Question 1

The desired reserve ratio is 10 percent.Fly By Night Bank has deposits of $250,000 and reserves of $25,000.What is the amount of its excess reserves?

Accepted Answer

The bank has no excess reserve

Question 2

Which of the following is NOT a monetary policy tool?

Accepted Answer

A)  last resort loans 
B)  open market operations 
C)  required reserve ratio 
D)  federal funds rate 
A)  last resort loans 
B)  open market operations 
C)  required reserve ratio 
D)  federal funds rate

Question 3

Nicholas is saving money collected from his paper route in order to purchase a new bicycle.His saving represents using money as

Accepted Answer

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

Question 4

What is barter?
What is a double coincidence of wants?
How does the existence of money affect barter?

Accepted Answer

Barter is the direct exchange of one goo

Question 5

The table below shows data (in millions) for Sun Trust Banks in September 2007 and September 2008.Suppose that the required reserve ratio is 3 percent. $$\begin{array} { | c | c | c | } 
\hline & 2007 & 2008 \
\hline \text { Loans } & \$ 83 & \$ 78 \
\hline \text { Reserves } & \$ 4 & \$ 5 \
\hline \text { Deposits } & \$ 114 & \$ 95 \
\hline
\end{array}$$
The data show that Sun Trust ________ make more loans in 2007 and ________ make more loans in 2008.

Accepted Answer

A)  can; can. 
B)  can; cannot. 
C)  cannot; cannot. 
D)  cannot; can. 
A)  can; can. 
B)  can; cannot. 
C)  cannot; cannot. 
D)  cannot; can.

Question 6

Suppose you hold $50 to buy groceries weekly and then the price of groceries increases by 5 percent.To be able to buy the same amount of groceries,what must happen to your nominal money holdings?

Accepted Answer

A)  They must increase by $5. 
B)  They can decrease by $5. 
C)  They must increase by $2.50. 
D)  They must increase, but the amount of the increase is different than the above answers. 
A)  They must increase by $5. 
B)  They can decrease by $5. 
C)  They must increase by $2.50. 
D)  They must increase, but the amount of the increase is different than the above answers.

Question 7

The quantity theory of money states that

Accepted Answer

A)  inflation increases when the money growth rate increases. 
B)  as the price level increases, the demand for money increases. 
C)  as the interest rate rises, the demand for money decreases. 
D)  changes in the quantity of money are determined by the commercial banks and not the Federal Reserve. 
A)  inflation increases when the money growth rate increases. 
B)  as the price level increases, the demand for money increases. 
C)  as the interest rate rises, the demand for money decreases. 
D)  changes in the quantity of money are determined by the commercial banks and not the Federal Reserve.

Question 8

Financial innovation is

Accepted Answer

A)  the process of turning assets into a more liquid form. 
B)  the development of new financial products and services. 
C)  responsible for credit cards being included as part of money. 
D)  causing a decrease in bank profits. 
A)  the process of turning assets into a more liquid form. 
B)  the development of new financial products and services. 
C)  responsible for credit cards being included as part of money. 
D)  causing a decrease in bank profits.

Question 9

The monetary base is the sum of

Accepted Answer

A)  U.S. Treasury notes and other government securities. 
B)  Federal Reserve notes, coins, and deposits of depository institutions. 
C)  foreign and domestic deposits at the Fed. 
D)  coins, currency, and checkable deposits. 
A)  U.S. Treasury notes and other government securities. 
B)  Federal Reserve notes, coins, and deposits of depository institutions. 
C)  foreign and domestic deposits at the Fed. 
D)  coins, currency, and checkable deposits.

Question 10

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

Accepted Answer

A)  checking deposits 
B)  traveler's checks 
C)  time deposits 
D)  shares of the stocks of large companies 
A)  checking deposits 
B)  traveler's checks 
C)  time deposits 
D)  shares of the stocks of large companies

Question 11

A currency drain occurs because people want to hold some of their money as currency rather than as deposits.

Accepted Answer

A) True 
 B)False

Question 12

Looking at historical evidence from 1990 to 2005 for the United States and other countries,which of the following are true?
I. There is a correlation between the growth rate of the quantity theory of money and the growth rate of real GDP.
II. There is a correlation between the growth rate of the quantity theory of money and the inflation rate.

Accepted Answer

A)  Only I is true. 
B)  Only II is true. 
C)  Both I and II are true. 
D)  Neither I or II is true. 
A)  Only I is true. 
B)  Only II is true. 
C)  Both I and II are true. 
D)  Neither I or II is true.

Question 13

When the velocity of circulation equals 4 in 2010,this fact means that

Accepted Answer

A)  consumers held four dollars in wealth for each dollar they spent in 2010. 
B)  on average, each dollar of money in the economy purchased four dollars of goods and services in GDP in 2010. 
C)  for each additional dollar of money injected into the economy, the price level rose 4 percent in 2010. 
D)  real output of goods and services in GDP rose by four dollars for each additional dollar of money consumers saved. 
A)  consumers held four dollars in wealth for each dollar they spent in 2010. 
B)  on average, each dollar of money in the economy purchased four dollars of goods and services in GDP in 2010. 
C)  for each additional dollar of money injected into the economy, the price level rose 4 percent in 2010. 
D)  real output of goods and services in GDP rose by four dollars for each additional dollar of money consumers saved.

Question 14

Read the following statements and determine if they are true or false. I. According to the quantity theory of money,an increase in the growth rate of the quantity of money increases inflation in the long run.
II) Historical and international data show that there is no correlation between inflation and money growth.

Accepted Answer

A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false. 
D)  I is false and II is true. 
A)  I and II are both true. 
B)  I and II are both false. 
C)  I is true and II is false. 
D)  I is false and II is true.

Question 15

If actual reserves are 100 when deposits are 400,then definitely the desired reserve ratio is 0.25.

Accepted Answer

A) True 
 B)False

Question 16

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

Accepted Answer

The statement is false.Credit cards are

Question 17

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Accepted Answer

A)  The Federal Open Market Committee 
B)  The Federal Reserve Banks 
C)  The Board of Governors 
D)  The Federal Government 
A)  The Federal Open Market Committee 
B)  The Federal Reserve Banks 
C)  The Board of Governors 
D)  The Federal Government

Question 18

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made.Immediately after the deposit is made,the bank's excess reserves equal

Accepted Answer

A)  zero. 
B)  $7,500. 
C)  $67,500. 
D)  It is impossible to determine without additional information. 
A)  zero. 
B)  $7,500. 
C)  $67,500. 
D)  It is impossible to determine without additional information.

Question 19

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

Accepted Answer

An increase in the interest ra

Question 20

When the interest rate is above the equilibrium interest rate there is an

Accepted Answer

A)  excess quantity of money and people will sell bonds. 
B)  excess demand for money and people will sell bonds. 
C)  excess quantity of money and people will buy bonds. 
D)  excess demand for money and people will buy bonds. 
A)  excess quantity of money and people will sell bonds. 
B)  excess demand for money and people will sell bonds. 
C)  excess quantity of money and people will buy bonds. 
D)  excess demand for money and people will buy bonds.

The desired reserve ratio is 10 percent.Fly By Night Bank has deposits of $250,000 and reserves of $25,000.What is the amount of its excess reserves?

Which of the following is NOT a monetary policy tool?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle.His saving represents using money as

What is barter? What is a double coincidence of wants? How does the existence of money affect barter?

The table below shows data (in millions) for Sun Trust Banks in September 2007 and September 2008.Suppose that the required reserve ratio is 3 percent. 2007 2008 Loans \ 83 \ 78 Reserves \ 4 \ 5 Deposits \ 114 \ 95 The data show that Sun Trust make more loans in 2007 and make more loans in 2008.

Suppose you hold $50 to buy groceries weekly and then the price of groceries increases by 5 percent.To be able to buy the same amount of groceries,what must happen to your nominal money holdings?

The quantity theory of money states that

Financial innovation is

The monetary base is the sum of

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

A currency drain occurs because people want to hold some of their money as currency rather than as deposits.

When the velocity of circulation equals 4 in 2010,this fact means that

If actual reserves are 100 when deposits are 400,then definitely the desired reserve ratio is 0.25.

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made.Immediately after the deposit is made,the bank's excess reserves equal

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

When the interest rate is above the equilibrium interest rate there is an

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 desired reserve ratio is 10 percent.Fly By Night Bank has deposits of $250,000 and reserves of $25,000.What is the amount of its excess reserves?

Which of the following is NOT a monetary policy tool?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle.His saving represents using money as

What is barter? What is a double coincidence of wants? How does the existence of money affect barter?

Suppose you hold $50 to buy groceries weekly and then the price of groceries increases by 5 percent.To be able to buy the same amount of groceries,what must happen to your nominal money holdings?

The quantity theory of money states that

Financial innovation is

The monetary base is the sum of

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

A currency drain occurs because people want to hold some of their money as currency rather than as deposits.

When the velocity of circulation equals 4 in 2010,this fact means that

If actual reserves are 100 when deposits are 400,then definitely the desired reserve ratio is 0.25.

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

Which of the following institutions is NOT part of the structure of the Federal Reserve system?

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made.Immediately after the deposit is made,the bank's excess reserves equal

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

When the interest rate is above the equilibrium interest rate there is an

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