Question 1

Money ________.

Accepted Answer

A)  is always composed of coins and paper 
B)  loses its value as it becomes older 
C)  requires a double coincidence of wants 
D)  is any commodity that is generally acceptable as a means of payment 
A)  is always composed of coins and paper 
B)  loses its value as it becomes older 
C)  requires a double coincidence of wants 
D)  is any commodity that is generally acceptable as a means of payment

Question 2

An increase in the nominal interest rate creates a ________ the money demand curve, and an increase in real GDP creates a ________ the money demand curve.

Accepted Answer

A)  movement down along; leftward shift of 
B)  rightward shift of; movement up along 
C)  movement up along; rightward shift of 
D)  leftward shift of; rightward shift of 
A)  movement down along; leftward shift of 
B)  rightward shift of; movement up along 
C)  movement up along; rightward shift of 
D)  leftward shift of; rightward shift of

Question 3

What is the opportunity cost of holding money?

Accepted Answer

The opportunity cost

Question 4

The quantity theory of money asserts that an increase in the quantity of money

Accepted Answer

A)  will decrease the price level by an offsetting amount. 
B)  by n percent will lead to an increase in the price level by n + 1 percent. 
C)  will lead to an equal percentage increase in real GDP. 
D)  will lead to an equal percentage increase in the price level. 
A)  will decrease the price level by an offsetting amount. 
B)  by n percent will lead to an increase in the price level by n + 1 percent. 
C)  will lead to an equal percentage increase in real GDP. 
D)  will lead to an equal percentage increase in the price level.

Question 5

A decrease in ________ decreases the demand for money.

Accepted Answer

A)  the discount rate 
B)  real GDP 
C)  the interest rate 
D)  the quantity of money 
A)  the discount rate 
B)  real GDP 
C)  the interest rate 
D)  the quantity of money

Question 6

TBK Bank Balance Sheet
Assets Liabilities
  
-The above table presents the balance sheet of the TBK commercial bank. If the desired reserve ratio is 25 percent, what is this bank's desired reserves?

Accepted Answer

A)  $120 
B)  $150 
C)  $175 
D)  $30 
A)  $120 
B)  $150 
C)  $175 
D)  $30

Question 7

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

Accepted Answer

A)  0.2. 
B)  5. 
C)  20.0. 
D)  0.5. 
A)  0.2. 
B)  5. 
C)  20.0. 
D)  0.5.

Question 8

The quantity theory of money predicts that in the ________, a 10 percent increase in the quantity of money leads to a 10 percent increase in ________.

Accepted Answer

A)  long run; real GDP 
B)  short run; velocity 
C)  long run; velocity 
D)  long run; price level 
A)  long run; real GDP 
B)  short run; velocity 
C)  long run; velocity 
D)  long run; price level

Question 9

The Board of Governors is the

Accepted Answer

A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  7-member group that oversees the Federal Reserve. 
C)  12-member monetary policy committee of the Federal Reserve. 
D)  50-member organization of state banking regulators of the Federal Reserve. 
A)  Presidents of the 12 regional banks of the Federal Reserve. 
B)  7-member group that oversees the Federal Reserve. 
C)  12-member monetary policy committee of the Federal Reserve. 
D)  50-member organization of state banking regulators of the Federal Reserve.

Question 10

In October of 2014, the interest rate on money market accounts was about 0.2 percent. In 2007, the interest rate on money market accounts was about 4.0 percent. What has been the impact on money demand from this fall in the interest rate?

Accepted Answer

A)  the money demand curve shifted to the right 
B)  the money demand curve shifted to the left 
C)  the quantity of money demanded increased 
D)  the quantity of money demanded decreased 
A)  the money demand curve shifted to the right 
B)  the money demand curve shifted to the left 
C)  the quantity of money demanded increased 
D)  the quantity of money demanded decreased

Question 11

If the desired reserve ratio rises, the money multiplier

Accepted Answer

A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  probably changes but more information is needed to determine if it increases or decreases. 
A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  probably changes but more information is needed to determine if it increases or decreases.

Question 12

The required reserve ratio ranges from

Accepted Answer

A)  0 to 3 percent. 
B)  0 to 7 percent. 
C)  3 to 30 percent. 
D)  0 to 10 percent. 
A)  0 to 3 percent. 
B)  0 to 7 percent. 
C)  3 to 30 percent. 
D)  0 to 10 percent.

Question 13

-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 14

The functions of money are

Accepted Answer

A)  interest rates, prices and output. 
B)  M1, M2 or currency. 
C)  currency, deposits, and traveler's checks. 
D)  medium of exchange, unit of account, and store of value. 
A)  interest rates, prices and output. 
B)  M1, M2 or currency. 
C)  currency, deposits, and traveler's checks. 
D)  medium of exchange, unit of account, and store of value.

Question 15

When the nominal interest rate rises, the quantity of money demanded decreases because

Accepted Answer

A)  people will buy fewer goods and hence hold less money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people shift funds from interest-bearing assets into money. 
D)  people shift funds from money holdings to interest-bearing assets. 
A)  people will buy fewer goods and hence hold less money. 
B)  the price level also rises and people decrease their demand for money. 
C)  people shift funds from interest-bearing assets into money. 
D)  people shift funds from money holdings to interest-bearing assets.

Question 16

Checks are NOT money because they

Accepted Answer

A)  are issued by banks, not by the government. 
B)  are merely instructions to transfer money. 
C)  have value in exchange but little intrinsic value. 
D)  are not backed by either gold or silver. 
A)  are issued by banks, not by the government. 
B)  are merely instructions to transfer money. 
C)  have value in exchange but little intrinsic value. 
D)  are not backed by either gold or silver.

Question 17

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 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 falls. 
D)  bond prices fall and so the interest rate falls. 
A)  the money market is in equilibrium. 
B)  people buy bonds and the interest rate falls. 
C)  people sell bonds and the interest rate falls. 
D)  bond prices fall and so the interest rate falls.

Question 18

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 19

-In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as

Accepted Answer

A)  b. 
B)  c. 
C)  d. 
D)  e. 
A)  b. 
B)  c. 
C)  d. 
D)  e.

Question 20

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Accepted Answer

A) True 
 B)False

Money ________.

An increase in the nominal interest rate creates a the money demand curve, and an increase in real GDP creates a the money demand curve.

What is the opportunity cost of holding money?

The quantity theory of money asserts that an increase in the quantity of money

A decrease in ________ decreases the demand for money.

TBK Bank Balance Sheet Assets Liabilities -The above table presents the balance sheet of the TBK commercial bank. If the desired reserve ratio is 25 percent, what is this bank's desired reserves?

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

The quantity theory of money predicts that in the , a 10 percent increase in the quantity of money leads to a 10 percent increase in .

The Board of Governors is the

In October of 2014, the interest rate on money market accounts was about 0.2 percent. In 2007, the interest rate on money market accounts was about 4.0 percent. What has been the impact on money demand from this fall in the interest rate?

If the desired reserve ratio rises, the money multiplier

The required reserve ratio ranges from

The functions of money are

When the nominal interest rate rises, the quantity of money demanded decreases because

Checks are NOT money because they

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that

Checking deposits at banks are

-In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

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

Money ________.

An increase in the nominal interest rate creates a ________ the money demand curve, and an increase in real GDP creates a ________ the money demand curve.

What is the opportunity cost of holding money?

The quantity theory of money asserts that an increase in the quantity of money

A decrease in ________ decreases the demand for money.

TBK Bank Balance Sheet Assets Liabilities -The above table presents the balance sheet of the TBK commercial bank. If the desired reserve ratio is 25 percent, what is this bank's desired reserves?

When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals

The quantity theory of money predicts that in the ________, a 10 percent increase in the quantity of money leads to a 10 percent increase in ________.

The Board of Governors is the

In October of 2014, the interest rate on money market accounts was about 0.2 percent. In 2007, the interest rate on money market accounts was about 4.0 percent. What has been the impact on money demand from this fall in the interest rate?

If the desired reserve ratio rises, the money multiplier

The required reserve ratio ranges from

The functions of money are

When the nominal interest rate rises, the quantity of money demanded decreases because

Checks are NOT money because they

-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that

Checking deposits at banks are

-In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

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

An increase in the nominal interest rate creates a the money demand curve, and an increase in real GDP creates a the money demand curve.

The quantity theory of money predicts that in the , a 10 percent increase in the quantity of money leads to a 10 percent increase in .