Exam 8: Money, the Price Level, and Inflation

The inflation rate in Venezuela has increased between 2005 and 2010, rising from 14 percent per year to 31 percent per year. At the same time, the growth rate of real GDP fell from 10 percent per year to -2.6 percent per year. The quantity theory of money

"When the Fed buys securities from a bank, the quantity of money eventually decreases by a fraction of the initial change in the monetary base." Is the previous statement correct or incorrect? Explain your answer.

The demand for money curve is the relationship between ________ and ________, other things remaining the same.

The Federal Reserve System

Cash assets of a commercial bank consist of

Are credit cards or debit cards money? Explain your answer.

A bank's reserves include

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

The most powerful individual in the Federal Reserve is the Chairman of the Board of Governors.

If the Fed sells securities to commercial banks, there is no money multiplier effect.

List the Fed's main policy tools and briefly explain each one.

A currency drain occurs because people want to hold some of their money as currency rather than as deposits.

Which of the following allow banks to minimize the cost to a business of borrowing? I.Borrowing long and lending short II.Raising funds from a large number of depositors III.Creating money by lending all their reserves

Which of the following is NOT a monetary policy tool?

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result

The direct exchange of goods and services for other goods and services is known as

The commercial banks on Sunny Island have checking deposits of $4 million, reserves of $600,000, and loans of $2.4 million. The desired reserve ratio is 10 percent. The banks have ________ of desired reserves and ________ of excess reserves.

How has growth in M2 minus the growth in real GDP compared to the inflation rate in the United States?

-Use the figure above to answer this question. Suppose the economy is operating at point a. A move to ________ could be explained by ________.

For a commercial bank, the term "reserves" refers to