Question 1

Real money supply expresses the money supply in terms of real goods and services.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the reserve requirement would:

Accepted Answer

A)  decrease excess reserves and reflect an expansionary monetary policy.
B)  decrease excess reserves and reflect a contractionary monetary policy.
C)  increase excess reserves and reflect an expansionary monetary policy.
D)  increase excess reserves and reflect a contractionary monetary policy.

Question 3

During the 1920s,the discount rate was the major policy tool of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 4

Define the three functions of money.

Accepted Answer

The medium of exchange enables one to un...

Question 5

The monetary base is $1,000 billion and the money multiplier is 5.5.What is the size of the money supply?

Accepted Answer

Monetary base x mone...

Question 6

Banks with excess reserves will supply more reserves to the federal funds market as the interest rate increases.

Accepted Answer

A) True 
 B)False

Question 7

The money multiplier is computed as follows:

Accepted Answer

A)  (c + 1) /(c + rr + e) .
B)  (c + 1) /(c + rr) .
C)  1/rr.
D)  (c + 1) /(c + e) .

Question 8

The banking system in the U.S.is based on:

Accepted Answer

A)  100 percent reserve banking.
B)  fractional reserve banking.
C)  0 percent reserve banking.
D)  none of the above.

Question 9

The private financial market where banks borrow and loan reserves to meet the minimum research requirements is called:

Accepted Answer

A)  federal funds market.
B)  loanable funds market.
C)  discount loans market.
D)  repo market.

Question 10

Open market sale will result in:

Accepted Answer

A)  increase in bank reserves and a decrease in the federal funds rate.
B)  increase in bank reserves and an increase in the federal funds rate.
C)  decrease in bank reserves and a decrease in the federal funds rate.
D)  decrease in bank reserves and an increase in the federal funds rate.

Question 11

The quantity of money demanded is positively related to the interest rate.

Accepted Answer

A) True 
 B)False

Question 12

Open market purchases and sales are conducted at the:

Accepted Answer

A)  Federal Reserve Bank of Kansas City.
B)  Federal Reserve Bank of New York.
C)  Federal Reserve Bank of Chicago.
D)  Federal Reserve Bank of St. Louis.

Question 13

The function of money that enables money to be used for future purchases is called:

Accepted Answer

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

Question 14

A decrease in the discount rate would:

Accepted Answer

A)  decrease bank borrowing of reserves and reflect an expansionary monetary policy.
B)  decrease bank borrowing of reserves and reflect a contractionary monetary policy.
C)  increase bank borrowing of reserves and reflect an expansionary monetary policy.
D)  increase bank borrowing of reserves and reflect a contractionary monetary policy.

Question 15

The reserve requirement is 0.20.What is the simple deposit multiplier?

Accepted Answer

A)  1
B)  5
C)  0.10
D)  100

Question 16

The money supply consists of:

Accepted Answer

A)  currency plus reserves.
B)  currency plus required reserves.
C)  currency plus excess reserves.
D)  currency plus demand deposits.

Question 17

Holding the real money supply constant,an increase in real money demand will reduce interest rates.

Accepted Answer

A) True 
 B)False

Question 18

The store of value does not require that money hold its value of time in terms of its purchasing power.

Accepted Answer

A) True 
 B)False

Question 19

The liquidity-money (LM)curve shows the alternative combinations of interest rates and real income that clears the money market.

Accepted Answer

A) True 
 B)False

Question 20

The barter system requires the double coincidence of wants to be fulfilled.

Accepted Answer

A) True 
 B)False

Exam 13: The Role of Money in the Macro Economy

The liquidity-money (LM)curve shows the alternative combinations of interest rates and real income that clears the money market.

Correct AnswerverifiedShow Answer

Real money supply expresses the money supply in terms of real goods and services.

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The barter system requires the double coincidence of wants to be fulfilled.

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Banks with excess reserves will supply more reserves to the federal funds market as the interest rate increases.

Correct AnswerverifiedShow Answer

Open market purchases and sales are conducted at the:

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The store of value does not require that money hold its value of time in terms of its purchasing power.

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The reserve requirement is 0.20.What is the simple deposit multiplier?

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The money multiplier is computed as follows:

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Holding the real money supply constant,an increase in real money demand will reduce interest rates.

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Define the three functions of money.

Correct AnswerverifiedThe medium of exchange enables one to un...View AnswerShow Answer

Open market sale will result in:

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The monetary base is $1,000 billion and the money multiplier is 5.5.What is the size of the money supply?

Correct AnswerverifiedMonetary base x mone...View AnswerShow Answer

The function of money that enables money to be used for future purchases is called:

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The quantity of money demanded is positively related to the interest rate.

Correct AnswerverifiedShow Answer

The private financial market where banks borrow and loan reserves to meet the minimum research requirements is called:

Correct AnswerverifiedShow Answer

The banking system in the U.S.is based on:

Correct AnswerverifiedShow Answer

An increase in the reserve requirement would:

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The money supply consists of:

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During the 1920s,the discount rate was the major policy tool of the Federal Reserve.

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A decrease in the discount rate would:

Correct AnswerverifiedShow Answer

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The medium of exchange enables one to un...
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Monetary base x mone...
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