14/ 15 Econ quiz
If GDP is 3600 and the money supply is 300, what is the velocity?
12
In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?
2010: .12 U.S. dollars; 2012: .15 U.S. dollars
In 2010, 100 Japanese yen purchased .88 U.S. dollars and in 2013, it purchased .93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?
2010: 113.6 yen, 2013: 107.5 yen
If nominal GDP is 2700 and the money supply is 900, what is velocity?
3
The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the ______________ .
Central Bank; safety and stability of the banking system.
Which of the following events would cause interest rates to increase?
a higher discount rate
One of the following groups is not participating in the foreign exchange markets. Which one?
an Iowa travel firm that arranges vacation tours for local seniors to Hawaii
A central bank that wants to increase the quantity of money in the economy will:
buy bonds in open market operations.
If the U.S. government uses an expansionary monetary policy to reduce interest rates, then it will:
cause the exchange rate for U.S. currency to depreciate.
The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions?
countercyclical
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?
discount rate
A stronger British pound is beneficial for
exchange students with a British scholarship studying in Canada.
When banks hold excess reserves because they don't see good lending opportunities:
it negatively affects expansionary monetary policy.
Why would an expansionary monetary policy no longer be available to combat recession for a country that has pegged its exchange rate?
it would depreciate the country's exchange rate and break its hard peg
A central bank that desires to reduce the quantity of money in the economy can:
raise the reserve requirement
For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits.
swings in exchange rates
Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________.
taking a management responsibili
If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then;
the Canadian dollar appreciated against the U.S. dollar.
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?
the money supply in the economy decreases
A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.
weakening; less
Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets?
French franc
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?
fighting inflation
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:
following an expansionary monetary policy.
People or firms use one currency to purchase another currency at the _______________________.
foreign exchange market
Which of the following is a traditional tool used by the Fed during recessions?
open market operations
Suppose the situation in which investors in the US are looking to Japan as a place where they should invest for a future high rate of return, while Japanese investors are looking to lower their investments in the US. The combined effect in the dollar exchange market will
shift the supply curve out, the demand curve shifts in and the value of the dollar decreases.
The quantitative easing policies adopted by the Federal Reserve are usually thought of as:
temporary emergency policies.
If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then:
the dollar depreciated against the yen.
According to the basic quantity equation of money, if price and output fall while velocity increases, then
the quantity of money will fall.
Portfolio investments are often made based on beliefs about how _______________ are likely to move in the near future.
exchange rates or rates of return
