Question 1

-Based on the data in the table above, what is the value of M1?

Accepted Answer

A)  $2,950 billion 
B)  $1,361 billion 
C)  $752 billion 
D)  $609 billion 
A)  $2,950 billion 
B)  $1,361 billion 
C)  $752 billion 
D)  $609 billion

Question 2

In the United States today, money consists of

Accepted Answer

A)  currency only. 
B)  deposits at banks only. 
C)  coins only. 
D)  currency and deposits at banks. 
A)  currency only. 
B)  deposits at banks only. 
C)  coins only. 
D)  currency and deposits at banks.

Question 3

Looking at historical evidence 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 4

A bank has checking deposits of $400, saving deposits of $900, time deposits of $900, loans of $950, government securities of $900, outstanding credit card balances of $400, currency in its vault of $40, and deposits in its reserve account at the Fed of $40.
a)What is the amount of this bank's deposits that are in M1?
b)What is the amount of this bank's deposits that are in M2?
c)What is the amount of this bank's reserves?

Accepted Answer

a)The only deposit that is in M1 is the

Question 5

Which of the following applies to the use of money as a unit of account?
I.A unit of account is an agreed measure for stating the prices of goods and services.
II.Using money as a unit of account creates a simplified pricing system.
III.Economies choose many goods as units of account.

Accepted Answer

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

Question 6

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 7

Currency held outside the banking system is included

Accepted Answer

A)  in M1 but not M2. 
B)  in M2 but not M1. 
C)  in both M1 and M2. 
D)  in neither M1 nor M2. 
A)  in M1 but not M2. 
B)  in M2 but not M1. 
C)  in both M1 and M2. 
D)  in neither M1 nor M2.

Question 8

TBK Bank Balance Sheet
Assets Liabilities
  
-The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?

Accepted Answer

A)  50 percent 
B)  12 percent 
C)  20 percent 
D)  17.14 percent 
A)  50 percent 
B)  12 percent 
C)  20 percent 
D)  17.14 percent

Question 9

What is a "currency drain?" How and why does it affect the money multiplier?

Accepted Answer

An increase in currency held outside the

Question 10

-According to the table above, the value of M1 is ________ and the value of M2 is ________.

Accepted Answer

A)  $900 billion; $3,650 billion 
B)  $910 billion; $3,460 billion 
C)  $900 billion; $3,450 billion 
D)  $910 billion; $3,660 billion 
A)  $900 billion; $3,650 billion 
B)  $910 billion; $3,460 billion 
C)  $900 billion; $3,450 billion 
D)  $910 billion; $3,660 billion

Question 11

M1 includes all the following items EXCEPT ________.

Accepted Answer

A)  checking deposits owned by individuals and businesses 
B)  traveler's checks 
C)  deposits in money market mutual funds 
D)  currency owned by individuals and businesses 
A)  checking deposits owned by individuals and businesses 
B)  traveler's checks 
C)  deposits in money market mutual funds 
D)  currency owned by individuals and businesses

Question 12

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that

Accepted Answer

A)  the money market is in equilibrium. 
B)  people buy bonds and the interest rate falls. 
C)  people sell bonds and the interest rate rises. 
D)  bond prices rise so that the interest rate rises. 
A)  the money market is in equilibrium. 
B)  people buy bonds and the interest rate falls. 
C)  people sell bonds and the interest rate rises. 
D)  bond prices rise so that the interest rate rises.

Question 13

Checking deposits are included in

Accepted Answer

A)  M1 only. 
B)  M2 only. 
C)  M1 and M2. 
D)  neither M1 nor M2. 
A)  M1 only. 
B)  M2 only. 
C)  M1 and M2. 
D)  neither M1 nor M2.

Question 14

Which of the following institutions is NOT a depository institution?

Accepted Answer

A)  the U.S. Treasury 
B)  a commercial bank 
C)  a money market mutual fund 
D)  a thrift institution, such as a savings and loan association 
A)  the U.S. Treasury 
B)  a commercial bank 
C)  a money market mutual fund 
D)  a thrift institution, such as a savings and loan association

Question 15

In the long run, when the Fed increases the quantity of money the

Accepted Answer

A)  no real variable changes. 
B)  price level falls. 
C)  real interest rate rises. 
D)  nominal interest rate falls. 
A)  no real variable changes. 
B)  price level falls. 
C)  real interest rate rises. 
D)  nominal interest rate falls.

Question 16

All the following statements about the Federal Reserve are true EXCEPT the fact that it ________.

Accepted Answer

A)  is a public authority 
B)  regulates a nation's depository institutions 
C)  accepts checking deposits from the nation's residents 
D)  controls the quantity of money 
A)  is a public authority 
B)  regulates a nation's depository institutions 
C)  accepts checking deposits from the nation's residents 
D)  controls the quantity of money

Question 17

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

Question 18

Which of the following is NOT a part of the monetary base?

Accepted Answer

A)  Chemical Bank's deposits of reserves at the Fed 
B)  First Bank's required reserves held at the Federal Reserve 
C)  currency 
D)  U.S. government securities owned by the Fed 
A)  Chemical Bank's deposits of reserves at the Fed 
B)  First Bank's required reserves held at the Federal Reserve 
C)  currency 
D)  U.S. government securities owned by the Fed

Question 19

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 20

When the Fed lowers the federal funds rate, it can lead to

Accepted Answer

A)  the Fed selling government securities. 
B)  an increase in lending by banks. 
C)  a decrease in demand deposits. 
D)  a decrease in the quantity of money. 
A)  the Fed selling government securities. 
B)  an increase in lending by banks. 
C)  a decrease in demand deposits. 
D)  a decrease in the quantity of money.

-Based on the data in the table above, what is the value of M1?

In the United States today, money consists of

Which of the following applies to the use of money as a unit of account? I.A unit of account is an agreed measure for stating the prices of goods and services. II.Using money as a unit of account creates a simplified pricing system. III.Economies choose many goods as units of account.

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

Currency held outside the banking system is included

TBK Bank Balance Sheet Assets Liabilities -The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?

What is a "currency drain?" How and why does it affect the money multiplier?

-According to the table above, the value of M1 is and the value of M2 is .

M1 includes all the following items EXCEPT ________.

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that

Checking deposits are included in

Which of the following institutions is NOT a depository institution?

In the long run, when the Fed increases the quantity of money the

All the following statements about the Federal Reserve are true EXCEPT the fact that it ________.

Commercial banks are able to create money by

Which of the following is NOT a part of the monetary base?

Liquidity can

When the Fed lowers the federal funds rate, it can lead 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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

-Based on the data in the table above, what is the value of M1?

In the United States today, money consists of

Which of the following applies to the use of money as a unit of account? I.A unit of account is an agreed measure for stating the prices of goods and services. II.Using money as a unit of account creates a simplified pricing system. III.Economies choose many goods as units of account.

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

Currency held outside the banking system is included

TBK Bank Balance Sheet Assets Liabilities -The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?

What is a "currency drain?" How and why does it affect the money multiplier?

-According to the table above, the value of M1 is ________ and the value of M2 is ________.

M1 includes all the following items EXCEPT ________.

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that

Checking deposits are included in

Which of the following institutions is NOT a depository institution?

In the long run, when the Fed increases the quantity of money the

All the following statements about the Federal Reserve are true EXCEPT the fact that it ________.

Commercial banks are able to create money by

Which of the following is NOT a part of the monetary base?

Liquidity can

When the Fed lowers the federal funds rate, it can lead 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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-According to the table above, the value of M1 is and the value of M2 is .