Question 1

1 to the supply of money curve MS0. B)  movement from point a to point b along the supply of money curve MS0. C)  shift from the supply of money curve MS0 to the supply of money curve MS1. D)  movement from point b to point a along the supply of money curve MS0." class="answers-bank-image d-inline" rel="preload" >
-In the figure above, a decrease in the monetary base would create a change such as a

Accepted Answer

A)   shift from the supply of money curve MS1 to the supply of money curve MS0.
B)   movement from point a to point b along the supply of money curve MS0.
C)   shift from the supply of money curve MS0 to the supply of money curve MS1.
D)   movement from point b to point a along the supply of money curve MS0.E) None of the above
F) C) and D)

Question 2

The money multiplier determines how much

Accepted Answer

A)   real GDP will be expanded given an increase in autonomous investment.
B)   money demand will expand given a change in the quantity of money.
C)   the quantity of money will be expanded given a change in the monetary base.
D)   the monetary base will be expanded given a change in the quantity of money.E) B) and D)
F) None of the above

Question 3

The monetary base consists of

Accepted Answer

A)   the quantity of money.
B)   government securities held by the Fed.
C)   the sum of Federal Reserve notes, coins, and depository institutionsʹ deposits at the Fed.
D)   demand deposits and vault cash.E) B) and C)
F) None of the above

Question 4

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Accepted Answer

A)   increases the quantity of money by $3.5 billion.
B)   increases the quantity of money by $10 billion.
C)   increases the quantity of money by $35 billion.
D)   increases the quantity of money but not by an amount given above.E) All of the above
F) None of the above

Question 5

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Accepted Answer

A)   increasing the number of commercial banks.
B)   changing discount rates.
C)   open market operations.
D)   changing the required reserve ratio.E) A) and B)
F) All of the above

Question 6

The Fed buys securities and gives the bank a check for the amount. After the check has cleared,

Accepted Answer

A)   reserves have increased by the amount of the check because the Fed pays for the check by increasing the amount of the bankʹs deposits with the Fed.
B)   reserves have decreased by the amount of the check because the Fed pays for the check by decreasing the bankʹs deposits at the Fed.
C)   reserves remain unchanged because the increase of reserves at the bank are offset by an increase in reserves at the Fed.
D)   reserves have increased by the amount of the reserves multiplied by the required reserve ratio, and the quantity of money increases by the difference between the amount of the check and the increase in the reserves.E) A) and B)
F) A) and C)

Question 7

-The figure above illustrates the effect of

Accepted Answer

A)   a decrease in the monetary base.
B)   an increase in the monetary base.
C)   an increase in real GDP.
D)   a decrease in real GDP.E) All of the above
F) B) and C)

Question 8

M2 is

Accepted Answer

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

Question 9

Component  Amount  (billions of  dollars)   Currency 235 Checking deposits 570 Savings deposits 416 Traveler’s checks 8 Time deposits 1,144 Money market  mutual  funds 930 Available credit on  credit  cards 675\begin{array} { | l | l | } \hline 	ext { Component } & \begin{array} { l } 	ext { Amount } \	ext { (billions of } \	ext { dollars)  }\end{array} \\hline 	ext { Currency } & 235 \\hline 	ext { Checking deposits } & 570 \\hline 	ext { Savings deposits } & 416 \\hline 	ext { Traveler&#x27;s checks } & 8 \\hline 	ext { Time deposits } & 1,144 \\hline \begin{array} { l } 	ext { Money market } \	ext { mutual } \	ext { funds }\end{array} & 930 \\hline \begin{array} { l } 	ext { Available credit on } \	ext { credit } \	ext { cards }\end{array} & 675 \\hline\end{array} Component  Currency  Checking deposits  Savings deposits  Traveler’s checks  Time deposits  Money market  mutual  funds ​ Available credit on  credit  cards ​​ Amount  (billions of  dollars)  ​23557041681,144930675​​ 
-According to the table above, the value of M1 is__________ and the value of M2 is__________ .

Accepted Answer

A)   $813 billion; $3303 billion
B)   $805 billion; $2490 billion
C)   $813 billion; $2490 billion
D)   $1,488 billion; $3978 billion E) A) and B)
F) None of the above

Question 10

The velocity of circulation is

Accepted Answer

A)   average quantity of money that exists during a year.
B)   equal to the price level multiplied by real GDP.
C)   equal to the quantity of money multiplied by nominal GDP.
D)   the average number of times a dollar bill is used in a year to buy the goods and services in GDP.E) B) and C)
F) A) and D)

Question 11

A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Accepted Answer

A)   $80,000
B)   $20,000
C)   $400,000
D)   $500,000E) A) and C)
F) B) and D)

Question 12

ʺEven though we can convert them into money, deposits at banks are not money.ʺ Is the previous statement correct or not?

Accepted Answer

The statement is incorrect. So...

Question 13

0 to the supply of money curve MS1. B)  shift from the supply of money curve MS1 to the supply of money curve MS0. C)  movement from point a to point b along the supply of money curve MS0. D)  movement from point b to point a along the supply of money curve MS0." class="answers-bank-image d-inline" rel="preload" >
-In the figure above, an increase in the monetary base would create a change such as a

Accepted Answer

A)   shift from the supply of money curve MS0 to the supply of money curve MS1.
B)   shift from the supply of money curve MS1 to the supply of money curve MS0.
C)   movement from point a to point b along the supply of money curve MS0.
D)   movement from point b to point a along the supply of money curve MS0.E) B) and D)
F) A) and B)

Question 14

The majority of money is created when

Accepted Answer

A)   banks make loans
B)   new coins are minted
C)   the Fed sells bonds
D)   the federal government borrows from the publicE) None of the above
F) A) and D)

Question 15

Federal Reserve policy tools include all of the following EXCEPT

Accepted Answer

A)   open market operations.
B)   required reserve ratios.
C)   desired reserve ratios.
D)   the discount rate.E) None of the above
F) A) and D)

Question 16

ʺWhen the Fed buys securities from a bank, the quantity of money eventually decreases by a fraction of the initial change in the monetary base.ʺ Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is wrong on two counts. Fi...

Question 17

If an economy has a velocity of circulation of 3, then

Accepted Answer

A)   in a year the average dollar is exchanged 3 times to purchase goods and services in GDP.
B)   nominal GDP is 1/3 the size of the quantity of money.
C)   the quantity of money is $3 for every dollar of GDP.
D)   the quantity of money is 3 times real GDP.E) A) and B)
F) A) and C)

Question 18

Which of the following is a service of depository institutions?

Accepted Answer

A)   monitoring the Federal Reserve
B)   pooling risk
C)   loaning funds to other depository institutions at the discount rate
D)   decreasing the liquidity drain of funds in the banking systemE) B) and C)
F) A) and B)

Question 19

When the velocity of circulation equals 4 in 2010, this fact means that

Accepted Answer

A)   for each additional dollar of money injected into the economy, the price level rose 4 percent in 2010.
B)   real output of goods and services in GDP rose by four dollars for each additional dollar of money consumers saved.
C)   on average, each dollar of money in the economy purchased four dollars of goods and services in GDP in 2010.
D)   consumers held four dollars in wealth for each dollar they spent in 2010.E) C) and D)
F) All of the above

Question 20

The opportunity cost of holding money refers to

Accepted Answer

A)   the pleasure that would have been received if the money balances had been used to buy a good or service.
B)   the service fees charged to withdraw currency from an ATM.
C)   the price level.
D)   the interest that could have been earned if the money balances had been changed into an interest-bearing asset.E) C) and D)
F) B) and D)

Exam 8: Money, the Price Level, and Inflation

The opportunity cost of holding money refers to

Correct Answer
verified

-The figure above illustrates the effect of

Correct Answer
verified

-In the figure above, an increase in the monetary base would create a change such as a

Correct Answer
verified

A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Correct Answer
verified

ʺWhen the Fed buys securities from a bank, the quantity of money eventually decreases by a fraction of the initial change in the monetary base.ʺ Is the previous statement correct or incorrect? Explain your answer.

Correct Answer
verified
The statement is wrong on two counts. Fi...
View Answer

-In the figure above, a decrease in the monetary base would create a change such as a

Correct Answer
verified

The money multiplier determines how much

Correct Answer
verified

The velocity of circulation is

Correct Answer
verified

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Correct Answer
verified

The monetary base consists of

Correct Answer
verified

Which of the following is a service of depository institutions?

Correct Answer
verified

ʺEven though we can convert them into money, deposits at banks are not money.ʺ Is the previous statement correct or not?

Correct Answer
verified
The statement is incorrect. So...
View Answer

Correct Answer
verified

M2 is

Correct Answer
verified

If an economy has a velocity of circulation of 3, then

Correct Answer
verified

Federal Reserve policy tools include all of the following EXCEPT

Correct Answer
verified

The Fed buys securities and gives the bank a check for the amount. After the check has cleared,

Correct Answer
verified

When the velocity of circulation equals 4 in 2010, this fact means that

Correct Answer
verified

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Correct Answer
verified

The majority of money is created when

Correct Answer
verified

Exam 8: Money, the Price Level, and Inflation

The opportunity cost of holding money refers to

Correct AnswerverifiedShow Answer

-The figure above illustrates the effect of

Correct AnswerverifiedShow Answer

-In the figure above, an increase in the monetary base would create a change such as a

Correct AnswerverifiedShow Answer

A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Correct AnswerverifiedShow Answer

ʺWhen the Fed buys securities from a bank, the quantity of money eventually decreases by a fraction of the initial change in the monetary base.ʺ Is the previous statement correct or incorrect? Explain your answer.

Correct AnswerverifiedThe statement is wrong on two counts. Fi...View AnswerShow Answer

-In the figure above, a decrease in the monetary base would create a change such as a

Correct AnswerverifiedShow Answer

The money multiplier determines how much

Correct AnswerverifiedShow Answer

The velocity of circulation is

Correct AnswerverifiedShow Answer

The tools at the disposal of the Fed for changing the quantity of money do NOT include

Correct AnswerverifiedShow Answer

The monetary base consists of

Correct AnswerverifiedShow Answer

Which of the following is a service of depository institutions?

Correct AnswerverifiedShow Answer

ʺEven though we can convert them into money, deposits at banks are not money.ʺ Is the previous statement correct or not?

Correct AnswerverifiedThe statement is incorrect. So...View AnswerShow Answer

Correct AnswerverifiedShow Answer

M2 is

Correct AnswerverifiedShow Answer

If an economy has a velocity of circulation of 3, then

Correct AnswerverifiedShow Answer

Federal Reserve policy tools include all of the following EXCEPT

Correct AnswerverifiedShow Answer

The Fed buys securities and gives the bank a check for the amount. After the check has cleared,

Correct AnswerverifiedShow Answer

When the velocity of circulation equals 4 in 2010, this fact means that

Correct AnswerverifiedShow Answer

If the money multiplier is 3.5, a $10 billion increase in the monetary base

Correct AnswerverifiedShow Answer

The majority of money is created when

Correct AnswerverifiedShow Answer

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The statement is wrong on two counts. Fi...
View Answer

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The statement is incorrect. So...
View Answer

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