Question 1

Suppose banks desire to keep 5 percent of their deposits on reserve. If the Fed purchases $20 million worth of government bonds from Bank B, the amount of bonds and loans Bank B holds will

Accepted Answer

A) decrease by $15 million. 
B) decrease by $20 million. 
C) increase by $15 million. 
D) remain unchanged. 
E) increase by $20 million.

Question 2

When you put your spare change into your child's piggy bank, money is serving as a

Accepted Answer

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

Question 3

Which of the following would not be counted as part of M1?

Accepted Answer

A) Paper money 
B) Demand deposits 
C) Savings deposits 
D) Travelers' checks 
E) Currency

Question 4

Throughout history, metallic coins have been the most common form of commodity money.

Accepted Answer

A) True 
 B)False

Question 5

State whether each of the following statements is true or false. Briefly explain your answers.

Accepted Answer

The answer of State whether each of the following statements...

Question 6

Money is the fraction of wealth used for transaction purposes.

Accepted Answer

A) True 
 B)False

Question 7

Velocity will decline if

Accepted Answer

A) the public becomes more confident about the economy's future. 
B) there is an increase in the use of credit cards. 
C) automatic teller machines become more accessible. 
D) the crime rate increases. 
E) banks increase the interest rate paid on checking deposits.

Question 8

The Federal Reserve System is divided into how many districts?

Accepted Answer

A) 12 
B) 7 
C) 50 
D) 2 
E) 6

Question 9

The quantity equation tells us that, in the long run, when the economy is at potential GDP, an increase in the growth of the money supply will

Accepted Answer

A) always increase inflation by the same amount if velocity is constant. 
B) increase inflation by a smaller amount if velocity increases. 
C) increase inflation by a larger amount if velocity decreases. 
D) always increase inflation. 
E) have no effect on inflation if velocity is constant.

Question 10

Which of the following is true?

Accepted Answer

A) None of these 
B) Commercial banks are the only legal type of financial intermediary. 
C) Banks are prohibited by law from earning a profit. 
D) It is customary to pay a higher interest rate on a loan than you would receive on your savings account from the same bank. 
E) A bank earns a profit by lending at a lower rate than it pays its depositors.

Question 11

Are hyperinflations only the result of large increases in the rate of money growth? Explain.

Accepted Answer

The answer of Are hyperinflations only the result of large...

Question 12

As the velocity of money rises, the amount of money being held by individuals also rises.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If the Fed purchases $10 million worth of government bonds from Bank INF, the amount of deposits held by the entire banking system will ultimately

Accepted Answer

A) increase by $100 million. 
B) decrease by $10 million. 
C) decrease by $100 million. 
D) not change. 
E) increase by $10 million.

Question 14

What do commercial banks have in common with all other firms in a market economy?

Accepted Answer

The answer of What do commercial banks have in common...

Question 15

When a hyperinflation occurs,

Accepted Answer

A) velocity remains constant. 
B) velocity increases. 
C) velocity decreases. 
D) the product of velocity and money declines. 
E) the product of velocity and money remains constant.

Question 16

In the long run, an increase in the money supply

Accepted Answer

A) is expected to lead to a decrease in velocity. 
B) has no predictable effect on nominal GDP. 
C) is expected to lead to an increase in velocity. 
D) is expected to lead to a decrease in nominal GDP. 
E) is expected to lead to an increase in nominal GDP.

Question 17

The chair of the Board of Governors of the Federal Reserve since 2014 is

Accepted Answer

A) Paul O'Neal. 
B) Irving Fisher. 
C) Ben Bernanke. 
D) Janet Yellen. 
E) Paul Volcker.

Question 18

Which of the following is not true?

Accepted Answer

A) Historians trace the origins of money to cities such as Babylon, more than 5,000 years ago. 
B) After World War I, the government of Germany printed too much money and correspondingly made the price of everything rise by millions of percentage points. 
C) In 2009, high inflation occurred in Zimbabwe as a result of its government printing too little money. 
D) In 2008 and 2009, the government of the United States dealt with a financial crisis by raising the supply of money. 
E) All of these are true.

Question 19

M2 includes

Accepted Answer

A) M1 plus government bonds. 
B) M1 plus U.S.government securities. 
C) M1 plus savings accounts and small time deposits. 
D) M1 plus term Eurodollar deposits. 
E) M1 minus savings accounts.

Question 20

The reserve ratio can be larger or smaller than the required reserve ratio.

Accepted Answer

A) True 
 B)False

Exam 22: Money and Inflation

Suppose banks desire to keep 5 percent of their deposits on reserve. If the Fed purchases $20 million worth of government bonds from Bank B, the amount of bonds and loans Bank B holds will

When you put your spare change into your child's piggy bank, money is serving as a

Which of the following would not be counted as part of M1?

Throughout history, metallic coins have been the most common form of commodity money.

State whether each of the following statements is true or false. Briefly explain your answers.

Money is the fraction of wealth used for transaction purposes.

Velocity will decline if

The Federal Reserve System is divided into how many districts?

The quantity equation tells us that, in the long run, when the economy is at potential GDP, an increase in the growth of the money supply will

Which of the following is true?

Are hyperinflations only the result of large increases in the rate of money growth? Explain.

As the velocity of money rises, the amount of money being held by individuals also rises.

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If the Fed purchases $10 million worth of government bonds from Bank INF, the amount of deposits held by the entire banking system will ultimately

What do commercial banks have in common with all other firms in a market economy?

When a hyperinflation occurs,

In the long run, an increase in the money supply

The chair of the Board of Governors of the Federal Reserve since 2014 is

Which of the following is not true?

M2 includes

The reserve ratio can be larger or smaller than the required reserve ratio.