Question 1

Traveler's checks are included in M1 but not in M2.

Accepted Answer

A) True 
 B)False

Question 2

The quantity of money that people choose to hold is

Accepted Answer

A)  positively related to the nominal interest rate. 
B)  positively related to real GDP. 
C)  negatively related to the price level. 
D)  positively related to the availability of ATM machines. 
A)  positively related to the nominal interest rate. 
B)  positively related to real GDP. 
C)  negatively related to the price level. 
D)  positively related to the availability of ATM machines.

Question 3

The demand for money is ________ related to the nominal interest rate.

Accepted Answer

A)  positively 
B)  negatively 
C)  not related 
D)  None of the above answers is correct because the relationship between the demand for money and the interest rate varies with the inflation rate. 
A)  positively 
B)  negatively 
C)  not related 
D)  None of the above answers is correct because the relationship between the demand for money and the interest rate varies with the inflation rate.

Question 4

The quantity theory of money addresses the

Accepted Answer

A)  long-run effect the quantity of money has on the price level. 
B)  determinants of potential GDP. 
C)  determinants of the equilibrium unemployment rate. 
D)  short-run effect the quantity of money has on the price level. 
A)  long-run effect the quantity of money has on the price level. 
B)  determinants of potential GDP. 
C)  determinants of the equilibrium unemployment rate. 
D)  short-run effect the quantity of money has on the price level.

Question 5

Which of the following tools is NOT a policy tool of the Fed?

Accepted Answer

A)  last resort loans 
B)  the tax rate on interest income 
C)  the reserve ratio 
D)  open market operations 
A)  last resort loans 
B)  the tax rate on interest income 
C)  the reserve ratio 
D)  open market operations

Question 6

University National Bank Balance Sheet
Assets Liabilities
  
-The above table has the balance of the University National Bank.All figures are in millions of dollars.The desired reserve ratio is 20 percent.What would be the total increase in loans at this bank if all excess reserves were loaned out?

Accepted Answer

A)  $1,160 million 
B)  $600 million 
C)  $232 million 
D)  $0 
A)  $1,160 million 
B)  $600 million 
C)  $232 million 
D)  $0

Question 7

Sam has $500 in traveler's checks.He cashes a $100 traveler check,deposits $150 into his checking account at a Savings and Loan Association,and deposits the remaining $250 into a savings account at a credit union.Immediately,________.

Accepted Answer

A)  M1 decreases by $250 and M2 does not change 
B)  M1 decreases by $400 and M2 increases by $250 
C)  M1 does not change and M2 increases by $250 
D)  M1 and M2 do not change 
A)  M1 decreases by $250 and M2 does not change 
B)  M1 decreases by $400 and M2 increases by $250 
C)  M1 does not change and M2 increases by $250 
D)  M1 and M2 do not change

Question 8

-In the figure above,a decrease in the monetary base would create a change such as a

Accepted Answer

A)  movement from point a to point b along the supply of money curve MS₀. 
B)  movement from point b to point a along the supply of money curve MS₀. 
C)  shift from the supply of money curve MS₀ to the supply of money curve MS₁. 
D)  shift from the supply of money curve MS₁ to the supply of money curve MS₀. 
A)  movement from point a to point b along the supply of money curve MS₀. 
B)  movement from point b to point a along the supply of money curve MS₀. 
C)  shift from the supply of money curve MS₀ to the supply of money curve MS₁. 
D)  shift from the supply of money curve MS₁ to the supply of money curve MS₀.

Question 9

Why is the nominal interest rate the opportunity cost of holding money?

Accepted Answer

The nominal interest rate is the opportu

Question 10

An asset category that caries the highest interest rate is

Accepted Answer

A)  checkable deposit accounts. 
B)  loans. 
C)  cash in the bank vault. 
D)  savings deposits. 
A)  checkable deposit accounts. 
B)  loans. 
C)  cash in the bank vault. 
D)  savings deposits.

Question 11

Depository institutions are good at minimizing

Accepted Answer

A)  the costs of monitoring borrowers. 
B)  risky borrowers. 
C)  liquidity. 
D)  all of the above 
A)  the costs of monitoring borrowers. 
B)  risky borrowers. 
C)  liquidity. 
D)  all of the above

Question 12

Checking deposits at banks are

Accepted Answer

A)  money. 
B)  not money because they are an intangible. 
C)  money only because they are insured by the FDIC. 
D)  not money until they are converted into currency. 
A)  money. 
B)  not money because they are an intangible. 
C)  money only because they are insured by the FDIC. 
D)  not money until they are converted into currency.

Question 13

If the Federal Reserve purchases government securities,

Accepted Answer

A)  banks' reserves will increase. 
B)  the federal funds rate will rise. 
C)  the discount rate will be forced higher. 
D)  None of the above answers is correct because none of the effects occur. 
A)  banks' reserves will increase. 
B)  the federal funds rate will rise. 
C)  the discount rate will be forced higher. 
D)  None of the above answers is correct because none of the effects occur.

Question 14

-In the above figure,suppose the economy is initially on the demand for money curve MD₁.What is the effect of a rise in the nominal interest rate?

Accepted Answer

A)  The demand for money curve would shift rightward to MD₂. 
B)  The demand for money curve would shift leftward to MD₀. 
C)  There would be a movement upward along the demand for money curve MD₁. 
D)  There would be a movement downward along the demand for money curve MD₁. 
A)  The demand for money curve would shift rightward to MD₂. 
B)  The demand for money curve would shift leftward to MD₀. 
C)  There would be a movement upward along the demand for money curve MD₁. 
D)  There would be a movement downward along the demand for money curve MD₁.

Question 15

When the monetary base increases by $4 billion,the quantity of money increases by $10 billion.Thus,the money multiplier equals

Accepted Answer

A)  0.4 
B)  2.5 
C)  40.0 
D)  none of the above 
A)  0.4 
B)  2.5 
C)  40.0 
D)  none of the above

Question 16

$$\begin{array} { | l | l } 
\hline  { \text { Assets } } &  { \text { Liabilities } } \
\hline \text { Reserves } & \
\$ 500 & \text { Deposits } \
\text { Loans } & \$ 3,000 \
\underline{\$ 2,500} & \
\text { Total assets } & \text { Total } \
\$ 1,000 & \$ 3,000 \
\hline
\end{array}$$
-The table above shows the balance sheet for Ralph's Bank.If the desired reserve ratio is 15 percent,Ralph's Bank has excess reserves of ________.

Accepted Answer

A)  $50 
B)  $500 
C)  $3,000 
D)  $2,500 
A)  $50 
B)  $500 
C)  $3,000 
D)  $2,500

Question 17

$\begin{array}{l|l}
{\text { Assets }} & {\text { Liabilities }} \
\hline \text { Reserves } & \
\$ 30 & \text { Deposits } \
\text { Loans } & \$ 1,000 \
\$ 970 & \
\text { Total } & \text { Total } \
\$ 1,000 & \$ 1,000
\end{array}$ 
-The above table gives the initial balance sheet for Mega Bank.Barney comes into the bank and deposits $50 of currency into his checking account.The desired reserve ratio is 3 percent.After Barney's deposit,but before any other actions occur,what volume of loans will be made by MegaBank if the bank wants more profit and holds no excess reserves?

Accepted Answer

A)  $15.00 
B)  $33.00 
C)  $48.50 
D)  $50.00 
A)  $15.00 
B)  $33.00 
C)  $48.50 
D)  $50.00

Question 18

The sale of $1 billion of securities to a bank or some other business by the Fed is an example of

Accepted Answer

A)  a last resort loan. 
B)  a multiple contraction of the quantity of money. 
C)  an open market operation. 
D)  a change in the required reserve ratio. 
A)  a last resort loan. 
B)  a multiple contraction of the quantity of money. 
C)  an open market operation. 
D)  a change in the required reserve ratio.

Question 19

The current chairman of the Federal Reserve System is

Accepted Answer

A)  Milton Friedman. 
B)  Alan Greenspan. 
C)  President Obama. 
D)  Ben Bernanke. 
A)  Milton Friedman. 
B)  Alan Greenspan. 
C)  President Obama. 
D)  Ben Bernanke.

Question 20

If M = $100,Y = $500 and P = $2,then V is equal to

Accepted Answer

A)  0.10 
B)  1. 
C)  10. 
D)  50. 
A)  0.10 
B)  1. 
C)  10. 
D)  50.

Traveler's checks are included in M1 but not in M2.

The quantity of money that people choose to hold is

The demand for money is ________ related to the nominal interest rate.

The quantity theory of money addresses the

Which of the following tools is NOT a policy tool of the Fed?

University National Bank Balance Sheet Assets Liabilities -The above table has the balance of the University National Bank.All figures are in millions of dollars.The desired reserve ratio is 20 percent.What would be the total increase in loans at this bank if all excess reserves were loaned out?

Sam has $500 in traveler's checks.He cashes a $100 traveler check,deposits $150 into his checking account at a Savings and Loan Association,and deposits the remaining $250 into a savings account at a credit union.Immediately,________.

-In the figure above,a decrease in the monetary base would create a change such as a

Why is the nominal interest rate the opportunity cost of holding money?

An asset category that caries the highest interest rate is

Depository institutions are good at minimizing

Checking deposits at banks are

If the Federal Reserve purchases government securities,

-In the above figure,suppose the economy is initially on the demand for money curve MD₁.What is the effect of a rise in the nominal interest rate?

When the monetary base increases by $4 billion,the quantity of money increases by $10 billion.Thus,the money multiplier equals

Assets Liabilities Reserves \ 500 Deposits Loans \ 3,000 Total assets Total \ 1,000 \ 3,000 -The table above shows the balance sheet for Ralph's Bank.If the desired reserve ratio is 15 percent,Ralph's Bank has excess reserves of ________.

The sale of $1 billion of securities to a bank or some other business by the Fed is an example of

The current chairman of the Federal Reserve System is

If M = $100,Y = $500 and P = $2,then V is equal to

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

Traveler's checks are included in M1 but not in M2.

The quantity of money that people choose to hold is

The demand for money is ________ related to the nominal interest rate.

The quantity theory of money addresses the

Which of the following tools is NOT a policy tool of the Fed?

University National Bank Balance Sheet Assets Liabilities -The above table has the balance of the University National Bank.All figures are in millions of dollars.The desired reserve ratio is 20 percent.What would be the total increase in loans at this bank if all excess reserves were loaned out?

Sam has $500 in traveler's checks.He cashes a $100 traveler check,deposits $150 into his checking account at a Savings and Loan Association,and deposits the remaining $250 into a savings account at a credit union.Immediately,________.

-In the figure above,a decrease in the monetary base would create a change such as a

Why is the nominal interest rate the opportunity cost of holding money?

An asset category that caries the highest interest rate is

Depository institutions are good at minimizing

Checking deposits at banks are

If the Federal Reserve purchases government securities,

-In the above figure,suppose the economy is initially on the demand for money curve MD₁.What is the effect of a rise in the nominal interest rate?

When the monetary base increases by $4 billion,the quantity of money increases by $10 billion.Thus,the money multiplier equals

Assets Liabilities Reserves \ 500 Deposits Loans \ 3,000 Total assets Total \ 1,000 \ 3,000 -The table above shows the balance sheet for Ralph's Bank.If the desired reserve ratio is 15 percent,Ralph's Bank has excess reserves of ________.

The sale of $1 billion of securities to a bank or some other business by the Fed is an example of

The current chairman of the Federal Reserve System is

If M = $100,Y = $500 and P = $2,then V is equal to

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