Question 1

In the short run, when the Fed decreases the quantity of money

Accepted Answer

A)  bond prices fall and the interest rate rises. 
B)  bond prices rise and the interest rate falls. 
C)  the demand for money increases. 
D)  the supply of money curve shifts rightward. 
A)  bond prices fall and the interest rate rises. 
B)  bond prices rise and the interest rate falls. 
C)  the demand for money increases. 
D)  the supply of money curve shifts rightward.

Question 2

-The above table gives the initial balance sheet for Mega Bank. Mega Bank's desired reserves equal its required reserves. Based on the initial balance sheet, what is the required reserve ratio for Mega Bank?

Accepted Answer

A)  3 percent 
B)  10 percent 
C)  30 percent 
D)  1.4 percent 
A)  3 percent 
B)  10 percent 
C)  30 percent 
D)  1.4 percent

Question 3

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

Accepted Answer

A)  Securities decrease by $100 million and reserves increase by $100 million. 
B)  Securities decrease by $100 million and deposits decrease by $100 million. 
C)  Securities increase by $100 million and reserves decrease by $100 million. 
D)  Securities increase by $100 million and reserves increase by $100 million. 
A)  Securities decrease by $100 million and reserves increase by $100 million. 
B)  Securities decrease by $100 million and deposits decrease by $100 million. 
C)  Securities increase by $100 million and reserves decrease by $100 million. 
D)  Securities increase by $100 million and reserves increase by $100 million.

Question 4

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

Accepted Answer

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

Question 5

The table below shows data for Brazil.
 
Assuming the rate of velocity change is constant

Accepted Answer

A)  the growth rate of money increased between 2006 and 2007. 
B)  the money growth rate was -0.4 percent in 2006. 
C)  the growth rate of nominal GDP was 1.7 percent in 2006. 
D)  the demand for money curve shifted leftward in 2006. 
A)  the growth rate of money increased between 2006 and 2007. 
B)  the money growth rate was -0.4 percent in 2006. 
C)  the growth rate of nominal GDP was 1.7 percent in 2006. 
D)  the demand for money curve shifted leftward in 2006.

Question 6

Which of the following affects the amount of money a person is willing to hold?

Accepted Answer

A)  The use of credit cards increases. 
B)  The price level rises from 103 to 107. 
C)  The interest rate that you earn on your savings account increases. 
D)  All of the above are correct. 
A)  The use of credit cards increases. 
B)  The price level rises from 103 to 107. 
C)  The interest rate that you earn on your savings account increases. 
D)  All of the above are correct.

Question 7

The monetary base is the sum of

Accepted Answer

A)  U.S. Treasury notes and other government securities. 
B)  currency and reserves of depository institutions. 
C)  foreign and domestic deposits at the Fed. 
D)  currency and checkable deposits at depository institutions. 
A)  U.S. Treasury notes and other government securities. 
B)  currency and reserves of depository institutions. 
C)  foreign and domestic deposits at the Fed. 
D)  currency and checkable deposits at depository institutions.

Question 8

According to the quantity theory of money, in the long run

Accepted Answer

A)  an increase in the quantity of money creates an increase the price level but no increase in real GDP. 
B)  the quantity of money in the economy will always be just the right amount. 
C)  an increase in the quantity of money creates an increase in the price level and in real GDP. 
D)  None of the above answers are correct. 
A)  an increase in the quantity of money creates an increase the price level but no increase in real GDP. 
B)  the quantity of money in the economy will always be just the right amount. 
C)  an increase in the quantity of money creates an increase in the price level and in real GDP. 
D)  None of the above answers are correct.

Question 9

An argument in favor of fractional-reserve banking is that

Accepted Answer

A)  unregulated institutions would be riskier than regulated fractional-reserve banks. 
B)  it increases the precision of the central bank's control over the quantity of money. 
C)  a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else. 
D)  it decreases the risk of a bank running out of cash. 
A)  unregulated institutions would be riskier than regulated fractional-reserve banks. 
B)  it increases the precision of the central bank's control over the quantity of money. 
C)  a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else. 
D)  it decreases the risk of a bank running out of cash.

Question 10

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

Accepted Answer

The bank can make loans equal to its exc

Question 11

According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in

Accepted Answer

A)  the price level. 
B)  the velocity of circulation. 
C)  real GDP. 
D)  the unemployment rate. 
A)  the price level. 
B)  the velocity of circulation. 
C)  real GDP. 
D)  the unemployment rate.

Question 12

What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money, why are they included in M1 or M2?

Accepted Answer

M1 is the sum of currency outside of the

Question 13

Which of the following is NOT part of the monetary base?

Accepted Answer

A)  currency 
B)  reserves of depository institutions 
C)  the public's checking deposits at commercial banks 
D)  commercial banks' reserves. 
A)  currency 
B)  reserves of depository institutions 
C)  the public's checking deposits at commercial banks 
D)  commercial banks' reserves.

Question 14

Which of the following is NOT included in the M1 measure of money?

Accepted Answer

A)  currency held outside banks 
B)  currency held in bank vaults 
C)  checking deposits at commercial banks 
D)  checking deposits at credit unions 
A)  currency held outside banks 
B)  currency held in bank vaults 
C)  checking deposits at commercial banks 
D)  checking deposits at credit unions

Question 15

If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

Accepted Answer

You have $200.75 of M1, compri

Question 16

Which of the following is CORRECT? The demand for money

Accepted Answer

A)  increases as real GDP increases. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  increases when the nominal interest rate rises. 
A)  increases as real GDP increases. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  increases when the nominal interest rate rises.

Question 17

The opportunity cost of holding money increases when

Accepted Answer

A)  the purchasing power of money rises. 
B)  the nominal interest rate rises. 
C)  the price level falls. 
D)  consumers' real incomes increase. 
A)  the purchasing power of money rises. 
B)  the nominal interest rate rises. 
C)  the price level falls. 
D)  consumers' real incomes increase.

Question 18

How does an increase in real GDP affect the demand for money curve?

Accepted Answer

An increase in real

Question 19

The demand for nominal money

Accepted Answer

A)  increases as the price level increases. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  is the same as the demand for real money. 
A)  increases as the price level increases. 
B)  decreases as the price level increases. 
C)  depends on the quantity of money. 
D)  is the same as the demand for real money.

Question 20

Are the members of the Board of Governors of the Federal Reserve System elected officials?

Accepted Answer

No, the members are not electe

In the short run, when the Fed decreases the quantity of money

-The above table gives the initial balance sheet for Mega Bank. Mega Bank's desired reserves equal its required reserves. Based on the initial balance sheet, what is the required reserve ratio for Mega Bank?

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

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

The table below shows data for Brazil. Assuming the rate of velocity change is constant

Which of the following affects the amount of money a person is willing to hold?

The monetary base is the sum of

According to the quantity theory of money, in the long run

An argument in favor of fractional-reserve banking is that

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in

What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money, why are they included in M1 or M2?

Which of the following is NOT part of the monetary base?

Which of the following is NOT included in the M1 measure of money?

If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

Which of the following is CORRECT? The demand for money

The opportunity cost of holding money increases when

How does an increase in real GDP affect the demand for money curve?

The demand for nominal money

Are the members of the Board of Governors of the Federal Reserve System elected officials?

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

In the short run, when the Fed decreases the quantity of money

-The above table gives the initial balance sheet for Mega Bank. Mega Bank's desired reserves equal its required reserves. Based on the initial balance sheet, what is the required reserve ratio for Mega Bank?

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

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

The table below shows data for Brazil. Assuming the rate of velocity change is constant

Which of the following affects the amount of money a person is willing to hold?

The monetary base is the sum of

According to the quantity theory of money, in the long run

An argument in favor of fractional-reserve banking is that

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in

What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money, why are they included in M1 or M2?

Which of the following is NOT part of the monetary base?

Which of the following is NOT included in the M1 measure of money?

If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

Which of the following is CORRECT? The demand for money

The opportunity cost of holding money increases when

How does an increase in real GDP affect the demand for money curve?

The demand for nominal money

Are the members of the Board of Governors of the Federal Reserve System elected officials?

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