Question 1

Which of the following is a tool that is used by the Fed to control the quantity of money?

Accepted Answer

A)  open market operations 
B)  excess reserves 
C)  government expenditure multiplier 
D)  real interest rate 
A)  open market operations 
B)  excess reserves 
C)  government expenditure multiplier 
D)  real interest rate

Question 2

The Federal Open Market Committee

Accepted Answer

A)  meets weekly to set Fed policy. 
B)  has 7 voting members. 
C)  always includes the president of the Federal Reserve Bank of New York as a member. 
D)  does not include any members of the Board of Governors. 
A)  meets weekly to set Fed policy. 
B)  has 7 voting members. 
C)  always includes the president of the Federal Reserve Bank of New York as a member. 
D)  does not include any members of the Board of Governors.

Question 3

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

Accepted Answer

The statement is incorrect. Many of the

Question 4

In Zealand, banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals ________.

Accepted Answer

A)  2.18 
B)  3.33 
C)  5.0 
D)  3.0 
A)  2.18 
B)  3.33 
C)  5.0 
D)  3.0

Question 5

Define the quantity theory of money and show how it is related to the equation of exchange.

Accepted Answer

The quantity theory of money is the prop

Question 6

Checks ________ money and checking deposits ________ money.

Accepted Answer

A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not 
A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not

Question 7

________ in the desired reserve ratio will ________ the money multiplier.

Accepted Answer

A)  An increase; have no effect on 
B)  An increase; decrease 
C)  A decrease; decrease 
D)  A decrease; will have no effect on 
A)  An increase; have no effect on 
B)  An increase; decrease 
C)  A decrease; decrease 
D)  A decrease; will have no effect on

Question 8

In response to the financial crisis of 2007 and the ensuing recession, the Fed announced three rounds of "quantitative easing," where the Fed purchased billions of dollars of securities. What impact would quantitative easing have on the monetary base?

Accepted Answer

A)  The monetary base would increase. 
B)  The monetary base would decrease. 
C)  The monetary base would not change. 
D)  While the monetary base would change, it is impossible to predict in which direction. 
A)  The monetary base would increase. 
B)  The monetary base would decrease. 
C)  The monetary base would not change. 
D)  While the monetary base would change, it is impossible to predict in which direction.

Question 9

M1 is usually larger than M2.

Accepted Answer

A) True 
 B)False

Question 10

The data show that money growth and inflation are

Accepted Answer

A)  positively correlated. 
B)  negatively correlated. 
C)  not correlated. 
D)  independent phenomena. 
A)  positively correlated. 
B)  negatively correlated. 
C)  not correlated. 
D)  independent phenomena.

Question 11

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 12

Which of the following is true regarding the required reserve ratio?

Accepted Answer

A)  The ratio determines the legally required amount of reserves a bank must hold. 
B)  The ratio determines the amount of excess reserves a bank must hold. 
C)  The ratio is only enforced against banks that are operating in a risky manner. 
D)  None of the above answers is correct. 
A)  The ratio determines the legally required amount of reserves a bank must hold. 
B)  The ratio determines the amount of excess reserves a bank must hold. 
C)  The ratio is only enforced against banks that are operating in a risky manner. 
D)  None of the above answers is correct.

Question 13

A depository institution receives deposits from lenders and makes loans to borrowers.

Accepted Answer

A) True 
 B)False

Question 14

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent.
a)How much does the bank have in excess reserves?
b)What can the bank do with its excess reserves? Name two options.

Accepted Answer

a)The excess reserves are $30, equal to

Question 15

Describe how financial innovation has affected the demand for money.

Accepted Answer

Financial innovation is the development

Question 16

In October of 2014, the nominal interest rate earned on money market accounts was around 0.20 percent. This interest rate is a measure of which of the following?

Accepted Answer

A)  the opportunity cost of holding money 
B)  the inflation rate 
C)  the demand for money 
D)  the real interest rate 
A)  the opportunity cost of holding money 
B)  the inflation rate 
C)  the demand for money 
D)  the real interest rate

Question 17

Excess reserves are equal to

Accepted Answer

A)  the sum of desired reserves plus any reserves that are more than are required. 
B)  actual reserves minus desired reserves. 
C)  actual reserves plus desired reserves. 
D)  desired reserves minus actual reserves. 
A)  the sum of desired reserves plus any reserves that are more than are required. 
B)  actual reserves minus desired reserves. 
C)  actual reserves plus desired reserves. 
D)  desired reserves minus actual reserves.

Question 18

Suppose that a bank begins with $500 million in deposits and $100 million in reserves and is just meeting its desired reserve ratio. Now suppose a decrease in the required reserve ratio lowers the desired reserve ratio to 10 percent. After the fall in the desired reserve ratio but before the bank makes any changes, the bank's excess reserves are

Accepted Answer

A)  0. 
B)  $400 million. 
C)  $450 million. 
D)  $50 million. 
A)  0. 
B)  $400 million. 
C)  $450 million. 
D)  $50 million.

Question 19

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  record keeping device. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  record keeping device.

Question 20

Suppose prices are quoted in dollars and transactions are conducted in pesos. The dollar serves as a

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  all of the above. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  all of the above.

Which of the following is a tool that is used by the Fed to control the quantity of money?

The Federal Open Market Committee

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

In Zealand, banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals ________.

Define the quantity theory of money and show how it is related to the equation of exchange.

Checks money and checking deposits money.

in the desired reserve ratio will the money multiplier.

In response to the financial crisis of 2007 and the ensuing recession, the Fed announced three rounds of "quantitative easing," where the Fed purchased billions of dollars of securities. What impact would quantitative easing have on the monetary base?

M1 is usually larger than M2.

The data show that money growth and inflation are

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

Which of the following is true regarding the required reserve ratio?

A depository institution receives deposits from lenders and makes loans to borrowers.

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent. a)How much does the bank have in excess reserves? b)What can the bank do with its excess reserves? Name two options.

Describe how financial innovation has affected the demand for money.

In October of 2014, the nominal interest rate earned on money market accounts was around 0.20 percent. This interest rate is a measure of which of the following?

Excess reserves are equal to

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Suppose prices are quoted in dollars and transactions are conducted in pesos. The dollar serves as a

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 a tool that is used by the Fed to control the quantity of money?

The Federal Open Market Committee

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

In Zealand, banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals ________.

Define the quantity theory of money and show how it is related to the equation of exchange.

Checks ________ money and checking deposits ________ money.

________ in the desired reserve ratio will ________ the money multiplier.

In response to the financial crisis of 2007 and the ensuing recession, the Fed announced three rounds of "quantitative easing," where the Fed purchased billions of dollars of securities. What impact would quantitative easing have on the monetary base?

M1 is usually larger than M2.

The data show that money growth and inflation are

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

Which of the following is true regarding the required reserve ratio?

A depository institution receives deposits from lenders and makes loans to borrowers.

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent. a)How much does the bank have in excess reserves? b)What can the bank do with its excess reserves? Name two options.

Describe how financial innovation has affected the demand for money.

In October of 2014, the nominal interest rate earned on money market accounts was around 0.20 percent. This interest rate is a measure of which of the following?

Excess reserves are equal to

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Suppose prices are quoted in dollars and transactions are conducted in pesos. The dollar serves as a

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

Checks money and checking deposits money.

in the desired reserve ratio will the money multiplier.