for 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

Which of the following is correct? The demand for money

A depository institution is a firm that takes deposits from ________ and makes loans to ________.

-In the above figure,if the interest rate is 4 percent,people

When bank deposits increase from $1 million to $2 million,banks' required reserves increase from $100,000 to $200,000.The required reserve ratio is ________.

The opportunity cost of holding money is

The money supply,as measured by M1,consists almost entirely of currency.

The velocity of circulation is

The majority of money is created when

Component Amount (billions of dollars) Money market mutual 4,400 fund deposits 1,237 Time deposits 1,589 Savings deposits 752 Checking deposits 609 -Based on the data in the table above,what is the value of M2?

The Federal Open Market Committee

Nominal GDP,PY,is $7.5 trillion.The quantity of money is $3 trillion.The velocity of circulation is

Depository institutions do all the following EXCEPT

Commercial banks are able to create money by

The definition of M2 includes I. M1. II) money market mutual funds. III) currency held outside of banks.

When you toss your spare quarters into a jar so you can use them later at the laundromat,you are using money in its function as a

Money market mutual funds invest in

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

The increased use of automatic teller machines has decreased the demand for 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

A depository institution is a firm that takes deposits from and makes loans to .