Question 1

In September 2008, Regions Bank held $78 million in loans, $95 million in deposits and $5 million in reserves. If Regions Bank's desired reserve ratio is 2.5 percent, then the bank

Accepted Answer

A)   can create money
B)   has excess reserves.
C)   can make loans.
D)   all of the above are true.E) B) and C)
F) A) and B)

Question 2

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Accepted Answer

Actual reserves are equal to the bank's ...

Question 3

The commercial banks in Lendland have Reserves $400 million
Loans $3,600 million
Deposits $4,000 million
Total assets $4,600 million The banks hold no excess reserves.
a) Calculate the banks' reserve ratio.
b) An immigrant arrives in Lendland with $5 million, which he deposits in a bank. How much does the immigr bank lend initially?

Accepted Answer

a) With no excess reserves, the desired ...

Question 4

List the Fed's main policy tools and briefly explain each one.

Accepted Answer

The Fed's main policy tools are: require...

Question 5

According to the quantity theory of money,

Accepted Answer

A)   V and Y are not affected by the quantity of money.
B)   V and P are not affected by the quantity of money.
C)   V and M are not affected by changes in the price level.
D)   V and M are constant.E) None of the above
F) A) and C)

Question 6

When macroeconomists say that the velocity of circulation was equal to 4 in 2008, what they mean is that

Accepted Answer

A)   on average, each dollar of money in the economy purchased four dollars of goods and services in GDP in 2008.
B)   real output of goods and services in GDP rose by four dollars for each additional dollar of money consumers saved.
C)   consumers held four dollars in wealth for each dollar they spent in 2008.
D)   for each additional dollar of money injected into the economy, the price level rose 4 percent in 2008.E) All of the above
F) C) and D)

Question 7

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

Accepted Answer

The statement is incorrect. So...

Question 8

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Accepted Answer

The Federal Reserve, or Fed, is the U.S....

Question 9

The "double coincidence of wants" problem is

Accepted Answer

A)   always present in all economic systems.
B)   created by the use of money.
C)   resolved under a system of barter.
D)   resolved by the use of money.E) A) and B)
F) B) and C)

Question 10

When the Fed is _ it is .

Accepted Answer

A)   adjusting the amount of money in circulation; issuing government bonds
B)   regulating the nation's financial institutions; conducting monetary policy
C)   adjusting the amount of money in circulation; conducting monetary policy
D)   issuing government bonds; conducting monetary policyE) B) and C)
F) All of the above

Question 11

The main policy designer of the Federal Reserve system is the

Accepted Answer

A)   12 district banks.
B)   Federal Open Market Committee.
C)   Council of Economic Advisors.
D)   President and Congress.E) A) and B)
F) A) and C)

Question 12

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Accepted Answer

A) True 
 B)False

Question 13

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

Accepted Answer

The equation of exchange is that M × V =...

Question 14

Which of the following is a goal of monetary policy?

Accepted Answer

A)   promote faster long- term economic growth
B)   keep inflation in check
C)   maintain full employment
D)   All of the above answers are correct.E) None of the above
F) B) and D)

Question 15

When a depository institution pools risk, it

Accepted Answer

A)   spreads loan losses across many depositors so that no one depositor faces a high degree of risk.
B)   makes loans to just one firm.
C)   buys short and lends long.
D)   borrows reserves from the Federal Reserve.E) A) and B)
F) C) and D)

Question 16

Checks are

Accepted Answer

A)   money, as are credit cards.
B)   not money, but credit cards are.
C)   not money, and neither are credit cards.
D)   money, but credit cards are not.E) A) and B)
F) None of the above

Question 17

Depository institution create liquidity when they

Accepted Answer

A)   have liabilities that are illiquid.
B)   buy assets that are liquid.
C)   borrow short and lend long.
D)   borrow long and lend short.E) B) and C)
F) B) and D)

Question 18

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

Accepted Answer

A)   less money than the quantity supplied and the interest rate will fall.
B)   more money than the quantity supplied and the interest rate will fall.
C)   more money than the quantity supplied and the interest rate will rise.
D)   less money than the quantity supplied and the interest rate will rise.E) None of the above
F) B) and C)

Question 19

The Board of Governors is the

Accepted Answer

A)   Presidents of the 12 regional banks of the Federal Reserve.
B)   12- member monetary policy committee of the Federal Reserve.
C)   50- member organization of state banking regulators of the Federal Reserve.
D)   7- member group that oversees the Federal Reserve.E) A) and B)
F) A) and C)

Question 20

The discount rate is the interest rate that

Accepted Answer

A)   the Federal Reserve charges when it loans reserves to depository institutions.
B)   the Federal Reserve charges when it loans to the U.S. Government.
C)   is the lowest rate that banks will charge when lending to their best customers.
D)   banks charge when they lend to each other.E) B) and C)
F) A) and D)

Exam 8: Money, the Price Level, and Inflation

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

Correct Answer
verified

Correct Answer
verified
a) With no excess reserves, the desired ...
View Answer

Which of the following is a goal of monetary policy?

Correct Answer
verified

When macroeconomists say that the velocity of circulation was equal to 4 in 2008, what they mean is that

Correct Answer
verified

In September 2008, Regions Bank held $78 million in loans, $95 million in deposits and $5 million in reserves. If Regions Bank's desired reserve ratio is 2.5 percent, then the bank

Correct Answer
verified

The discount rate is the interest rate that

Correct Answer
verified

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Correct Answer
verified
Actual reserves are equal to the bank's ...
View Answer

According to the quantity theory of money,

Correct Answer
verified

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

Correct Answer
verified
The equation of exchange is that M × V =...
View Answer

When a depository institution pools risk, it

Correct Answer
verified

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Correct Answer
verified

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Correct Answer
verified
The Federal Reserve, or Fed, is the U.S....
View Answer

Checks are

Correct Answer
verified

The main policy designer of the Federal Reserve system is the

Correct Answer
verified

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

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

The "double coincidence of wants" problem is

Correct Answer
verified

Depository institution create liquidity when they

Correct Answer
verified

The Board of Governors is the

Correct Answer
verified

When the Fed is _ it is .

Correct Answer
verified

List the Fed's main policy tools and briefly explain each one.

Correct Answer
verified
The Fed's main policy tools are: require...
View Answer

Exam 8: Money, the Price Level, and Inflation

-In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion

Correct AnswerverifiedShow Answer

Correct Answerverifieda) With no excess reserves, the desired ...View AnswerShow Answer

Which of the following is a goal of monetary policy?

Correct AnswerverifiedShow Answer

When macroeconomists say that the velocity of circulation was equal to 4 in 2008, what they mean is that

Correct AnswerverifiedShow Answer

In September 2008, Regions Bank held $78 million in loans, $95 million in deposits and $5 million in reserves. If Regions Bank's desired reserve ratio is 2.5 percent, then the bank

Correct AnswerverifiedShow Answer

The discount rate is the interest rate that

Correct AnswerverifiedShow Answer

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Correct AnswerverifiedActual reserves are equal to the bank's ...View AnswerShow Answer

According to the quantity theory of money,

Correct AnswerverifiedShow Answer

What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?

Correct AnswerverifiedThe equation of exchange is that M × V =...View AnswerShow Answer

When a depository institution pools risk, it

Correct AnswerverifiedShow Answer

The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

Correct AnswerverifiedShow Answer

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Correct AnswerverifiedThe Federal Reserve, or Fed, is the U.S....View AnswerShow Answer

Checks are

Correct AnswerverifiedShow Answer

The main policy designer of the Federal Reserve system is the

Correct AnswerverifiedShow Answer

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

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

The "double coincidence of wants" problem is

Correct AnswerverifiedShow Answer

Depository institution create liquidity when they

Correct AnswerverifiedShow Answer

The Board of Governors is the

Correct AnswerverifiedShow Answer

When the Fed is _ it is .

Correct AnswerverifiedShow Answer

List the Fed's main policy tools and briefly explain each one.

Correct AnswerverifiedThe Fed's main policy tools are: require...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
a) With no excess reserves, the desired ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Actual reserves are equal to the bank's ...
View Answer

Correct Answer
verified

Correct Answer
verified
The equation of exchange is that M × V =...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Federal Reserve, or Fed, is the U.S....
View Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Fed's main policy tools are: require...
View Answer