MACRO TESTv2
Which of the following is the best example of money used as a store of value?
A farmer stores \$100 dollar bills in a strong box under the floor in a barn
Which of the following is the best example of money used as a medium of exchange?
In a prisoner of war camp cigarettes are traded for socks, candy and/or food, even by nonsmokers.
Percentage change in P is approximately equal to the percentage change in
M minus the percentage change in Y plus the percentage change in velocity
The M2 measure of money consists of the sum of
M1, savings deposits, small time deposits, and money market mutual funds
When money is used to purchase goods and services, it serves as a:
Medium of exchange
To an economist, ................ is anything that is generally accepted in payment for goods and services or in the repayment of debt.
Money
An important factor in the evolution of commodity money to fiat money is
a desire to reduce transaction costs
A trade in a barter economy requires
a double coincidence of wants
Banks create money in
a fractional-reserve banking system but not in a 100-percent-reserve banking system
When your grandfather keeps a bundle of \$100 dollar bills behind a brick in the basement, this is an example of dollars serving as
a store of value
In a small open economy, if the world interest rate is r3, then the economy has
a trade deficit
When the price of a pizza is quoted in dollars, this is an example of dollars serving as:
a unit of account
The direct trade of goods and services for other goods and services is called
barter
If the demand for real money balances is proportional to real income, velocity will:
be constant
In a small open economy, if domestic investment exceeds domestic saving, then the extra investment will be financed by:
borrowing from abroad
In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to:
make loans to foreigners
In a 100-percent-reserve banking system, banks
cannot affect the money supply
The minimum amount of owners' equity in a bank mandated by regulators is called a _____ requirement
capital
The value of a bank's owners' equity is called bank
capital
All of the following are considered money in the United States EXCEPT
credit cards
The money supply consists of
currency plus demand deposits
The M1 measure of money consists of the sum of
currency, checking deposits, and travelers' checks
The money supply will decrease if the
currency-deposit ratio increases
If a U.S. corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a U.S. government bond, then U.S. net exports ______, and net capital outflows ______.
decrease; decrease
Bank reserves equal:
deposits that banks have received but have not lent out
The U.S. dollar exchange rate (units of foreign currency per U.S. dollar) for currencies of countries with high inflation rates relative to the United States has tended to ______, and the U.S. dollar exchange rate (units of foreign currency per U.S. dollar) for currencies of countries with low inflation rates relative to the United States has tended to ______.
depreciate; appreciate
Net capital outflow is equal to the amount that
domestic investors lend abroad minus the amount that foreign investors lend here.
Finding both parties to a trade who have something the other party wishes to trade for is called a
double coincidence of wants
Small time deposits are .............. the M1 measure of money and .............. the M2 measure of money
excluded from; included in
Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase
exports by the small open economy
When the real exchange rate rises
exports will decrease and imports will increase
In a small open economy, when foreign governments reduce national saving in their countries, the equilibrium real exchange rate (measured in units of the home currency divided by units of foreign currency)
falls, and home country net exports rise
If the nominal interest rates in the United States and Canada are 8 percent and 12 percent, respectively, the real interest rates are the same, and the real exchange rate is fixed, then the market's expectation about the number of Canadian dollars to be received for a U.S. dollar a year from now will be that it will
increase by 4 percent
If the real exchange rate depreciates from 1 Japanese good per U.S. good to 0.5 Japanese good per U.S. good, then U.S. exports ______, and U.S. imports ______.
increase; decrease
Starting from a trade balance, if the world interest rate falls, then, holding other factors constant, in a small open economy the amount of domestic investment will _____, and net exports will _____
increase; decrease
If a U.S. corporation sells a product in Europe and uses the proceeds to purchase shares in a European corporation, then U.S. net exports ______, and net capital outflows ______.
increase; increase
In a small open economy, if the world interest rate falls, then domestic investment will _____, and the real exchange rate will _____, holding all else constant.
increase; increase
In a small open economy with perfect capital mobility, a reduction in the government's budget deficit ______ net exports, and the real exchange rate ______.
increases; depreciates
If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal?
increasing taxes
In a small open economy, policies that increase
investment tend to cause a trade deficit
The world interest rate
is the interest rate prevailing in world financial markets
Money serves as a unit of account when
it is a basic measure of economic value
Money serves as a store of value when
it is a means of holding wealth
A small open economy with perfect capital mobility is characterized by all of the following except that:
its domestic interest rate always exceeds the world interest rate
When people want to hold _____ money, the income velocity of money increases, and the money demand parameter k ______
less; decreases
The lower the real exchange rate is, the ______ expensive domestic goods are relative to foreign goods, and the ______ the demand is for net exports.
less; greater
Money performs each of the functions listed EXCEPT serving as a(n)
liability of the nonbank public
The costs of reprinting catalogs and price lists because of inflation are called
menu costs
The ex ante real interest rate is equal to the nominal interest rate
minus the expected inflation rate
The money supply will increase if the
monetary base increases
Macroeconomists call assets used to make transactions
money
All of the following assets are included in M1 except:
money market deposit accounts
If a country has a high rate of inflation relative to the United States (holding the real exchange rate fixed), the dollar will buy:
more of the foreign currency over time
Hyperinflations ultimately are the result of excessive growth rates of the money supply; the underlying motive for the excessive money growth rates is frequently a government's
need to generate revenue to pay for spending
In a large open economy, the exchange rate adjusts so that net exports equal
net capital outflow
The real exchange rate is determined by the equality of
net capital outflow and the demand for net exports
If income velocity is assumed to be constant, but no other assumptions are made, the level of ______ is determined by M
nominal GDP
The opportunity cost of holding money is the
nominal interest rate
The real interest rate is equal to the
nominal interest rate minus the inflation rate
The nominal exchange rate between the U.S. dollar and the Japanese yen (measured in $ / yen) is the
number of yen you can get for one dollar
The rate of inflation is the
percentage change in the level of prices
The major source of government revenue in most countries that are experiencing hyperinflation is:
seigniorage
According to purchasing-power parity, if the dollar price of oil is higher in New York than in London, arbitrageurs will _____ oil in New York and _____ oil in London to drive _____ the price of oil in New York
sell; buy; down
The three functions of money are
serving as a medium of exchange, unit of account, and store of value
When money is used as a means to hold wealth, it serves as a
store of value
In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade ______ and ______ net capital outflow
surplus; positive
In a small open economy, starting from a position of balanced trade, if the government increases the income tax, this produces a tendency toward a trade ______ and ______ net capital outflow
surplus; positive
According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by:
the Federal Reserve
The theoretical separation of real and monetary variables is called
the classical dichotomy
The value of net exports is also the value of
the difference of national saving and domestic investment
A depreciation of the real exchange rate in a small open economy could be the result of:
the expiration of an investment tax-credit provision
The ratio of the money supply to the monetary base is called
the money multiplier
In the classical model, according to the quantity theory of money and the Fisher equation, an increase in money growth increases:
the nominal interest rate
If velocity is constant and, in addition, the factors of production and the production function determine real GDP, then
the price level is proportional to the money supply
In the long run, according to the quantity theory of money and classical macroeconomic theory, if velocity is constant, then ______ determines real GDP and ______ determines nominal GDP
the productive capability of the economy; the money supply
If net capital outflow is positive, then:
the trade balance must be positive
When money is the basic measure of economic value, it serves as a
unit of account
When a pizza maker lists the price of a pizza as $10, this is an example of using money as a
unit of account.
People use money as a unit of account when they:
use money as a measure of economic transactions
The quantity theory of money assumes that
velocity is constant
Barter is
. the direct trade of goods and services for other goods and services
The central bank in the United States is the
Federal Reserve
Open-market operations are
Federal Reserve purchases and sales of government bonds.
Which of the following is the best example of money used as a unit of account?
The prices of construction jobs, real estate, and cars on the island of Yap are quoted in cases of beer to purchase each
The ex post real interest rate will be greater than the ex ante real interest rate when the
actual rate of inflation is less than the expected rate of inflation
If nominal wages cannot be cut, then the only way to reduce real wages is by
adjustments via inflation
In a system with fractional-reserve banking
all banks must hold reserves equal to a fraction of their deposits
If the purchasing-power parity theory is true, then
all changes in the nominal exchange rate result from changes in price levels.
Net exports equal GDP minus domestic spending on
all goods and services
An appreciation of the real exchange rate in a small open economy could be the result of
an increase in government spending
Money is
any asset used to make purchases
If the number of dollars per yen rises, this is called a(n):
appreciation of the yen
Credit card balances are not considered to be money primarily because they
are not part of people's wealth
"Inflation tax" means that
as the price level rises, the real value of money held by the public decreases
The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate plus the
foreign inflation rate minus the domestic inflation rate
People use money as a store of value when they
hold money to transfer purchasing power into the future
If domestic saving exceeds domestic investment, then net exports are ______ and net capital outflows are ______
positive; positive
The currency-deposit ratio is determined by
preferences of households about the form of money they wish to hold
The definition of the transactions velocity of money is
prices multiplied by transactions divided by money
The right of seigniorage is the right to
print money.
Purchasing-power parity theory:
provides a reason to expect that movements in the real exchange rate will typically be small or temporary
