Question 1

When you pay $8 for salad you ordered for lunch, you are using money as a(n)

Accepted Answer

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

Question 2

When the aggregate price level (P) is multiplied by real aggregate income (Y), the result is

Accepted Answer

A)  the aggregate money multiplier. 
B)  the real aggregate price level. 
C)  nominal income. 
D)  aggregate money demand. 
A)  the aggregate money multiplier. 
B)  the real aggregate price level. 
C)  nominal income. 
D)  aggregate money demand.

Question 3

A ________ is considered an asset of that bank.

Accepted Answer

A)  bank loan 
B)  bank deposit 
C)  bank liability 
D)  demand deposit 
A)  bank loan 
B)  bank deposit 
C)  bank liability 
D)  demand deposit

Question 4

Saving account balances are included in

Accepted Answer

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

Question 5

An open-market purchase of securities by the Fed results in ________ in reserves and ________ in the supply of money.

Accepted Answer

A)  an increase; a decrease 
B)  a decrease; a decrease 
C)  an increase; an increase 
D)  a decrease; an increase 
A)  an increase; a decrease 
B)  a decrease; a decrease 
C)  an increase; an increase 
D)  a decrease; an increase

Question 6

The M2 definition of money includes demand deposits.

Accepted Answer

A) True 
 B)False

Question 7

Short-term securities are usually called ________ and long-term securities are usually called ________.

Accepted Answer

A)  notes; bills 
B)  loans; notes 
C)  bonds; stocks 
D)  bills; bonds 
A)  notes; bills 
B)  loans; notes 
C)  bonds; stocks 
D)  bills; bonds

Question 8

Currency debasement occurs when

Accepted Answer

A)  the value of money falls as a result of a rapid increase in its supply. 
B)  the government requires that a certain form of money must be accepted in settlement of debts. 
C)  items are designated as money that are intrinsically worthless. 
D)  items are used as money that also have intrinsic value in some other use. 
A)  the value of money falls as a result of a rapid increase in its supply. 
B)  the government requires that a certain form of money must be accepted in settlement of debts. 
C)  items are designated as money that are intrinsically worthless. 
D)  items are used as money that also have intrinsic value in some other use.

Question 9

The U.S. dollar is an example of fiat money because

Accepted Answer

A)  it is the strongest currency in the world. 
B)  it is the most widely used currency in international trade. 
C)  it is backed by a large reserve of gold and silver. 
D)  by law, it is decreed as money. 
A)  it is the strongest currency in the world. 
B)  it is the most widely used currency in international trade. 
C)  it is backed by a large reserve of gold and silver. 
D)  by law, it is decreed as money.

Question 10

The need for a barter system diminishes when money is used as a

Accepted Answer

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

Question 11

Refer to the information provided in Table 10.7 below to answer the questions that follow.
Table 10.7  
-Refer to Table 10.7. The required reserve ratio is

Accepted Answer

A)  8%. 
B)  15%. 
C)  20%. 
D)  25%. 
A)  8%. 
B)  15%. 
C)  20%. 
D)  25%.

Question 12

Time deposits are considered a(n) ________ of a bank.

Accepted Answer

A)  asset 
B)  required reserve 
C)  liability 
D)  loan 
A)  asset 
B)  required reserve 
C)  liability 
D)  loan

Question 13

Which of the following is not a form of commodity money?

Accepted Answer

A)  checks 
B)  cigarettes 
C)  precious stones 
D)  all of the above 
A)  checks 
B)  cigarettes 
C)  precious stones 
D)  all of the above

Question 14

Refer to the information provided in Figure 10.2 below to answer the questions that follow.   Figure 10.2
-Refer to Figure 10.2. Suppose the money demand is currently at Point D. A movement to point C could be caused by

Accepted Answer

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

Question 15

Refer to the information provided in Table 10.5 below to answer the questions that follow.
Table 10.5  
-Refer to Table 10.5. Bloomington Bank's total assets are

Accepted Answer

A)  $500. 
B)  $1,200. 
C)  $1,700. 
D)  $3,400. 
A)  $500. 
B)  $1,200. 
C)  $1,700. 
D)  $3,400.

Question 16

Thompson National Trust has assets of $500,000 and liabilities of $400,000. Thompson National Trust's net worth is

Accepted Answer

A)  $100,000. 
B)  $400,000. 
C)  $500,000. 
D)  $900,000. 
A)  $100,000. 
B)  $400,000. 
C)  $500,000. 
D)  $900,000.

Question 17

The money supply has decreased from $2.75 trillion to $2.25 trillion. Which of the following could have caused this increase?

Accepted Answer

A)  The Fed purchased government securities from the public. 
B)  Consumers who were holding money within the banking system withdrew this money. 
C)  The Fed decreased the discount rate. 
D)  Commercial banks decide to hold fewer excess reserves. 
A)  The Fed purchased government securities from the public. 
B)  Consumers who were holding money within the banking system withdrew this money. 
C)  The Fed decreased the discount rate. 
D)  Commercial banks decide to hold fewer excess reserves.

Question 18

The main advantage of using M2 instead of M1 as the measure for money is that

Accepted Answer

A)  M2 can be measured more accurately. 
B)  M2 includes only instantly accessible assets. 
C)  M2 is sometimes more stable. 
D)  M2 varies as the interest rate varies. 
A)  M2 can be measured more accurately. 
B)  M2 includes only instantly accessible assets. 
C)  M2 is sometimes more stable. 
D)  M2 varies as the interest rate varies.

Question 19

Sarafina withdraws $450 from her saving account and places the money in her wallet. This transaction will

Accepted Answer

A)  not change M1 and decrease M2. 
B)  increase M1 and not change M2. 
C)  increase both M1 and M2. 
D)  decrease both M1 and M2. 
A)  not change M1 and decrease M2. 
B)  increase M1 and not change M2. 
C)  increase both M1 and M2. 
D)  decrease both M1 and M2.

Question 20

The amount of money banks can loan out is determined by the discount rate.

Accepted Answer

A) True 
 B)False

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

When you pay $8 for salad you ordered for lunch, you are using money as a(n)

When the aggregate price level (P) is multiplied by real aggregate income (Y), the result is

A ________ is considered an asset of that bank.

Saving account balances are included in

An open-market purchase of securities by the Fed results in ________ in reserves and ________ in the supply of money.

The M2 definition of money includes demand deposits.

Short-term securities are usually called ________ and long-term securities are usually called ________.

Currency debasement occurs when

The U.S. dollar is an example of fiat money because

The need for a barter system diminishes when money is used as a

Refer to the information provided in Table 10.7 below to answer the questions that follow. Table 10.7 -Refer to Table 10.7. The required reserve ratio is

Time deposits are considered a(n) ________ of a bank.

Which of the following is not a form of commodity money?

Refer to the information provided in Figure 10.2 below to answer the questions that follow. Figure 10.2 -Refer to Figure 10.2. Suppose the money demand is currently at Point D. A movement to point C could be caused by

Refer to the information provided in Table 10.5 below to answer the questions that follow. Table 10.5 -Refer to Table 10.5. Bloomington Bank's total assets are

Thompson National Trust has assets of $500,000 and liabilities of $400,000. Thompson National Trust's net worth is

The money supply has decreased from $2.75 trillion to $2.25 trillion. Which of the following could have caused this increase?

The main advantage of using M2 instead of M1 as the measure for money is that

Sarafina withdraws $450 from her saving account and places the money in her wallet. This transaction will

The amount of money banks can loan out is determined by the discount rate.

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

An open-market purchase of securities by the Fed results in in reserves and in the supply of money.

Short-term securities are usually called and long-term securities are usually called .