ECON 131 FINAL CHP. 15

If GDP is 3600 and the money supply is 300, what is the velocity? A. 18 B. 8 C. 4.57 D. 12

12

If nominal GDP is 2700 and the money supply is 900, what is velocity? A. 25 B. 13.5 C. 3 D. .33

3

If GDP is 2400 and the money supply is 600, then what is the velocity? A. 18.3 B. 4 C. 4.57 D. 12

4

The quantitative easing policies adopted by the Federal Reserve are usually thought of as: A. short term loans to fill out reserves. B. temporary emergency measures. C. traditional monetary policies. D. a relatively weak tool.

temporary emergency measures

Which of the following is considered to be a relatively weak tool of monetary policy? A. quantitative easing B. altering the discount rate C. reserve requirements D. reducing the money supply

altering the discount rate

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks? A. discount rate B. reserve requirement C. Fed rate D. open market rate

discount rate

The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the: A. FOMC; passing of tax and spending bills. B. Central Bank; safety and stability of the banking system. C. FFIEC; day-to-day democratic control of policy. D. FDIC; responsibility for deposit insurance.

Central Bank; safety and stability of the banking system.

_____________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect? A. Altering the discount rate B. Reserve requirements C. Long and variable time lags D. Quantitative easing

Long and variable time lags

When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following: A. a loose monetary policy. B. a contractionary monetary policy. C. a expansionary monetary policy. D. a quantitative easing policy.

a contractionary monetary policy

Which of the following events would cause interest rates to increase? A. lower tax rates B. a higher discount rate C. lower reserve requirements D. an open market operation to buy bonds

a higher discount rate

What is the name given to the macroeconomic equation MV = PQ? A. basic velocity of money equation B. basic quantity equation of output C. basic quantity equation of money D. basic velocity of price equation

basic quantity equation of money

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely: A. keep track of whether money is flowing in or out of the bank. B. buy bonds to increase the size of its reserve assets. C. reduce the quantity of money and loans on the balance sheet. D. borrow for the short term from the central bank.

borrow for the short term from the central bank.

Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond? A. by noting a decrease in net worth B. by increasing its reserves C. its balance sheet will be unchanged D. it can make more loans with increased loan assets

by increasing its reserves

When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected? A. real interest rate B. consumer lending rate C. nominal interest rate D. federal funds rate

federal funds rate

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be? A. leverage cycle B. bank runs C. fighting inflation D. bank supervision

fighting inflation

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: A. follow expansionary monetary policy. B. follow loose monetary policy. C. follow tight monetary policy. D. follow quantitative easing policy.

follow quantitative easing policy

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is: A. following a loose monetary policy. B. following a tight monetary policy. C. following a contractionary monetary policy. D. reversing quantitative easing.

following a loose monetary policy

In good economic times, a surge in lending exaggerates the episode of economic growth. Which of the following adaptations of monetary policy can moderate these exaggerated effects? A. price stability to reinforce effect of deposit insurance B. monitoring asset prices and leverage C. quantitative easing when banks are under stress D. inflation-targeting lender of last resort policies

monitoring asset prices and leverage

Which of the following is a traditional tool used by the Fed during recessions? A. quantitative easing B. higher interest rates C. open market operations D. coins and paper currency

open market operations

A central bank that desires to reduce the quantity of money in the economy can: A. raise the reserve requirement. B. buy bonds in open market operations. C. lower the discount rate. D. engage in quantitative easing.

raise the reserve requirement

If the economy is at equilibrium as shown in the diagram above, then an expansionary monetary policy will: A. have no effect on both unemployment and inflation. B. reduce unemployment, but increase inflation. C. reduce both unemployment and inflation. D. reduce unemployment, but have little effect on inflation.

reduce unemployment, but have little effect on inflation

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? A. discount requirements B. deposit requirements C. reserve requirements D. monetary requirements

reserve requirements

When the central bank decides it will sell bonds using open market operations: A. interest rates decrease. B. the money supply increases. C. the money supply decreases. D. the money supply is unaffected.

the money supply decreases

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result? A. the money supply in the economy decreases B. Southern's net worth increases by $25 million C. decrease in Southern's bond assets by $25 million D. increase in Southern's loan assets of $25 million

the money supply in the economy decreases