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Honors Economics- Monetary Policy

20 Questions  I  By Katienicolel
Economics Quizzes & Trivia

  
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1.  When money is used as a standard of value, a person is
A.
B.
C.
D.
E.
2.  Which of the following characteristics of money could be found in bars of gold?
A.
B.
C.
D.
E.
3.  When money is used as a medium of exchange, a person is
A.
B.
C.
D.
4.  The M1 definition of money includes which of the following
A.
B.
C.
5.  What is the result of the equation of exchange of the velocity of money remains constant and the money supply increases?
A.
B.
C.
D.
E.
6.  If the legal reserve requirement is 25%, the value of the simple deposit expansion multiplier is
A.
B.
C.
D.
E.
7.  Which of the following is most likely to increase the velocity of money?
A.
B.
C.
D.
E.
8.  Vault cash and reserve accounts are similiar in that each
A.
B.
C.
D.
E.
9.  The reserve requirement for the banking system is 20%. Currently, Third National Bank has no excess reserves. Then, Behroz deposits $100 in her checking account at Third National. A) Explain, without using a mathematical formula, why Behroz's deposit can lead to an increase in the money supply that is greater than $100. B) Discuss 2 limitations of this process.
10.  Suppose the required reserve ratio is .20. A) What would be the value of the deposit expansion multiplier? B) Discuss why it is unlikely that a new deposit of $1,000 would result in the money supply fully increasing as indicated by the deposit expansion multiplier.
11.  Reserves, the money supply and interest rates are most likely to change in which of the following ways when the Fed sells bonds?
A.
B.
C.
D.
E.
12.  Which of the following actions by the Fed will result in an increase in bank's excess reserves?
A.
B.
C.
D.
E.
13.  The Fed has 3 primary tools to expand or contract the money supply. A) List the 3 tools. B) Which tool does the Fed use most often? C) Explain why the Fed uses the tool you indicated in B.
14.  Suppose the Fed buys $400,000 worth of securities from the securities dealers on the open market. If the reserve requirement is 20% and the banks hold no excess reserves, what will happen to the total money supply?
A.
B.
C.
D.
E.
15.  Which of the following does the Fed use most often to combat a recession?
A.
B.
C.
D.
E.
16.  To reduce inflation, the Fed could
A.
B.
C.
D.
E.
17.  Which of the following combinations of monetary policy actions would definitely cause a decrease in aggregate demand?
A.
B.
C.
D.
E.
18.  Expansionary Monetary Policy results in which of the following in the short run?
A.
B.
C.
D.
19.  Suppose the economy is experiencing rising unemployment, slowing increases in real GDP and modest inflation. The Fed decides to follow an expansionary policy. A) Describe what this policy might include. B) If the policy is effective, explain the short-run effect it would have on each of the following: I. Interest rates II. Investment III. Price level IV. GDP V. Employment
20.  The Fed Board of Governors determines that it is appropriate to follow a contractionary policy. A) Would the monetary policy be to increase or decrease the money supply? B) Describe the policy the Fed is likely to take and explain how its action achieves the goal following a contractionary policy. C) If the policy is effective, explain the short-run effect it would have on each of the following: I. Interest rates II. Investment III. Price level IV. GDP V. Employment
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