Question 1

Credit cards are

Accepted Answer

A)  a part of money because they are used in so many transactions. 
B)  a part of money when the transaction approach is used but not when the liquidity approach is used. 
C)  not part of money because they represent a loan of money to the user. 
D)  not part of money because the government has no control over the amount of credit outstanding. 
A)  a part of money because they are used in so many transactions. 
B)  a part of money when the transaction approach is used but not when the liquidity approach is used. 
C)  not part of money because they represent a loan of money to the user. 
D)  not part of money because the government has no control over the amount of credit outstanding.

Question 2

In September 2007, Regions Bank held $3 million in reserves against M1 deposits and made $83 million in loans. Between September 2007 and September 2008, deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2008, it will

Accepted Answer

A)  increase its reserves. 
B)  definitely make more loans. 
C)  cannot make more loans. 
D)  decrease its reserves. 
A)  increase its reserves. 
B)  definitely make more loans. 
C)  cannot make more loans. 
D)  decrease its reserves.

Question 3

Federal Reserve policy tools include all of the following EXCEPT

Accepted Answer

A)  desired reserve ratios. 
B)  required reserve ratios. 
C)  the discount rate. 
D)  open market operations. 
A)  desired reserve ratios. 
B)  required reserve ratios. 
C)  the discount rate. 
D)  open market operations.

Question 4

-In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess

Accepted Answer

A)  quantity of money and the interest rate will rise. 
B)  quantity of money and the interest rate will fall. 
C)  demand for money and the interest rate will fall. 
D)  demand for money and the interest rate will rise. 
A)  quantity of money and the interest rate will rise. 
B)  quantity of money and the interest rate will fall. 
C)  demand for money and the interest rate will fall. 
D)  demand for money and the interest rate will rise.

Question 5

Which of the following is a primary function of money?

Accepted Answer

A)  to serve as a unit of account 
B)  to serve as an encouragement to work 
C)  to reduce the burden of excessive imports 
D)  to raise funds for the government 
A)  to serve as a unit of account 
B)  to serve as an encouragement to work 
C)  to reduce the burden of excessive imports 
D)  to raise funds for the government

Question 6

Which of the following is a service of depository institutions?

Accepted Answer

A)  decreasing the liquidity drain of funds in the banking system 
B)  monitoring the Federal Reserve 
C)  pooling risk 
D)  loaning funds to other depository institutions at the discount rate 
A)  decreasing the liquidity drain of funds in the banking system 
B)  monitoring the Federal Reserve 
C)  pooling risk 
D)  loaning funds to other depository institutions at the discount rate

Question 7

Which of the following is NOT an asset of the Federal Reserve?

Accepted Answer

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

Question 8

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Accepted Answer

A)  open market operations. 
B)  changing the required reserve ratio. 
C)  changing discount rates. 
D)  increasing the number of commercial banks. 
A)  open market operations. 
B)  changing the required reserve ratio. 
C)  changing discount rates. 
D)  increasing the number of commercial banks.

Question 9

If you use $500 of currency to make a deposit in a saving deposit

Accepted Answer

A)  M1 decreases, but M2 is unchanged. 
B)  M1 decreases and M2 increases. 
C)  M1 is unchanged, but M2 increases. 
D)  M1 and M2 both increase. 
A)  M1 decreases, but M2 is unchanged. 
B)  M1 decreases and M2 increases. 
C)  M1 is unchanged, but M2 increases. 
D)  M1 and M2 both increase.

Question 10

If the price level doubles, the

Accepted Answer

A)  nominal demand for money doubles. 
B)  nominal demand for money drops by half. 
C)  real demand for money drops by half. 
D)  real demand for money doubles. 
A)  nominal demand for money doubles. 
B)  nominal demand for money drops by half. 
C)  real demand for money drops by half. 
D)  real demand for money doubles.

Question 11

Sarah buys shares from a financial institution that uses her funds together with other funds to purchase U.S. treasury bills. Sarah has deposited her money into a ________.

Accepted Answer

A)  savings bank 
B)  credit union 
C)  money market mutual fund 
D)  savings and loan association 
A)  savings bank 
B)  credit union 
C)  money market mutual fund 
D)  savings and loan association

Question 12

When bank deposits increase from $1 million to $2 million, banks' required reserves increase from $100,000 to $200,000. The required reserve ratio is ________.

Accepted Answer

A)  10.0 
B)  0.10 
C)  1.00 
D)  0.25 
A)  10.0 
B)  0.10 
C)  1.00 
D)  0.25

Question 13

Liquidity ________.

Accepted Answer

A)  is the property of money being instantly convertible into assets 
B)  increases when a consumer has more credit cards 
C)  is how quickly an asset loses its worth 
D)  is the property of assets being instantly convertible into money 
A)  is the property of money being instantly convertible into assets 
B)  increases when a consumer has more credit cards 
C)  is how quickly an asset loses its worth 
D)  is the property of assets being instantly convertible into money

Question 14

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?

Accepted Answer

A)  Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million. 
B)  Securities increase by $100 million and reserves of Bank A increase by $100 million. 
C)  Securities increase by $100 million and reserves of Bank A decrease by $100 million. 
D)  Securities decrease by $100 million and reserves of Bank A increase by $100 million. 
A)  Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million. 
B)  Securities increase by $100 million and reserves of Bank A increase by $100 million. 
C)  Securities increase by $100 million and reserves of Bank A decrease by $100 million. 
D)  Securities decrease by $100 million and reserves of Bank A increase by $100 million.

Question 15

Why is the nominal interest rate the opportunity cost of holding money?

Accepted Answer

The nominal interest rate is the opportu

Question 16

Which of the following functions are performed by depository institutions?
I.They make long-term loans using short-term deposits, thereby creating liquidity.
II.They efficiently gather funds from a large base of depositors.
III.They concentrate risk.

Accepted Answer

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

Question 17

If nominal GDP equals $10 trillion and the velocity of circulation is 5, then

Accepted Answer

A)  real GDP is $2 trillion. 
B)  the quantity of money is $50 trillion. 
C)  the quantity of money is $2 trillion. 
D)  the real value of the quantity of money is $10 trillion. 
A)  real GDP is $2 trillion. 
B)  the quantity of money is $50 trillion. 
C)  the quantity of money is $2 trillion. 
D)  the real value of the quantity of money is $10 trillion.

Question 18

The U.S. historical evidence

Accepted Answer

A)  generally supports the quantity theory of money in the long run. 
B)  does not support the quantity theory of money. 
C)  demonstrates that there is no correlation between the money growth rate and inflation. 
D)  shows that a higher inflation rate causes an increase in the money growth rate. 
A)  generally supports the quantity theory of money in the long run. 
B)  does not support the quantity theory of money. 
C)  demonstrates that there is no correlation between the money growth rate and inflation. 
D)  shows that a higher inflation rate causes an increase in the money growth rate.

Question 19

A commercial bank puts the funds it receives from various sources into

Accepted Answer

A)  securities, cash assets and loans. 
B)  loans, notes and coins in the bank's vault and deposits. 
C)  reserves, deposits and loans. 
D)  securities, cash assets and deposits. 
A)  securities, cash assets and loans. 
B)  loans, notes and coins in the bank's vault and deposits. 
C)  reserves, deposits and loans. 
D)  securities, cash assets and deposits.

Question 20

The definition of M2 includes

Accepted Answer

A)  M1. 
B)  savings deposits. 
C)  time deposits. 
D)  all of the above. 
A)  M1. 
B)  savings deposits. 
C)  time deposits. 
D)  all of the above.

Credit cards are

In September 2007, Regions Bank held $3 million in reserves against M1 deposits and made $83 million in loans. Between September 2007 and September 2008, deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2008, it will

Federal Reserve policy tools include all of the following EXCEPT

-In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess

Which of the following is a primary function of money?

Which of the following is a service of depository institutions?

Which of the following is NOT an asset of the Federal Reserve?

The tools at the disposal of the Fed for changing the quantity of money do NOT include

If you use $500 of currency to make a deposit in a saving deposit

If the price level doubles, the

Sarah buys shares from a financial institution that uses her funds together with other funds to purchase U.S. treasury bills. Sarah has deposited her money into a ________.

When bank deposits increase from $1 million to $2 million, banks' required reserves increase from $100,000 to $200,000. The required reserve ratio is ________.

Liquidity ________.

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?

Why is the nominal interest rate the opportunity cost of holding money?

Which of the following functions are performed by depository institutions? I.They make long-term loans using short-term deposits, thereby creating liquidity. II.They efficiently gather funds from a large base of depositors. III.They concentrate risk.

If nominal GDP equals $10 trillion and the velocity of circulation is 5, then

The U.S. historical evidence

A commercial bank puts the funds it receives from various sources into

The definition of M2 includes

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

Credit cards are

In September 2007, Regions Bank held $3 million in reserves against M1 deposits and made $83 million in loans. Between September 2007 and September 2008, deposits decreased from $114 million to $95 million. If Regions Bank wants to maintain its desired reserve ratio in 2008, it will

Federal Reserve policy tools include all of the following EXCEPT

-In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess

Which of the following is a primary function of money?

Which of the following is a service of depository institutions?

Which of the following is NOT an asset of the Federal Reserve?

The tools at the disposal of the Fed for changing the quantity of money do NOT include

If you use $500 of currency to make a deposit in a saving deposit

If the price level doubles, the

Sarah buys shares from a financial institution that uses her funds together with other funds to purchase U.S. treasury bills. Sarah has deposited her money into a ________.

When bank deposits increase from $1 million to $2 million, banks' required reserves increase from $100,000 to $200,000. The required reserve ratio is ________.

Liquidity ________.

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?

Why is the nominal interest rate the opportunity cost of holding money?

Which of the following functions are performed by depository institutions? I.They make long-term loans using short-term deposits, thereby creating liquidity. II.They efficiently gather funds from a large base of depositors. III.They concentrate risk.

If nominal GDP equals $10 trillion and the velocity of circulation is 5, then

The U.S. historical evidence

A commercial bank puts the funds it receives from various sources into

The definition of M2 includes

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