Question 1

When the nominal interest rate rises, the

Accepted Answer

A)  quantity of money demanded decreases. 
B)  demand for money decreases. 
C)  demand for money increases. 
D)  quantity of money demanded increases. 
A)  quantity of money demanded decreases. 
B)  demand for money decreases. 
C)  demand for money increases. 
D)  quantity of money demanded increases.

Question 2

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________.

Accepted Answer

A)  the price level 
B)  the growth rate of real GDP 
C)  the inflation level 
D)  the growth rate of potential GDP 
A)  the price level 
B)  the growth rate of real GDP 
C)  the inflation level 
D)  the growth rate of potential GDP

Question 3

When the interest rate is above the equilibrium interest rate there is an

Accepted Answer

A)  excess quantity of money and people will sell bonds. 
B)  excess demand for money and people will sell bonds. 
C)  excess quantity of money and people will buy bonds. 
D)  excess demand for money and people will buy bonds. 
A)  excess quantity of money and people will sell bonds. 
B)  excess demand for money and people will sell bonds. 
C)  excess quantity of money and people will buy bonds. 
D)  excess demand for money and people will buy bonds.

Question 4

Currency outside of banks increases from $100 million to $200 million. This change is considered

Accepted Answer

A)  a currency drain. 
B)  a decrease in the monetary base. 
C)  expansionary monetary policy. 
D)  contractionary monetary policy. 
A)  a currency drain. 
B)  a decrease in the monetary base. 
C)  expansionary monetary policy. 
D)  contractionary monetary policy.

Question 5

The Federal Reserve has ________ regional Federal Reserve Banks and ________ members of the Board of Governors.

Accepted Answer

A)  12; 12 
B)  12; 7 
C)  7; 12 
D)  7; 7 
A)  12; 12 
B)  12; 7 
C)  7; 12 
D)  7; 7

Question 6

Which of the following is an example of money functioning as a medium of exchange?

Accepted Answer

A)  Walmart accepting your $20 when you buy a Blu-ray. 
B)  Apple pricing an iPhone at $299. 
C)  Bank of America paying you 3 percent on your saving account. 
D)  You saving your spare change in a jar before depositing them in your savings account. 
A)  Walmart accepting your $20 when you buy a Blu-ray. 
B)  Apple pricing an iPhone at $299. 
C)  Bank of America paying you 3 percent on your saving account. 
D)  You saving your spare change in a jar before depositing them in your savings account.

Question 7

The balance owed on credit cards in the United States in 2014 was $880 billion. When consumers pay off this balance in full,

Accepted Answer

A)  M1 will decrease by $880 billion. 
B)  M1 will remain unchanged but M2 will decrease by $880 billion. 
C)  neither M1 nor M2 will change. 
D)  M1 will increase by $880 billion. 
A)  M1 will decrease by $880 billion. 
B)  M1 will remain unchanged but M2 will decrease by $880 billion. 
C)  neither M1 nor M2 will change. 
D)  M1 will increase by $880 billion.

Question 8

Which of the following are part of a commercial bank's reserves?
I.cash in the bank's vaults
II.loans
III.cash in checking accounts

Accepted Answer

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

Question 9

Which of the following is NOT included in the M1 measure of money?

Accepted Answer

A)  checking deposits 
B)  currency 
C)  traveler's checks 
D)  savings deposits 
A)  checking deposits 
B)  currency 
C)  traveler's checks 
D)  savings deposits

Question 10

The commercial banks in Fundland have
Reserves	 $500 million
Loans	$3,500 million
Deposits	$4,000 million
Total assets	$5,000 million
The banks hold no excess reserves.
a)Calculate the banks' desired reserve ratio.
b)An immigrant arrives in Fundland with $10 million, which she deposits in a bank. How much does the immigrant's bank lend initially?

Accepted Answer

a)With no excess reserves, the desired r

Question 11

When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the

Accepted Answer

A)  federal funds rate. 
B)  loan rate. 
C)  prime rate. 
D)  discount rate. 
A)  federal funds rate. 
B)  loan rate. 
C)  prime rate. 
D)  discount rate.

Question 12

The commercial banks in Lendland have
Reserves	 $400 million
Loans	$3,600 million
Deposits	$4,000 million
Total assets	$4,600 million
The banks hold no excess reserves.
a)Calculate the banks' reserve ratio.
b)An immigrant arrives in Lendland with $5 million, which he deposits in a bank. How much does the immigrant's bank lend initially?

Accepted Answer

a)With no excess reserves, the desired r

Question 13

Checks ________ money and credit cards ________ money.

Accepted Answer

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

Question 14

The Fed's purchase of government securities could

Accepted Answer

A)  increase loans made by banks. 
B)  be an effective anti-inflationary policy. 
C)  decrease the price level and have no effect on real GDP. 
D)  decrease bank reserves. 
A)  increase loans made by banks. 
B)  be an effective anti-inflationary policy. 
C)  decrease the price level and have no effect on real GDP. 
D)  decrease bank reserves.

Question 15

The chairman of the Federal Reserve's Board of Governors

Accepted Answer

A)  controls the agenda of the Federal Open Market Committee meetings. 
B)  is the main point of contact between the Fed and the President of the U.S. 
C)  receives frequent background briefings on monetary policy issues from a large staff of economists and technical experts. 
D)  All of the above answers are correct. 
A)  controls the agenda of the Federal Open Market Committee meetings. 
B)  is the main point of contact between the Fed and the President of the U.S. 
C)  receives frequent background briefings on monetary policy issues from a large staff of economists and technical experts. 
D)  All of the above answers are correct.

Question 16

A unit of account

Accepted Answer

A)  is a type of accounting of how many currency units there are in an economy. 
B)  is an accounting of the total units of goods and services produced in an economy. 
C)  is an agreed measure for stating the prices of goods and services in an economy. 
D)  is a type of value stored within all assets. 
A)  is a type of accounting of how many currency units there are in an economy. 
B)  is an accounting of the total units of goods and services produced in an economy. 
C)  is an agreed measure for stating the prices of goods and services in an economy. 
D)  is a type of value stored within all assets.

Question 17

Which of the following is TRUE regarding the quantity theory of money?
I.The theory predicts that in the long run the inflation rate equals the money growth rate minus the growth rate of real GDP.
II.The theory predicts that countries with high growth rates of money will have high inflation rates.
III.The theory predicts that increases in the growth rate of velocity lowers the inflation rate.

Accepted Answer

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

Question 18

University National Bank Balance Sheet
Assets Liabilities
  
-The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all excess reserves were loaned out?

Accepted Answer

A)  $528 million 
B)  $352 million 
C)  $232 million 
D)  $0 
A)  $528 million 
B)  $352 million 
C)  $232 million 
D)  $0

Question 19

Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is

Accepted Answer

A)  22.5. 
B)  10.5. 
C)  2.5. 
D)  3. 
A)  22.5. 
B)  10.5. 
C)  2.5. 
D)  3.

Question 20

The discount rate is the interest rate

Accepted Answer

A)  paid on time deposits. 
B)  paid on funds banks borrow from other banks. 
C)  paid on funds that depository institutions borrow from the Federal Reserve. 
D)  that banks charge their "best" customers. 
A)  paid on time deposits. 
B)  paid on funds banks borrow from other banks. 
C)  paid on funds that depository institutions borrow from the Federal Reserve. 
D)  that banks charge their "best" customers.

When the nominal interest rate rises, the

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________.

When the interest rate is above the equilibrium interest rate there is an

Currency outside of banks increases from $100 million to $200 million. This change is considered

The Federal Reserve has regional Federal Reserve Banks and members of the Board of Governors.

Which of the following is an example of money functioning as a medium of exchange?

The balance owed on credit cards in the United States in 2014 was $880 billion. When consumers pay off this balance in full,

Which of the following are part of a commercial bank's reserves? I.cash in the bank's vaults II.loans III.cash in checking accounts

Which of the following is NOT included in the M1 measure of money?

When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the

Checks money and credit cards money.

The Fed's purchase of government securities could

The chairman of the Federal Reserve's Board of Governors

A unit of account

University National Bank Balance Sheet Assets Liabilities -The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all excess reserves were loaned out?

Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is

The discount rate is the interest rate

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

When the nominal interest rate rises, the

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________.

When the interest rate is above the equilibrium interest rate there is an

Currency outside of banks increases from $100 million to $200 million. This change is considered

The Federal Reserve has ________ regional Federal Reserve Banks and ________ members of the Board of Governors.

Which of the following is an example of money functioning as a medium of exchange?

The balance owed on credit cards in the United States in 2014 was $880 billion. When consumers pay off this balance in full,

Which of the following are part of a commercial bank's reserves? I.cash in the bank's vaults II.loans III.cash in checking accounts

Which of the following is NOT included in the M1 measure of money?

When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the

Checks ________ money and credit cards ________ money.

The Fed's purchase of government securities could

The chairman of the Federal Reserve's Board of Governors

A unit of account

University National Bank Balance Sheet Assets Liabilities -The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all excess reserves were loaned out?

Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is

The discount rate is the interest rate

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

The Federal Reserve has regional Federal Reserve Banks and members of the Board of Governors.

Checks money and credit cards money.