Question 1

Which of the following would not be included in M2?

Accepted Answer

A)  demand deposits 
B)  money market accounts 
C)  checking accounts 
D)  Treasury bonds 
A)  demand deposits 
B)  money market accounts 
C)  checking accounts 
D)  Treasury bonds

Question 2

Cold Creek Credit Union has liabilities of $450,000 and net worth of $175,000. Cold Creek Credit Union's assets are

Accepted Answer

A)  $175,000. 
B)  $275,000. 
C)  $450,000. 
D)  $625,000. 
A)  $175,000. 
B)  $275,000. 
C)  $450,000. 
D)  $625,000.

Question 3

Currency held outside banks is included in

Accepted Answer

A)  both M1 and M2. 
B)  M2 only. 
C)  M1 only. 
D)  neither M1 nor M2. 
A)  both M1 and M2. 
B)  M2 only. 
C)  M1 only. 
D)  neither M1 nor M2.

Question 4

Refer to the information provided in Table 10.3 below to answer the questions that follow.
Table 10.3  
-Refer to Table 10.3. The net worth of People's Bank is $________.

Accepted Answer

A)  1,000,000 
B)  800,000 
C)  300,000 
D)  200,000 
A)  1,000,000 
B)  800,000 
C)  300,000 
D)  200,000

Question 5

If people think interest rates are above their normal levels, they will want to hold more money in savings accounts and less in cash.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not included in M1 or M2?

Accepted Answer

A)  checking account balances 
B)  currency in circulation outside of commercial banks 
C)  traveler's checks 
D)  credit card balances 
A)  checking account balances 
B)  currency in circulation outside of commercial banks 
C)  traveler's checks 
D)  credit card balances

Question 7

Refer to the information provided in Table 10.2 below to answer the questions that follow.
Table 10.2  
-Refer to Table 10.2. First Commercial Bank's excess reserves equal $________.

Accepted Answer

A)  200,000 
B)  600,000 
C)  1,000,000 
D)  1,500,000 
A)  200,000 
B)  600,000 
C)  1,000,000 
D)  1,500,000

Question 8

Cowrie shells have been used as money is West Africa. This is an example of

Accepted Answer

A)  fiat money. 
B)  legal money. 
C)  token money. 
D)  commodity money. 
A)  fiat money. 
B)  legal money. 
C)  token money. 
D)  commodity money.

Question 9

Government securities that mature in less than a year are called

Accepted Answer

A)  Federal funds bonds. 
B)  government bonds. 
C)  Federal Reserve bonds. 
D)  Treasury bills. 
A)  Federal funds bonds. 
B)  government bonds. 
C)  Federal Reserve bonds. 
D)  Treasury bills.

Question 10

When a seller on eBay posts a "Buy-It-Now" price on the Vespa scooter she is trying to sell, she is using money as a

Accepted Answer

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

Question 11

When you take $100 from your saving account and deposit it in your checking account, M2 decreases.

Accepted Answer

A) True 
 B)False

Question 12

Included in M2 are

Accepted Answer

A)  bank loans. 
B)  credit cards. 
C)  bank capital. 
D)  demand deposits. 
A)  bank loans. 
B)  credit cards. 
C)  bank capital. 
D)  demand deposits.

Question 13

Refer to the information provided in Scenario 10.2 below to answer the questions that follow.
SCENARIO 10.2: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up.  
-Refer to Scenario 10.2. What is the money multiplier in this economy?

Accepted Answer

A)  10 
B)  16.67 
C)  20 
D)  50 
A)  10 
B)  16.67 
C)  20 
D)  50

Question 14

Assume the current one-year interest rate on a bond is 2%, and the one-year expected rate a year from now is 3%. According to the expectations theory of the term structure of interest rates, the two-year interest rate is

Accepted Answer

A)  2%. 
B)  2.5%. 
C)  3%. 
D)  5%. 
A)  2%. 
B)  2.5%. 
C)  3%. 
D)  5%.

Question 15

M1 is a

Accepted Answer

A)  stock variable. 
B)  flow variable. 
C)  near money. 
D)  commodity money. 
A)  stock variable. 
B)  flow variable. 
C)  near money. 
D)  commodity money.

Question 16

Refer to the information provided in Figure 10.1 below to answer the questions that follow.   Figure 10.1
-Refer to Figure 10.1. A movement from Point B to Point D can be caused by

Accepted Answer

A)  a decrease in nominal income. 
B)  an increase in the interest rate. 
C)  a decrease in the interest rate. 
D)  an increase in nominal income. 
A)  a decrease in nominal income. 
B)  an increase in the interest rate. 
C)  a decrease in the interest rate. 
D)  an increase in nominal income.

Question 17

The money supply has increased from $1.4 trillion to $1.45 trillion. Which of the following could have caused this increase?

Accepted Answer

A)  The Fed sold government securities to the public. 
B)  Consumers who were holding money outside the banking system deposit this money. 
C)  The Fed increased the discount rate. 
D)  Commercial banks began to hold excess reserves. 
A)  The Fed sold government securities to the public. 
B)  Consumers who were holding money outside the banking system deposit this money. 
C)  The Fed increased the discount rate. 
D)  Commercial banks began to hold excess reserves.

Question 18

Since they must lend money to make money, all banks are necessarily insolvent.

Accepted Answer

A) True 
 B)False

Question 19

Josie wants to trade swimming lessons for cooking lessons. Maria wants to trade cooking lessons for swimming lessons. Josie and Maria have

Accepted Answer

A)  the basis for a liquidity exchange. 
B)  a double incidence of demand. 
C)  the basis for a double fiat exchange. 
D)  a double coincidence of wants. 
A)  the basis for a liquidity exchange. 
B)  a double incidence of demand. 
C)  the basis for a double fiat exchange. 
D)  a double coincidence of wants.

Question 20

A sale of government securities to the public by the Federal Reserve will increase the money supply.

Accepted Answer

A) True 
 B)False

Which of the following would not be included in M2?

Cold Creek Credit Union has liabilities of $450,000 and net worth of $175,000. Cold Creek Credit Union's assets are

Currency held outside banks is included in

Refer to the information provided in Table 10.3 below to answer the questions that follow. Table 10.3 -Refer to Table 10.3. The net worth of People's Bank is $________.

If people think interest rates are above their normal levels, they will want to hold more money in savings accounts and less in cash.

Which of the following is not included in M1 or M2?

Refer to the information provided in Table 10.2 below to answer the questions that follow. Table 10.2 -Refer to Table 10.2. First Commercial Bank's excess reserves equal $________.

Cowrie shells have been used as money is West Africa. This is an example of

Government securities that mature in less than a year are called

When a seller on eBay posts a "Buy-It-Now" price on the Vespa scooter she is trying to sell, she is using money as a

When you take $100 from your saving account and deposit it in your checking account, M2 decreases.

Included in M2are

Assume the current one-year interest rate on a bond is 2%, and the one-year expected rate a year from now is 3%. According to the expectations theory of the term structure of interest rates, the two-year interest rate is

M1 is a

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. A movement from Point B to Point D can be caused by

The money supply has increased from $1.4 trillion to $1.45 trillion. Which of the following could have caused this increase?

Since they must lend money to make money, all banks are necessarily insolvent.

Josie wants to trade swimming lessons for cooking lessons. Maria wants to trade cooking lessons for swimming lessons. Josie and Maria have

A sale of government securities to the public by the Federal Reserve will increase the money supply.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 10: Money, the Federal Reserve, and the Interest Rate

Which of the following would not be included in M2?

Cold Creek Credit Union has liabilities of $450,000 and net worth of $175,000. Cold Creek Credit Union's assets are

Currency held outside banks is included in

Refer to the information provided in Table 10.3 below to answer the questions that follow. Table 10.3 -Refer to Table 10.3. The net worth of People's Bank is $________.

If people think interest rates are above their normal levels, they will want to hold more money in savings accounts and less in cash.

Which of the following is not included in M1 or M2?

Refer to the information provided in Table 10.2 below to answer the questions that follow. Table 10.2 -Refer to Table 10.2. First Commercial Bank's excess reserves equal $________.

Cowrie shells have been used as money is West Africa. This is an example of

Government securities that mature in less than a year are called

When a seller on eBay posts a "Buy-It-Now" price on the Vespa scooter she is trying to sell, she is using money as a

When you take $100 from your saving account and deposit it in your checking account, M2 decreases.

Included in M2 are

Assume the current one-year interest rate on a bond is 2%, and the one-year expected rate a year from now is 3%. According to the expectations theory of the term structure of interest rates, the two-year interest rate is

M1 is a

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. A movement from Point B to Point D can be caused by

The money supply has increased from $1.4 trillion to $1.45 trillion. Which of the following could have caused this increase?

Since they must lend money to make money, all banks are necessarily insolvent.

Josie wants to trade swimming lessons for cooking lessons. Maria wants to trade cooking lessons for swimming lessons. Josie and Maria have

A sale of government securities to the public by the Federal Reserve will increase the money supply.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Included in M2are