Macroeconomics [ch 16]

31 Questions | Total Attempts: 1218

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Macroeconomics Quizzes & Trivia

Money and prices in the long run


Questions and Answers
  • 1. 
    • A. 

      Unit of account

    • B. 

      Store of value

    • C. 

      Hedge against inflation

    • D. 

      Medium of exchange

  • 2. 
    Required reserves of banks are a fixed percentage of their
    • A. 

      Loans

    • B. 

      Assets

    • C. 

      Deposits

    • D. 

      Government bonds

  • 3. 
    • A. 

      Currency, demand deposits, traveler's checks, and other checkable accounts

    • B. 

      Currency, demand deposits, savings deposits, money market mututal funds, and small time deposits.

    • C. 

      Currency, government bonds, gold certificates, and coins.

    • D. 

      Currency, NOW accounts, savings accounts, and government bonds.

    • E. 

      None of the above

  • 4. 
    If the reserve requirement is 25 percent, the value of the money multiplier is
    • A. 

      0.25

    • B. 

      4

    • C. 

      25

    • D. 

      None of the above

  • 5. 
    An example of fiat money is
    • A. 

      Gold

    • B. 

      Paper dollars

    • C. 

      Coins

    • D. 

      Cigarettes in a prisoner-of-war camp

  • 6. 
    Which of the following policy actions by the Fed is likely to increase the money supply?
    • A. 

      Reducing reserve requirements

    • B. 

      Selling government bonds

    • C. 

      Increasing the discount rate

    • D. 

      All of these will increase the money supply

  • 7. 
    The Board of Governors of the Federal Reserve System consists of
    • A. 

      7 members appointed by Congress and 7 appointed by the president

    • B. 

      7 members elected by the Federal Reserve Banks

    • C. 

      12 members appointed by Congress

    • D. 

      7 members appointed by the president

    • E. 

      5 members appointd by the president and 7 rotating presidents of the Federal Reserve Banks

  • 8. 
    Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B.  If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?
    • A. 

      $1,000

    • B. 

      9,000

    • C. 

      10,000

    • D. 

      $0

  • 9. 
    Commodity money
    • A. 

      Has no intrinsic value

    • B. 

      Has intrinsic value

    • C. 

      Is used exclusively in the United States

    • D. 

      Is used as reserves to back fiat money

  • 10. 
    A decrease in the reserve requirement causes
    • A. 

      Reserves to rise

    • B. 

      Reserves to fall

    • C. 

      The money multiplier to rise

    • D. 

      The money multiplier to fall

    • E. 

      None of the above

  • 11. 
    To insulate the Federal Reserve from political pressure,
    • A. 

      The Board of Governors are elected by the public

    • B. 

      The Board of Governors have lifetime tenure

    • C. 

      The Board of Governors are supervised by the House Banking Committee

    • D. 

      The Board of Governors are appointed to 14-year terms

  • 12. 
    Which of the following statements is true?
    • A. 

      The FOMC meets once per year to discuss monetary policy

    • B. 

      The Federal Reserve was created in 1871 in response to the Civil War

    • C. 

      When the Fed sells government bonds, the money supply decreases

    • D. 

      The primary tool of monetary policy is the reserve requirement

  • 13. 
    The discount rate is
    • A. 

      The interest rate the Fed pays on reserves

    • B. 

      The interest rate the Fed charges on loans to banks

    • C. 

      The interest rate banks pay on the public's deposits

    • D. 

      The interest rate the public pays when borrowing from banks

  • 14. 
    Required reserves of banks are a fixed percentage of their
    • A. 

      Loans

    • B. 

      Assets

    • C. 

      Deposits

    • D. 

      Government bonds

  • 15. 
    • A. 

      Sell government bonds, decrease reserve requirements, decrease the discount rate

    • B. 

      Sell government bonds, increase reserve requirements, increase the discount rate

    • C. 

      Buy government bonds, increase reserve requirements, decrease the discount rate

    • D. 

      Buy government bonds, decrease reserve requirements, decrease the discount rate

    • E. 

      None of the above

  • 16. 
    If the reserve requirement is 25 percent, the value of the money multiplier is
    • A. 

      0.25

    • B. 

      4

    • C. 

      25

    • D. 

      None of the above

  • 17. 
    • A. 

      $1,000

    • B. 

      $4,000

    • C. 

      $5,000

    • D. 

      $0

  • 18. 
    Which of the following policy actions by the Fed is likely to increase the money supply?
    • A. 

      Reducing reserve requirements

    • B. 

      Selling government bonds

    • C. 

      Increasing the discount rate

    • D. 

      All of these will increase the money supply

  • 19. 
    • A. 

      The money supply is unaffected

    • B. 

      The money supply increases by more than $1,000

    • C. 

      The money supply increases by less than $1,000

    • D. 

      The money supply decreases by more than $1,000

    • E. 

      The money supply decreases by less tahn $1,000

  • 20. 
    Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B.  If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?
    • A. 

      $1,000

    • B. 

      9,000

    • C. 

      10,000

    • D. 

      $0

  • 21. 
    Given the following T-account, what is the largest new loan this bank can prudently make if the reserve requirement is 10 percent?                   Test Bank                               Assets|LiabilitiesReserves   $150 | Deposits $1,000Loans       $850
    • A. 

      $0

    • B. 

      $50

    • C. 

      $150

    • D. 

      $1,000

    • E. 

      None of the above is correct

  • 22. 
    A decrease in the reserve requirement causes
    • A. 

      Reserves to rise

    • B. 

      Reserves to fall

    • C. 

      The money multiplier to rise

    • D. 

      The money multiplier to fall

    • E. 

      None of the above

  • 23. 
    • A. 

      Government expenditures, taxation, and reserve requirements

    • B. 

      The money supply, government purchases, and taxation

    • C. 

      Coin, currency, and demand deposits

    • D. 

      Open-market operations, reserve requirements, and the discount rate

    • E. 

      Fiat, commodity, and deposit money

  • 24. 
    The discount rate is
    • A. 

      The interest rate the Fed pays on reserves

    • B. 

      The interest rate the Fed charges on loans to banks

    • C. 

      The interest rate banks pay on the public's deposits

    • D. 

      The interest rate the public pays when borrowing from banks

  • 25. 
    Which of the following policy combinations would consistently work to increase the money supply?
    • A. 

      Sell government bonds, decrease reserve requirements, decrease the discount rate

    • B. 

      Sell government bonds, increase reserve requirements, increase the discount rate

    • C. 

      Buy government bonds, increase reserve requirements, decrease the discount rate

    • D. 

      Buy government bonds, decrease reserve requirements, decrease the discount rate

    • E. 

      None of the above

  • 26. 
    • A. 

      Rise less than the money multiplier would suggest

    • B. 

      Rise more than the money multiplier would suggest

    • C. 

      Fall less than the money multiplier would suggest

    • D. 

      Fall more than the money multiplier would sugget

  • 27. 
    Suppose the Fed purchases a $1,000 government bond from you.  If you deposit the entire $1,000 in your bank, what is the total potential change in the money supply as a result of the Fed's action if reserve requirements are 20 percent?
    • A. 

      $1,000

    • B. 

      $4,000

    • C. 

      $5,000

    • D. 

      $0

  • 28. 
    Suppose all banks maintain a 100 percent reserve ratio.  If an individual deposits $1,000 of currency in a bank,
    • A. 

      The money supply is unaffected

    • B. 

      The money supply increases by more than $1,000

    • C. 

      The money supply increases by less than $1,000

    • D. 

      The money supply decreases by more than $1,000

    • E. 

      The money supply decreases by less tahn $1,000

  • 29. 
    Given the following T-account, what is the largest new loan this bank can prudently make if the reserve requirement is 10 percent?                   Test Bank                               Assets|LiabilitiesReserves   $150 | Deposits $1,000Loans       $850
    • A. 

      $0

    • B. 

      $50

    • C. 

      $150

    • D. 

      $1,000

    • E. 

      None of the above is correct

  • 30. 
    The three main tools of monetary policy are
    • A. 

      Government expenditures, taxation, and reserve requirements

    • B. 

      The money supply, government purchases, and taxation

    • C. 

      Coin, currency, and demand deposits

    • D. 

      Open-market operations, reserve requirements, and the discount rate

    • E. 

      Fiat, commodity, and deposit money

  • 31. 
    Suppose the Fed purchases a government bond from a person who deposits the entire amount fomr the sale in her bank.  If the bank holds some of the deposit as excess reserves, the money supply will
    • A. 

      Rise less than the money multiplier would suggest

    • B. 

      Rise more than the money multiplier would suggest

    • C. 

      Fall less than the money multiplier would suggest

    • D. 

      Fall more than the money multiplier would sugget