Question 1

If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

Accepted Answer

If the Fed sells $100 million of U.S. go

Question 2

The Federal Open Market Committee (FOMC)is composed of

Accepted Answer

A)  representatives from the governors of all 50 states. 
B)  Presidents of 5 Federal Reserve regional banks and the Board of Governors. 
C)  the 12 Presidents of the Federal Reserve regional banks. 
D)  the Board of Governors, the Vice-President of the United States, and the Secretary of Treasury for the United States. 
A)  representatives from the governors of all 50 states. 
B)  Presidents of 5 Federal Reserve regional banks and the Board of Governors. 
C)  the 12 Presidents of the Federal Reserve regional banks. 
D)  the Board of Governors, the Vice-President of the United States, and the Secretary of Treasury for the United States.

Question 3

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Accepted Answer

Reserves include the bank's de

Question 4

-According to the table above, the value of M1 is ________ and the value of M2 is ________.

Accepted Answer

A)  $813 billion; $2490 billion 
B)  $805 billion; $2490 billion 
C)  $813 billion; $3303 billion 
D)  $1,488 billion; $3978 billion 
A)  $813 billion; $2490 billion 
B)  $805 billion; $2490 billion 
C)  $813 billion; $3303 billion 
D)  $1,488 billion; $3978 billion

Question 5

M2 is

Accepted Answer

A)  smaller than M1. 
B)  larger than M1. 
C)  equal to M1, given full employment. 
D)  equal to M1, but only when all three functions of money apply. 
A)  smaller than M1. 
B)  larger than M1. 
C)  equal to M1, given full employment. 
D)  equal to M1, but only when all three functions of money apply.

Question 6

An increase in the nominal interest rate

Accepted Answer

A)  shifts the demand for money curve rightward. 
B)  shifts the demand for money curve leftward. 
C)  leads to an upward movement along the demand for money curve. 
D)  leads to a downward movement along the demand for money curve. 
A)  shifts the demand for money curve rightward. 
B)  shifts the demand for money curve leftward. 
C)  leads to an upward movement along the demand for money curve. 
D)  leads to a downward movement along the demand for money curve.

Question 7

Comparing M1 and M2 we know that

Accepted Answer

A)  M1 is larger because it contains currency. 
B)  M2 is approximately equal to M1. 
C)  M2 is larger because it contains M1 and other assets. 
D)  M2 is larger because it contains more liquid assets than does M1. 
A)  M1 is larger because it contains currency. 
B)  M2 is approximately equal to M1. 
C)  M2 is larger because it contains M1 and other assets. 
D)  M2 is larger because it contains more liquid assets than does M1.

Question 8

An argument in favor of 100 percent reserve banking is that

Accepted Answer

A)  a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else. 
B)  banks should be allowed to lend deposits in order to increase their profits and strengthen the banking system. 
C)  unregulated institutions would be riskier than regulated fractional-reserve banks. 
D)  it would limit the precision of the central bank's control over the quantity of money. 
A)  a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else. 
B)  banks should be allowed to lend deposits in order to increase their profits and strengthen the banking system. 
C)  unregulated institutions would be riskier than regulated fractional-reserve banks. 
D)  it would limit the precision of the central bank's control over the quantity of money.

Question 9

According to the quantity theory of money, changes in the price level are the result of changes in the

Accepted Answer

A)  prime interest rate. 
B)  real interest rate. 
C)  quantity of money. 
D)  velocity of circulation. 
A)  prime interest rate. 
B)  real interest rate. 
C)  quantity of money. 
D)  velocity of circulation.

Question 10

Matthew purchases a candy bar with his allowance. This purchase represents using money as

Accepted Answer

A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  none of the above. 
A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  none of the above.

Question 11

The majority of money is created when

Accepted Answer

A)  banks make loans. 
B)  new coins are minted. 
C)  the federal government borrows from the public. 
D)  the Fed sells bonds. 
A)  banks make loans. 
B)  new coins are minted. 
C)  the federal government borrows from the public. 
D)  the Fed sells bonds.

Question 12

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion. It must be the case that

Accepted Answer

A)  the economy is suffering from inflation. 
B)  the average price paid for a "typical" good is $5. 
C)  there will be a shortage of money balances in the economy. 
D)  the velocity of circulation is 5. 
A)  the economy is suffering from inflation. 
B)  the average price paid for a "typical" good is $5. 
C)  there will be a shortage of money balances in the economy. 
D)  the velocity of circulation is 5.

Question 13

Financial innovation is

Accepted Answer

A)  the process of turning assets into a more liquid form. 
B)  the development of new financial products and services. 
C)  responsible for credit cards being included as part of money. 
D)  causing a decrease in bank profits. 
A)  the process of turning assets into a more liquid form. 
B)  the development of new financial products and services. 
C)  responsible for credit cards being included as part of money. 
D)  causing a decrease in bank profits.

Question 14

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Accepted Answer

A)  minimum rate. 
B)  required reserve ratio. 
C)  money multiplier. 
D)  discount rate. 
A)  minimum rate. 
B)  required reserve ratio. 
C)  money multiplier. 
D)  discount rate.

Question 15

The Federal Reserve is divided into 7 districts.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following does NOT describe a function of money?

Accepted Answer

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

Question 18

Which of the following is included in M1?

Accepted Answer

A)  the $200 you charged on your credit card to purchase your textbooks 
B)  the $200 check you wrote to purchase your textbooks 
C)  the $200 in cash you used to purchase your textbooks 
D)  the $200 loan you arranged to purchase your textbooks 
A)  the $200 you charged on your credit card to purchase your textbooks 
B)  the $200 check you wrote to purchase your textbooks 
C)  the $200 in cash you used to purchase your textbooks 
D)  the $200 loan you arranged to purchase your textbooks

Question 19

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Accepted Answer

A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  none of the above 
A)  a medium of exchange. 
B)  a store of value. 
C)  an unit of account. 
D)  none of the above

Question 20

Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, ________.

Accepted Answer

A)  M1 decreases by $250 and M2 does not change 
B)  M1 decreases by $400 and M2 increases by $250 
C)  M1 does not change and M2 increases by $250 
D)  M1 and M2 do not change 
A)  M1 decreases by $250 and M2 does not change 
B)  M1 decreases by $400 and M2 increases by $250 
C)  M1 does not change and M2 increases by $250 
D)  M1 and M2 do not change

If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

The Federal Open Market Committee (FOMC)is composed of

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

-According to the table above, the value of M1 is and the value of M2 is .

M2 is

An increase in the nominal interest rate

Comparing M1 and M2 we know that

An argument in favor of 100 percent reserve banking is that

According to the quantity theory of money, changes in the price level are the result of changes in the

Matthew purchases a candy bar with his allowance. This purchase represents using money as

The majority of money is created when

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion. It must be the case that

Financial innovation is

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

The Federal Reserve is divided into 7 districts.

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

Which of the following does NOT describe a function of money?

Which of the following is included in M1?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, ________.

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

If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

The Federal Open Market Committee (FOMC)is composed of

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

-According to the table above, the value of M1 is ________ and the value of M2 is ________.

M2 is

An increase in the nominal interest rate

Comparing M1 and M2 we know that

An argument in favor of 100 percent reserve banking is that

According to the quantity theory of money, changes in the price level are the result of changes in the

Matthew purchases a candy bar with his allowance. This purchase represents using money as

The majority of money is created when

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion. It must be the case that

Financial innovation is

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

The Federal Reserve is divided into 7 districts.

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

Which of the following does NOT describe a function of money?

Which of the following is included in M1?

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, ________.

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

-According to the table above, the value of M1 is and the value of M2 is .