Question 1

Which of the following is NOT money?

Accepted Answer

A)  currency 
B)  checking deposits 
C)  checks in the checkbook 
D)  All of the above are money. 
A)  currency 
B)  checking deposits 
C)  checks in the checkbook 
D)  All of the above are money.

Question 2

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 3

The increased use of automatic teller machines has decreased the demand for money.

Accepted Answer

A) True 
 B)False

Question 4

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 5

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

Accepted Answer

The equation of exchange is that M × V =

Question 6

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Accepted Answer

A)  increases the quantity of money by $35 billion. 
B)  increases the quantity of money by $2.86 billion. 
C)  increases the quantity of money by $3.5 billion. 
D)  increases the quantity of money by $10 billion. 
A)  increases the quantity of money by $35 billion. 
B)  increases the quantity of money by $2.86 billion. 
C)  increases the quantity of money by $3.5 billion. 
D)  increases the quantity of money by $10 billion.

Question 7

Monetary policy is conducted

Accepted Answer

A)  only by the Federal Reserve. 
B)  by the Federal Reserve and the President of the United States. 
C)  by the Federal Reserve, the President of the United States, and Congress. 
D)  by the Federal Reserve with veto power residing with the President of the United States. 
A)  only by the Federal Reserve. 
B)  by the Federal Reserve and the President of the United States. 
C)  by the Federal Reserve, the President of the United States, and Congress. 
D)  by the Federal Reserve with veto power residing with the President of the United States.

Question 8

-The above table has the demand for money schedule.
a)If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate?
b)If the Fed wants the interest rate to be 4 percent, what must it do?

Accepted Answer

a)If the Fed sets the quantity of money

Question 9

The main policy designer of the Federal Reserve system is the

Accepted Answer

A)  12 district banks. 
B)  President and Congress. 
C)  Federal Open Market Committee. 
D)  Council of Economic Advisors. 
A)  12 district banks. 
B)  President and Congress. 
C)  Federal Open Market Committee. 
D)  Council of Economic Advisors.

Question 10

List and discuss the four economic functions that depository institutions provide their customers.

Accepted Answer

Depository institutions create liquidity

Question 11

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  3 percent 
D)  6 percent 
A)  1 percent 
B)  5 percent 
C)  3 percent 
D)  6 percent

Question 12

The Board of Governors of the Federal Reserve System consists of

Accepted Answer

A)  7 members appointed by Congress and 7 appointed by the President. 
B)  the presidents of each regional Federal Reserve bank. 
C)  12 members appointed by Congress. 
D)  7 members appointed by the President of the United States. 
A)  7 members appointed by Congress and 7 appointed by the President. 
B)  the presidents of each regional Federal Reserve bank. 
C)  12 members appointed by Congress. 
D)  7 members appointed by the President of the United States.

Question 13

The fact that money can be exchanged for goods reflects money's role as a

Accepted Answer

A)  cause of inflation. 
B)  medium of exchange. 
C)  unit of account. 
D)  store of value. 
A)  cause of inflation. 
B)  medium of exchange. 
C)  unit of account. 
D)  store of value.

Question 14

The main policy-making organ of the Federal Reserve System is

Accepted Answer

A)  the Board of Governors. 
B)  the Federal Reserve branch banks. 
C)  the Federal Reserve chairman and the Federal Reserve branch bank presidents. 
D)  the Federal Open Market Committee. 
A)  the Board of Governors. 
B)  the Federal Reserve branch banks. 
C)  the Federal Reserve chairman and the Federal Reserve branch bank presidents. 
D)  the Federal Open Market Committee.

Question 15

What are the three functions of money?

Accepted Answer

Money serves as a medium of exchange (so

Question 16

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

Accepted Answer

A)  10 percent 
B)  15 percent 
C)  5 percent 
D)  85 percent 
A)  10 percent 
B)  15 percent 
C)  5 percent 
D)  85 percent

Question 17

The required reserve ratio is the ratio of reserves to ________ required by banking regulations.

Accepted Answer

A)  deposits 
B)  loans 
C)  profits 
D)  currency 
A)  deposits 
B)  loans 
C)  profits 
D)  currency

Question 18

Which of the following is the most liquid?

Accepted Answer

A)  the U.S. dollars that your professor used this morning to buy breakfast 
B)  your credit card 
C)  gold 
D)  the pencil or pen in your hand right now 
A)  the U.S. dollars that your professor used this morning to buy breakfast 
B)  your credit card 
C)  gold 
D)  the pencil or pen in your hand right now

Question 19

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

Accepted Answer

Reserves include the bank's de

Question 20

Which of the following is NOT one of the Fed's monetary policy tools?

Accepted Answer

A)  last resort loans 
B)  the required reserve ratio 
C)  the income tax rate 
D)  buying and selling U.S. government securities 
A)  last resort loans 
B)  the required reserve ratio 
C)  the income tax rate 
D)  buying and selling U.S. government securities

Which of the following is NOT money?

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

The increased use of automatic teller machines has decreased the demand for money.

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

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Monetary policy is conducted

-The above table has the demand for money schedule. a)If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate? b)If the Fed wants the interest rate to be 4 percent, what must it do?

The main policy designer of the Federal Reserve system is the

List and discuss the four economic functions that depository institutions provide their customers.

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

The Board of Governors of the Federal Reserve System consists of

The fact that money can be exchanged for goods reflects money's role as a

The main policy-making organ of the Federal Reserve System is

What are the three functions of money?

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

The required reserve ratio is the ratio of reserves to ________ required by banking regulations.

Which of the following is the most liquid?

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

Which of the following is NOT one of the Fed's monetary policy tools?

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

Which of the following is NOT money?

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

The increased use of automatic teller machines has decreased the demand for money.

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

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Monetary policy is conducted

-The above table has the demand for money schedule. a)If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate? b)If the Fed wants the interest rate to be 4 percent, what must it do?

The main policy designer of the Federal Reserve system is the

List and discuss the four economic functions that depository institutions provide their customers.

Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?

The Board of Governors of the Federal Reserve System consists of

The fact that money can be exchanged for goods reflects money's role as a

The main policy-making organ of the Federal Reserve System is

What are the three functions of money?

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

The required reserve ratio is the ratio of reserves to ________ required by banking regulations.

Which of the following is the most liquid?

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

Which of the following is NOT one of the Fed's monetary policy tools?

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