ECN 211 Exam 3/Finals :)

Which of the following lists is included in what economists call "money"? A. Cash B. Cash and stocks and bonds C. cash and stocks and bonds and real estate D. cash and stocks and bonds and real estate and all other assets

A. Cash

Which of the following is a store of value? A. Cash and stocks B. Cash but not stocks C. Stocks but not cash D. Neither cash nor stocks

A. Cash and stocks

If the Federal Open Market Committee decides to increase the money supply, then the Federal Reserve A. Creates dollars and uses them to purchase government bonds from the public B. Sells government bonds from its portfolio to the public C. Creates dollars and uses them to purchase various types of stocks and bonds from the public D. Sells various types of stocks and bonds from its portfolio to the public

A. Creates dollars and uses them to purchase government bonds from the public

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by A. More than $1000 B. Exactly $1000 C. Less than $1000 D. None of the above are correct

A. More than $1000

Fiscal policy is determined by A. the president and Congress and involves changing government spending and taxation. B. the president and Congress and involves changing the money supply. C. the Federal Reserve and involves changing government spending and taxation. D. the Federal Reserve and involves changing the money supply.

A. The president and Congress and involves changing government spending and taxation.

Which of the following events would shift money demand to the right? A. an increase in the price level B. a decrease in the price level C. an increase in the interest rate D. a decrease in the interest rate

A. an increase in the price level

The money multiplier equals A. 1/R, where R represents the quantity of reserves in the economy. B. 1/R, where R represents the reserve ratio for all banks in the economy. C. 1/(1+R), where R represents the quantity of reserves in the economy. D. 1/(1+R), where R represents the reserve ratio for all banks in the economy.

B. 1/R, where R represents the reserve ratio for all banks in the economy.

To increase the money supply, the Fed could A. Sell government bonds. B. auction more loans to banks. C. increase the reserve requirement. D. None of the above is correct.

B. Auction more loans to banks

When there is a reserve requirement, banks A. Must hold exactly the required quantity of reserves. B. May hold more than, but not less than, the required quantity of reserves C. May hold less than, but not more than, the required quantity of reserves D. Must seek the Fed's permission whenever they wish to expand or contract their loans to customers

B. May hold more than, but not less than, the required quantity of reserves

Commodity money is A. Backed by gold B. The principal type of money in use today C. Money with intrinsic value D. Receipts created in international trade that are used as a medium of exchange

C. Money with intrinsic value

The classical dichotomy argues that changes in the money supply A. affect both nominal and real variables. B. affect neither nominal nor real variables. C. affect nominal variables, but not real variables. D. do not affect nominal variables, but do affect real variables

C. affect nominal variables, but not real variables.

When the Fed decreases the money supply, we expect A. interest rates and stock prices to rise. B. interest rates and stock prices to fall. C. interest rates to rise and stock prices to fall. D. interest rates to fall and stock prices to rise.

C. interest rates to rise and stock prices to fall.

The discount rate is the interest rate that A. Banks charge one another for loans. B. banks charge the Fed for loans. C. the Fed charges banks for loans D. the Fed charges Congress for loans

C. the Fed charges banks for loans

Which of the following shifts aggregate demand to the left? A. The price level rises. B. Interest rates fall. C. The dollar depreciates for some reason other than a change in the price level. D. Stock prices fall for some reason other than a change in the price level.

D. Stock prices fall for some reason other than a change in the price level.

Monetary policy is determined by A. The president and Congress and involves changing government spending and taxation. B. The president and Congress and involves changing the money supply. C. The Federal Reserve and involves changing government spending and taxation. D. The Federal Reserve and involves changing the money supply.

D. The Federal Reserve and involves changing the money supply.

The velocity of money is A. the rate at which the Fed puts money into the economy. B. the same thing as the long-term growth rate of the money supply. C. the money supply divided by nominal GDP. D. the average number of times per year a dollar is spent.

D. the average number of times per year a dollar is spent.

People choose to hold a larger quantity of money if A. the interest rate rises, which causes the opportunity cost of holding money to rise. B. the interest rate falls, which causes the opportunity cost of holding money to rise. C. the interest rate rises, which causes the opportunity cost of holding money to fall. D. the interest rate falls, which causes the opportunity cost of holding money to fall.

D. the interest rate falls, which causes the opportunity cost of holding money to fall.

The Fed has the power to increase or decrease the number of dollars in the economy through decisions of A. The Board of Governors B. The FOMC C. The regional Federal Reserve Bank presidents D. The U.S. Treasury

B. The FOMC

For a given real interest rate, an increase in inflation makes the after-tax real interest rate A. decrease, which encourages savings. B. decrease, which discourages savings. C. increase, which encourages savings. D. increase, which discourages savings.

B. decrease, which discourages savings.