Question 1

Modern U.S.commercial banks perform all of the following functions EXCEPT

Accepted Answer

A)  accept checking deposits. 
B)  issue paper currency. 
C)  make loans to households and business firms. 
D)  accept savings deposits. 
A)  accept checking deposits. 
B)  issue paper currency. 
C)  make loans to households and business firms. 
D)  accept savings deposits.

Question 2

If the desired reserve ratio is 3 percent and deposits totaled $575 billion,banks would hold

Accepted Answer

A)  $534.75 in reserves. 
B)  $17.25 billion in excess reserves. 
C)  $1,725 billion in currency. 
D)  $17.25 billion in reserves. 
A)  $534.75 in reserves. 
B)  $17.25 billion in excess reserves. 
C)  $1,725 billion in currency. 
D)  $17.25 billion in reserves.

Question 3

$$\begin{array} { | l | l | } 
\hline { \text { Assets } } &{ \text { Liabilities } } \
\hline \text { Reserves } & \text { Deposits } \
\$100& \$ 400 \
\text { Loans } & \text { Net Worth } \
\$ 600 & \$ 300 \
\text { Total } & \text { Total } \
\$ 700 & \$ 700 \
\hline
\end{array}$$
-The above table gives the initial balance sheet for Mini Bank.If the bank's desired reserve ratio is 10 percent,it will make

Accepted Answer

A)  more loans. 
B)  fewer loans. 
C)  no change in its lending. 
D)  you cannot predict what the bank will do from this balance sheet without more information. 
A)  more loans. 
B)  fewer loans. 
C)  no change in its lending. 
D)  you cannot predict what the bank will do from this balance sheet without more information.

Question 4

If nominal GDP equals $10 trillion and the velocity of circulation is 5,then

Accepted Answer

A)  real GDP is $2 trillion. 
B)  the quantity of money is $50 trillion. 
C)  the quantity of money is $2 trillion. 
D)  the real value of the quantity of money is $10 trillion. 
A)  real GDP is $2 trillion. 
B)  the quantity of money is $50 trillion. 
C)  the quantity of money is $2 trillion. 
D)  the real value of the quantity of money is $10 trillion.

Question 5

Depository institutions do all of the following EXCEPT

Accepted Answer

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

Question 6

Credit cards were introduced in 1959. In 2009,the U.S.credit card balance was $866 billion. Which of the following is true?

Accepted Answer

A)  The $866 billion balance is part of M2 but not part of M1. 
B)  The $866 billion balance is part of both M1 and M2. 
C)  Only that portion of the $866 billion actually charged in 2009 is counted in M1 and M2. 
D)  No part of the $866 billion balance is counted in M1 and M2. 
A)  The $866 billion balance is part of M2 but not part of M1. 
B)  The $866 billion balance is part of both M1 and M2. 
C)  Only that portion of the $866 billion actually charged in 2009 is counted in M1 and M2. 
D)  No part of the $866 billion balance is counted in M1 and M2.

Question 7

When you bought your textbook for this course,you were using money as a

Accepted Answer

A)  store of value. 
B)  price mechanism. 
C)  medium of exchange. 
D)  unit of account. 
A)  store of value. 
B)  price mechanism. 
C)  medium of exchange. 
D)  unit of account.

Question 8

A highly liquid asset

Accepted Answer

A)  has high transaction costs associated with its sale. 
B)  is highly leveraged. 
C)  generally has a very limited market for its resale. 
D)  can be converted into a means of payment easily without loss of value. 
A)  has high transaction costs associated with its sale. 
B)  is highly leveraged. 
C)  generally has a very limited market for its resale. 
D)  can be converted into a means of payment easily without loss of value.

Question 9

In Zealand,banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent.The money multiplier equals ________.

Accepted Answer

A)  2.18 
B)  3.33 
C)  5.0 
D)  3.0 
A)  2.18 
B)  3.33 
C)  5.0 
D)  3.0

Question 10

Which of the following is NOT a monetary policy tool of the Federal Reserve?

Accepted Answer

A)  changes in required reserves 
B)  last resort loans 
C)  deposit insurance 
D)  open market operations 
A)  changes in required reserves 
B)  last resort loans 
C)  deposit insurance 
D)  open market operations

Question 11

The president of which Federal Reserve bank is always a voting member of the FOMC?

Accepted Answer

The president of the New York Federal Re

Question 12

In the economy of Brightland,the commercial banks have deposits of $600 billion.Their reserves are $60 billion.All reserves are in deposits with the Central Bank and the commercial banks hold no excess reserves.There is $120 billion in Central Bank notes outside the banks,and there are no coins.
a) What is the economy's monetary base?
b) What is the quantity of money in the economy?
c) Calculate the money multiplier.
d) Suppose the Central Bank of Brightland undertakes an open market purchase of securities of so that the monetary base increases by $5 billion.By how much will the quantity of money change?

Accepted Answer

a) The monetary base is the sum of Centr

Question 13

Using a credit card can best be likened to

Accepted Answer

A)  taking out a loan. 
B)  a barter exchange. 
C)  using any other form of money because you immediately get to take the goods home. 
D)  writing a check on your demand deposit account. 
A)  taking out a loan. 
B)  a barter exchange. 
C)  using any other form of money because you immediately get to take the goods home. 
D)  writing a check on your demand deposit account.

Question 14

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

Accepted Answer

A)  zero. 
B)  $40,000. 
C)  $120,000. 
D)  $20,000. 
A)  zero. 
B)  $40,000. 
C)  $120,000. 
D)  $20,000.

Question 15

During periods of inflation,which function of money is most severely affected?

Accepted Answer

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

Question 16

Discuss the quantity theory of money.Be sure to mention the velocity of circulation and the equation of exchange.

Accepted Answer

The quantity theory of money is the prop

Question 17

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Accepted Answer

A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  source of liquidity 
A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  source of liquidity

Question 18

Liquidity can

Accepted Answer

A)  not be created. 
B)  be created by borrowing short and lending long. 
C)  only be created by the government. 
D)  be created by borrowing long and lending short. 
A)  not be created. 
B)  be created by borrowing short and lending long. 
C)  only be created by the government. 
D)  be created by borrowing long and lending short.

Question 19

The opportunity cost of holding money increases when

Accepted Answer

A)  the purchasing power of money rises. 
B)  the nominal interest rate rises. 
C)  the price level falls. 
D)  consumers' real incomes increase. 
A)  the purchasing power of money rises. 
B)  the nominal interest rate rises. 
C)  the price level falls. 
D)  consumers' real incomes increase.

Question 20

Currency outside of banks increases from $100 million to $200 million.This change is considered

Accepted Answer

A)  a currency drain. 
B)  a decrease in the monetary base. 
C)  expansionary monetary policy. 
D)  contractionary monetary policy. 
A)  a currency drain. 
B)  a decrease in the monetary base. 
C)  expansionary monetary policy. 
D)  contractionary monetary policy.

Modern U.S.commercial banks perform all of the following functions EXCEPT

If the desired reserve ratio is 3 percent and deposits totaled $575 billion,banks would hold

Assets Liabilities Reserves Deposits \1 00 \ 400 Loans Net Worth \ 600 \ 300 Total Total \ 700 \ 700 -The above table gives the initial balance sheet for Mini Bank.If the bank's desired reserve ratio is 10 percent,it will make

If nominal GDP equals $10 trillion and the velocity of circulation is 5,then

Depository institutions do all of the following EXCEPT

Credit cards were introduced in 1959. In 2009,the U.S.credit card balance was $866 billion. Which of the following is true?

When you bought your textbook for this course,you were using money as a

A highly liquid asset

In Zealand,banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent.The money multiplier equals ________.

Which of the following is NOT a monetary policy tool of the Federal Reserve?

The president of which Federal Reserve bank is always a voting member of the FOMC?

Using a credit card can best be likened to

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

During periods of inflation,which function of money is most severely affected?

Discuss the quantity theory of money.Be sure to mention the velocity of circulation and the equation of exchange.

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Liquidity can

The opportunity cost of holding money increases when

Currency outside of banks increases from $100 million to $200 million.This change is considered

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

Modern U.S.commercial banks perform all of the following functions EXCEPT

If the desired reserve ratio is 3 percent and deposits totaled $575 billion,banks would hold

Assets Liabilities Reserves Deposits \1 00 \ 400 Loans Net Worth \ 600 \ 300 Total Total \ 700 \ 700 -The above table gives the initial balance sheet for Mini Bank.If the bank's desired reserve ratio is 10 percent,it will make

If nominal GDP equals $10 trillion and the velocity of circulation is 5,then

Depository institutions do all of the following EXCEPT

Credit cards were introduced in 1959. In 2009,the U.S.credit card balance was $866 billion. Which of the following is true?

When you bought your textbook for this course,you were using money as a

A highly liquid asset

In Zealand,banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent.The money multiplier equals ________.

Which of the following is NOT a monetary policy tool of the Federal Reserve?

The president of which Federal Reserve bank is always a voting member of the FOMC?

Using a credit card can best be likened to

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

During periods of inflation,which function of money is most severely affected?

Discuss the quantity theory of money.Be sure to mention the velocity of circulation and the equation of exchange.

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Liquidity can

The opportunity cost of holding money increases when

Currency outside of banks increases from $100 million to $200 million.This change is considered

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