Question 1

A bank creates money by

Accepted Answer

A)  lending its excess reserves. 
B)  purchasing currency from the Federal Reserve. 
C)  buying bonds from the Federal Reserve. 
D)  printing more checks. 
A)  lending its excess reserves. 
B)  purchasing currency from the Federal Reserve. 
C)  buying bonds from the Federal Reserve. 
D)  printing more checks.

Question 2

Explain the process by which the banking system creates money.

Accepted Answer

When a bank gains excess reserves, it us

Question 3

In the United States, the central bank is the ________.

Accepted Answer

A)  Bank of America 
B)  Federal Reserve System 
C)  Federal Reserve Bank of New York 
D)  Federal Reserve Bank of Washington D.C. 
A)  Bank of America 
B)  Federal Reserve System 
C)  Federal Reserve Bank of New York 
D)  Federal Reserve Bank of Washington D.C.

Question 4

"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement-is it correct or incorrect?

Accepted Answer

The statement is incorrect on several di

Question 5

A bank can only make a loan if it has

Accepted Answer

A)  excess reserves. 
B)  a creditworthy customer willing to pay a high interest rate. 
C)  permission from the Federal Reserve. 
D)  reserves equal to its deposits. 
A)  excess reserves. 
B)  a creditworthy customer willing to pay a high interest rate. 
C)  permission from the Federal Reserve. 
D)  reserves equal to its deposits.

Question 6

Which of the following is an asset of the Fed?

Accepted Answer

A)  Mortgage-backed securities 
B)  currency 
C)  reserves of depository institutions 
D)  Both answers B and C are correct. 
A)  Mortgage-backed securities 
B)  currency 
C)  reserves of depository institutions 
D)  Both answers B and C are correct.

Question 7

-The above table has the demand for money schedule.
a)If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate?
b)Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

Accepted Answer

a)The equilibrium interest rate is 4 per

Question 8

When a depository institution pools risk, it

Accepted Answer

A)  buys short and lends long. 
B)  borrows reserves from the Federal Reserve. 
C)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
D)  makes loans to just one firm. 
A)  buys short and lends long. 
B)  borrows reserves from the Federal Reserve. 
C)  spreads loan losses across many depositors so that no one depositor faces a high degree of risk. 
D)  makes loans to just one firm.

Question 9

In a world with no money, costs are expressed in terms of other goods. If one video game costs two hamburgers, and a hamburger costs three sodas, how many sodas would it take to buy a video game?

Accepted Answer

A)  6 
B)  5 
C)  3 
D)  3/2 
A)  6 
B)  5 
C)  3 
D)  3/2

Question 10

The monetary expansion process from an open market operation continues until

Accepted Answer

A)  required reserves are eliminated. 
B)  the Federal Reserve takes actions to stop the process. 
C)  the discount rate is lower than market interest rates. 
D)  excess bank reserves are eliminated. 
A)  required reserves are eliminated. 
B)  the Federal Reserve takes actions to stop the process. 
C)  the discount rate is lower than market interest rates. 
D)  excess bank reserves are eliminated.

Question 11

Which of the following is NOT a function of money?

Accepted Answer

A)  medium of exchange 
B)  barter 
C)  unit of account 
D)  store of value 
A)  medium of exchange 
B)  barter 
C)  unit of account 
D)  store of value

Question 12

The major role of a commercial bank is to

Accepted Answer

A)  make mortgage loans. 
B)  sell shares and use the proceeds to buy stocks. 
C)  receive deposits and make loans. 
D)  restrain the growth of the quantity of money. 
A)  make mortgage loans. 
B)  sell shares and use the proceeds to buy stocks. 
C)  receive deposits and make loans. 
D)  restrain the growth of the quantity of money.

Question 13

The money multiplier determines how much

Accepted Answer

A)  real GDP will be expanded given an increase in autonomous investment. 
B)  the monetary base will be expanded given a change in the quantity of money. 
C)  the quantity of money will be expanded given a change in the monetary base. 
D)  money demand will expand given a change in the quantity of money. 
A)  real GDP will be expanded given an increase in autonomous investment. 
B)  the monetary base will be expanded given a change in the quantity of money. 
C)  the quantity of money will be expanded given a change in the monetary base. 
D)  money demand will expand given a change in the quantity of money.

Question 14

Barter is an inefficient means of exchange because

Accepted Answer

A)  barter transactions require a double coincidence of wants. 
B)  barter only occurs in relatively primitive economies. 
C)  demand will not necessarily equal supply. 
D)  in a barter transaction only one party needs to want what the other party has to sell. 
A)  barter transactions require a double coincidence of wants. 
B)  barter only occurs in relatively primitive economies. 
C)  demand will not necessarily equal supply. 
D)  in a barter transaction only one party needs to want what the other party has to sell.

Question 15

If the Fed sells government securities

Accepted Answer

A)  commercial bank reserves will decrease. 
B)  the government's debt will decrease. 
C)  commercial bank reserves will increase. 
D)  there will be no effect on the quantity of money. 
A)  commercial bank reserves will decrease. 
B)  the government's debt will decrease. 
C)  commercial bank reserves will increase. 
D)  there will be no effect on the quantity of money.

Question 16

Suppose that the interest rate is greater than the equilibrium interest rate. Which of the following occurs?
I.There is an excess quantity of money.
II.The quantity of money automatically increases.
III.The interest rate falls.

Accepted Answer

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

Question 17

Controlling the quantity of money and interest rates to influence aggregate economic activity is called

Accepted Answer

A)  foreign policy. 
B)  monetary policy. 
C)  fiscal policy. 
D)  bank antitrust policy. 
A)  foreign policy. 
B)  monetary policy. 
C)  fiscal policy. 
D)  bank antitrust policy.

Question 18

-When the interest rate falls in the money market, the quantity of money demanded ________ and the quantity of money supplied ________.

Accepted Answer

A)  increases; decreases 
B)  decreases; increases 
C)  stays the same; decreases 
D)  increases; stays the same 
A)  increases; decreases 
B)  decreases; increases 
C)  stays the same; decreases 
D)  increases; stays the same

Question 19

If V = 5, P = $3, and Y = 50, then the quantity of money equals

Accepted Answer

A)  $10. 
B)  $30. 
C)  $150. 
D)  $300. 
A)  $10. 
B)  $30. 
C)  $150. 
D)  $300.

Question 20

The Chairman of the Fed is appointed by ________.

Accepted Answer

A)  the Board of Governors of the Federal Reserve System 
B)  the President of the United States 
C)  Congress 
D)  the U.S. Senate 
A)  the Board of Governors of the Federal Reserve System 
B)  the President of the United States 
C)  Congress 
D)  the U.S. Senate

A bank creates money by

Explain the process by which the banking system creates money.

In the United States, the central bank is the ________.

"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement-is it correct or incorrect?

A bank can only make a loan if it has

Which of the following is an asset of the Fed?

-The above table has the demand for money schedule. a)If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate? b)Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

When a depository institution pools risk, it

In a world with no money, costs are expressed in terms of other goods. If one video game costs two hamburgers, and a hamburger costs three sodas, how many sodas would it take to buy a video game?

The monetary expansion process from an open market operation continues until

Which of the following is NOT a function of money?

The major role of a commercial bank is to

The money multiplier determines how much

Barter is an inefficient means of exchange because

If the Fed sells government securities

Suppose that the interest rate is greater than the equilibrium interest rate. Which of the following occurs? I.There is an excess quantity of money. II.The quantity of money automatically increases. III.The interest rate falls.

Controlling the quantity of money and interest rates to influence aggregate economic activity is called

-When the interest rate falls in the money market, the quantity of money demanded and the quantity of money supplied .

If V = 5, P = $3, and Y = 50, then the quantity of money equals

The Chairman of the Fed is appointed by ________.

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

A bank creates money by

Explain the process by which the banking system creates money.

In the United States, the central bank is the ________.

"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement-is it correct or incorrect?

A bank can only make a loan if it has

Which of the following is an asset of the Fed?

-The above table has the demand for money schedule. a)If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate? b)Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

When a depository institution pools risk, it

In a world with no money, costs are expressed in terms of other goods. If one video game costs two hamburgers, and a hamburger costs three sodas, how many sodas would it take to buy a video game?

The monetary expansion process from an open market operation continues until

Which of the following is NOT a function of money?

The major role of a commercial bank is to

The money multiplier determines how much

Barter is an inefficient means of exchange because

If the Fed sells government securities

Suppose that the interest rate is greater than the equilibrium interest rate. Which of the following occurs? I.There is an excess quantity of money. II.The quantity of money automatically increases. III.The interest rate falls.

Controlling the quantity of money and interest rates to influence aggregate economic activity is called

-When the interest rate falls in the money market, the quantity of money demanded ________ and the quantity of money supplied ________.

If V = 5, P = $3, and Y = 50, then the quantity of money equals

The Chairman of the Fed is appointed by ________.

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

-When the interest rate falls in the money market, the quantity of money demanded and the quantity of money supplied .