Question 1

If the money supply equals 2,000, velocity equals 3, and real GDP equals 4,000, then the price level equals:

Accepted Answer

A) 1.5. 
B) 2. 
C) 3. 
D) 6,000. 
A) 1.5. 
B) 2. 
C) 3. 
D) 6,000.

Question 2

In the long run, countries with higher rates of money growth usually have:

Accepted Answer

A) higher rates of inflation. 
B) lower rates of inflation. 
C) faster growth rates of real output. 
D) smaller budget deficits. 
A) higher rates of inflation. 
B) lower rates of inflation. 
C) faster growth rates of real output. 
D) smaller budget deficits.

Question 3

The seven Fed governors, the president of the Federal Reserve Bank of New York, and four of the presidents of the other regional Federal Reserve Banks constitute the:

Accepted Answer

A) National Monetary Commission. 
B) Board of Governors. 
C) Federal Open Market Committee. 
D) Federal Reserve System. 
A) National Monetary Commission. 
B) Board of Governors. 
C) Federal Open Market Committee. 
D) Federal Reserve System.

Question 4

Assets of the commercial banking system include:

Accepted Answer

A) reserves and loans. 
B) deposits. 
C) reserves and deposits. 
D) loans and deposits. 
A) reserves and loans. 
B) deposits. 
C) reserves and deposits. 
D) loans and deposits.

Question 5

When the Federal Reserve sells government bonds to the public, this is an example of a(n):

Accepted Answer

A) open-market sale. 
B) open-market purchase. 
C) discount loan. 
D) bank panic. 
A) open-market sale. 
B) open-market purchase. 
C) discount loan. 
D) bank panic.

Question 6

When an individual deposits currency into a checking account:

Accepted Answer

A) bank reserves increase, which allows banks to lend more and increases the money supply. 
B) bank reserves decrease, which reduces the amount banks can lend and reduces the growth of the money supply. 
C) bank reserves are unchanged. 
D) bank liabilities increase, which reduces the amount banks can lend and reduces the growth of the money supply. 
A) bank reserves increase, which allows banks to lend more and increases the money supply. 
B) bank reserves decrease, which reduces the amount banks can lend and reduces the growth of the money supply. 
C) bank reserves are unchanged. 
D) bank liabilities increase, which reduces the amount banks can lend and reduces the growth of the money supply.

Question 7

The quantity equation states that:

Accepted Answer

A) money times velocity equals nominal GDP. 
B) money times velocity equals real GDP. 
C) money times the average price level equals nominal GDP. 
D) money times the average price level equals real GDP. 
A) money times velocity equals nominal GDP. 
B) money times velocity equals real GDP. 
C) money times the average price level equals nominal GDP. 
D) money times the average price level equals real GDP.

Question 8

In a fractional-reserve banking system the reserve/deposit ratio equals:

Accepted Answer

A) more than 100 percent. 
B) currency held by the public divided by deposits. 
C) 100 percent. 
D) less than 100 percent. 
A) more than 100 percent. 
B) currency held by the public divided by deposits. 
C) 100 percent. 
D) less than 100 percent.

Question 9

When money is the basic measure of economic value, it serves as a:

Accepted Answer

A) double coincidence of wants. 
B) store of value. 
C) medium of exchange. 
D) unit of account. 
A) double coincidence of wants. 
B) store of value. 
C) medium of exchange. 
D) unit of account.

Question 10

In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal ________ and the money supply equals ________.

Accepted Answer

A) $48,000,000; $75,000,000 
B) $54,000,000; $54,000,000 
C) $48,000,000; $54,000,000 
D) $96,000,000; $96,000,000 
A) $48,000,000; $75,000,000 
B) $54,000,000; $54,000,000 
C) $48,000,000; $54,000,000 
D) $96,000,000; $96,000,000

Question 11

If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals:

Accepted Answer

A) 2. 
B) 2.5. 
C) 5. 
D) 5,000. 
A) 2. 
B) 2.5. 
C) 5. 
D) 5,000.

Question 12

The central bank of the United States is:

Accepted Answer

A) Bank of America. 
B) Bank of the United States. 
C) the U.S. Treasury. 
D) the Federal Reserve System. 
A) Bank of America. 
B) Bank of the United States. 
C) the U.S. Treasury. 
D) the Federal Reserve System.

Question 13

The Federal Reserve System first began operations in:

Accepted Answer

A) 1789. 
B) 1865. 
C) 1914. 
D) 1934 
A) 1789. 
B) 1865. 
C) 1914. 
D) 1934

Question 14

If real GDP equals 5,000, nominal GDP equals 10,000, and the price level equals 2, then what is velocity if the money stock equals 2,000?

Accepted Answer

A) 2 
B) 2.5 
C) 5 
D) 10 
A) 2 
B) 2.5 
C) 5 
D) 10

Question 15

Velocity is determined by:

Accepted Answer

A) the Federal Reserve. 
B) the size of the government budget deficit. 
C) average labor productivity times the population growth rate. 
D) payments methods and technology. 
A) the Federal Reserve. 
B) the size of the government budget deficit. 
C) average labor productivity times the population growth rate. 
D) payments methods and technology.

Question 16

The Federal Reserve consists of ________ regional banks, ________ governors on the Board of Governors, and ________ voting members of the Federal Open Market Committee.

Accepted Answer

A) 7; 12; 12 
B) 12; 7; 12 
C) 12; 7; 19 
D) 14; 7; 21 
A) 7; 12; 12 
B) 12; 7; 12 
C) 12; 7; 19 
D) 14; 7; 21

Question 17

According to the quantity equation, if velocity and real GDP are constant, and the Federal Reserve increases the money supply by 5 percent, then the price level:

Accepted Answer

A) decreases by 5 percent. 
B) decreases by more than 5 percent. 
C) increases by more than 5 percent. 
D) increases by 5 percent. 
A) decreases by 5 percent. 
B) decreases by more than 5 percent. 
C) increases by more than 5 percent. 
D) increases by 5 percent.

Question 18

When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:

Accepted Answer

A) increases by more than $1,000,000. 
B) increases by $1,000,000. 
C) increases by less than $1,000,000. 
D) decreases by $1,000,000. 
A) increases by more than $1,000,000. 
B) increases by $1,000,000. 
C) increases by less than $1,000,000. 
D) decreases by $1,000,000.

Question 19

Based on the information in the table, what quantity of reserves did the Federal Reserve inject into the economy in 1932?

Accepted Answer

A) $0.30 billion 
B) $0.23 billion 
C) $0.16 billion 
D) $0.07 billion 
A) $0.30 billion 
B) $0.23 billion 
C) $0.16 billion 
D) $0.07 billion

Question 20

Based on the information in the table, if the public had not decided to hold more currency in 1932, but the actions of the Federal Reserve and the banks remained the same, the money supply at the end of 1932 would have been:

Accepted Answer

A) $33.8 billion 
B) $34.2 billion 
C) $35.9 billion 
D) $36.1 billion 
A) $33.8 billion 
B) $34.2 billion 
C) $35.9 billion 
D) $36.1 billion

Exam 22: Money Prices and the Federal Reserve

If the money supply equals 2,000, velocity equals 3, and real GDP equals 4,000, then the price level equals:

In the long run, countries with higher rates of money growth usually have:

The seven Fed governors, the president of the Federal Reserve Bank of New York, and four of the presidents of the other regional Federal Reserve Banks constitute the:

Assets of the commercial banking system include:

When the Federal Reserve sells government bonds to the public, this is an example of a(n):

When an individual deposits currency into a checking account:

The quantity equation states that:

In a fractional-reserve banking system the reserve/deposit ratio equals:

When money is the basic measure of economic value, it serves as a:

In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal ________ and the money supply equals ________.

If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals:

The central bank of the United States is:

The Federal Reserve System first began operations in:

If real GDP equals 5,000, nominal GDP equals 10,000, and the price level equals 2, then what is velocity if the money stock equals 2,000?

Velocity is determined by:

The Federal Reserve consists of ________ regional banks, ________ governors on the Board of Governors, and ________ voting members of the Federal Open Market Committee.

According to the quantity equation, if velocity and real GDP are constant, and the Federal Reserve increases the money supply by 5 percent, then the price level:

When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:

Based on the information in the table, what quantity of reserves did the Federal Reserve inject into the economy in 1932?

Based on the information in the table, if the public had not decided to hold more currency in 1932, but the actions of the Federal Reserve and the banks remained the same, the money supply at the end of 1932 would have been:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal and the money supply equals .

The Federal Reserve consists of regional banks, governors on the Board of Governors, and voting members of the Federal Open Market Committee.