Question 1

-The above table gives the initial balance sheet for Mini Bank. If the bank's desired reserve ratio is 10 percent, it will make

Accepted Answer

A)  more loans. 
B)  fewer loans. 
C)  no change in its lending. 
D)  you cannot predict what the bank will do from this balance sheet without more information. 
A)  more loans. 
B)  fewer loans. 
C)  no change in its lending. 
D)  you cannot predict what the bank will do from this balance sheet without more information.

Question 2

Which of the following is considered a depository institution?
I.the U.S. Treasury
II.a commercial bank like Citibank
III.a credit union for federal government employees

Accepted Answer

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

Question 3

The smaller the currency drain, the

Accepted Answer

A)  smaller the increase in the quantity of money from an increase in reserves. 
B)  more likely it is that the banking system will hold a larger proportion of excess reserves. 
C)  the smaller the effect of a change in the discount rate. 
D)  larger the increase in the quantity of money from an increase in reserves. 
A)  smaller the increase in the quantity of money from an increase in reserves. 
B)  more likely it is that the banking system will hold a larger proportion of excess reserves. 
C)  the smaller the effect of a change in the discount rate. 
D)  larger the increase in the quantity of money from an increase in reserves.

Question 4

If real GDP decreases, the demand for money curve will shift

Accepted Answer

A)  leftward and the interest rate will rise. 
B)  leftward and the interest rate will fall. 
C)  rightward and the interest rate will rise. 
D)  rightward and the interest rate will fall. 
A)  leftward and the interest rate will rise. 
B)  leftward and the interest rate will fall. 
C)  rightward and the interest rate will rise. 
D)  rightward and the interest rate will fall.

Question 5

Suppose prices are quoted in dollars and transactions are conducted in pesos. The peso 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.

Question 6

Whenever a bank's actual reserves exceed its desired reserves, the bank

Accepted Answer

A)  can lend out additional funds. 
B)  needs to call in loans. 
C)  will go out of business. 
D)  must increase the amount of its required reserves by obtaining more cash. 
A)  can lend out additional funds. 
B)  needs to call in loans. 
C)  will go out of business. 
D)  must increase the amount of its required reserves by obtaining more cash.

Question 7

Which of the following is part of M2?

Accepted Answer

A)  checks 
B)  credit cards 
C)  currency held inside a bank 
D)  none of these are part of M1 or M2 
A)  checks 
B)  credit cards 
C)  currency held inside a bank 
D)  none of these are part of M1 or M2

Question 8

Which of the following is a liability on the balance sheet of the Federal Reserve System?

Accepted Answer

A)  currency 
B)  U.S. government securities 
C)  mortgage-backed securities 
D)  None of the above are correct because they are all assets of the Federal Reserve. 
A)  currency 
B)  U.S. government securities 
C)  mortgage-backed securities 
D)  None of the above are correct because they are all assets of the Federal Reserve.

Question 9

The equation of exchange states that the price level is equal to

Accepted Answer

A)  the quantity of money. 
B)  velocity of circulation multiplied by the quantity of money divided by real GDP. 
C)  real GDP multiplied by the velocity of circulation divided by nominal GDP. 
D)  the velocity of circulation. 
A)  the quantity of money. 
B)  velocity of circulation multiplied by the quantity of money divided by real GDP. 
C)  real GDP multiplied by the velocity of circulation divided by nominal GDP. 
D)  the velocity of circulation.

Question 10

M1 includes

Accepted Answer

A)  currency, checking deposits and traveler's checks. 
B)  money, stocks and bonds. 
C)  money, checking deposits and traveler's checks. 
D)  money market mutual funds, stocks and bonds. 
A)  currency, checking deposits and traveler's checks. 
B)  money, stocks and bonds. 
C)  money, checking deposits and traveler's checks. 
D)  money market mutual funds, stocks and bonds.

Question 11

"The velocity of circulation is the average speed with which money is loaned to businesses and households." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. Th

Question 12

Which of the following is TRUE regarding the Federal Open Market Committee (FOMC)?

Accepted Answer

A)  It is the main policy-making group of the Congress. 
B)  Representatives from each state control its operation. 
C)  It meets about every six weeks to decide on monetary policy. 
D)  Both answers A and C are correct. 
A)  It is the main policy-making group of the Congress. 
B)  Representatives from each state control its operation. 
C)  It meets about every six weeks to decide on monetary policy. 
D)  Both answers A and C are correct.

Question 13

What factors affect the demand for money?

Accepted Answer

Four factors influence the demand for mo

Question 14

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Accepted Answer

A)  medium of exchange. 
B)  standard of deferred payment. 
C)  store of value. 
D)  unit of account. 
A)  medium of exchange. 
B)  standard of deferred payment. 
C)  store of value. 
D)  unit of account.

Question 15

If a savings and loan "pools risk," which of the following must it do?

Accepted Answer

A)  take funds in from a large number of lenders 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  lend money to a large number of firms 
D)  Both answers A and C are correct. 
A)  take funds in from a large number of lenders 
B)  have a large spread between the interest rate it charges borrowers and the interest rate it pays lenders 
C)  lend money to a large number of firms 
D)  Both answers A and C are correct.

Question 16

In the short run, which of the following actions lower the interest rate?

Accepted Answer

A)  a decrease in the demand for money 
B)  an increase in the demand for money 
C)  a decrease in the quantity of money 
D)  a decrease in bond prices 
A)  a decrease in the demand for money 
B)  an increase in the demand for money 
C)  a decrease in the quantity of money 
D)  a decrease in bond prices

Question 17

In comparing growth rates of money growth and inflation across countries, the long-run proposition of the quantity theory of money is supported.

Accepted Answer

A) True 
 B)False

Question 18

If the price level rises, the quantity of

Accepted Answer

A)  nominal money people demand increases. 
B)  real money people demand increases. 
C)  nominal money people demand decreases. 
D)  real money people demand decreases. 
A)  nominal money people demand increases. 
B)  real money people demand increases. 
C)  nominal money people demand decreases. 
D)  real money people demand decreases.

Question 19

The table below shows data (in millions)for Sun Trust Banks in September 2007 and September 2008.
 
The data show that Sun Trust

Accepted Answer

A)  increased its reserve ratio to 5.3 percent over the 12 months. 
B)  increased its reserve ratio to 6.4 percent over the 12 months. 
C)  has fewer excess reserves in 2008. 
D)  faced a higher currency drain ratio in 2008. 
A)  increased its reserve ratio to 5.3 percent over the 12 months. 
B)  increased its reserve ratio to 6.4 percent over the 12 months. 
C)  has fewer excess reserves in 2008. 
D)  faced a higher currency drain ratio in 2008.

Question 20

Which of the following is NOT included in the M2 measure of money?

Accepted Answer

A)  checking deposits 
B)  traveler's checks 
C)  time deposits 
D)  shares of the stocks of large companies 
A)  checking deposits 
B)  traveler's checks 
C)  time deposits 
D)  shares of the stocks of large companies

-The above table gives the initial balance sheet for Mini Bank. If the bank's desired reserve ratio is 10 percent, it will make

Which of the following is considered a depository institution? I.the U.S. Treasury II.a commercial bank like Citibank III.a credit union for federal government employees

The smaller the currency drain, the

If real GDP decreases, the demand for money curve will shift

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

Whenever a bank's actual reserves exceed its desired reserves, the bank

Which of the following is part of M2?

Which of the following is a liability on the balance sheet of the Federal Reserve System?

The equation of exchange states that the price level is equal to

M1 includes

"The velocity of circulation is the average speed with which money is loaned to businesses and households." Is the previous statement correct or incorrect?

Which of the following is TRUE regarding the Federal Open Market Committee (FOMC)?

What factors affect the demand for money?

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

If a savings and loan "pools risk," which of the following must it do?

In the short run, which of the following actions lower the interest rate?

In comparing growth rates of money growth and inflation across countries, the long-run proposition of the quantity theory of money is supported.

If the price level rises, the quantity of

The table below shows data (in millions)for Sun Trust Banks in September 2007 and September 2008. The data show that Sun Trust

Which of the following is NOT included in the M2 measure of money?

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

-The above table gives the initial balance sheet for Mini Bank. If the bank's desired reserve ratio is 10 percent, it will make

Which of the following is considered a depository institution? I.the U.S. Treasury II.a commercial bank like Citibank III.a credit union for federal government employees

The smaller the currency drain, the

If real GDP decreases, the demand for money curve will shift

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

Whenever a bank's actual reserves exceed its desired reserves, the bank

Which of the following is part of M2?

Which of the following is a liability on the balance sheet of the Federal Reserve System?

The equation of exchange states that the price level is equal to

M1 includes

"The velocity of circulation is the average speed with which money is loaned to businesses and households." Is the previous statement correct or incorrect?

Which of the following is TRUE regarding the Federal Open Market Committee (FOMC)?

What factors affect the demand for money?

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

If a savings and loan "pools risk," which of the following must it do?

In the short run, which of the following actions lower the interest rate?

In comparing growth rates of money growth and inflation across countries, the long-run proposition of the quantity theory of money is supported.

If the price level rises, the quantity of

The table below shows data (in millions)for Sun Trust Banks in September 2007 and September 2008. The data show that Sun Trust

Which of the following is NOT included in the M2 measure of money?

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