ECON 202 - Module 15 Quiz

If the money supply is 500, and the velocity is 4, what is nominal GDP?

2,000

Fill in the blank with the correct answer by typing in the box. Velocity is a term that economists use to describe how _______ money circulates through the economy.

quickly

Select whether the statement is true or false. Monetary policy affects interest rates and the available quantity of loanable funds, which in turn affects several components of aggregate demand.

true

Select whether the statement is true or false. The most commonly used tool of monetary policy in the U.S. is open market operations.

true

Select whether the statement is true or false. The organization responsible for conducting monetary policy and ensuring that a nation's financial system operates smoothly is called the central bank.

true

Select whether the statement is true or false. When many banks are choosing to hold excess reserves, expansionary monetary policy may not work well.

true

Fill in the blank with the correct answer by typing in the box. The Federal Reserve is responsible for assuring that banks are in _________ with a wide variety of consumer protection laws.

compliance

Which of the following institutions is responsible for ensuring that enough currency and coins are circulating through the financial system to meet public demands?

Federal Reserve

Atlantic Bank is required to hold 10 percent of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?

It would increase its reserves.

When do the staggered terms of the Federal Reserve governors expire?

January 31 of every even year

In the United States, which institution is primarily responsible for inspecting credit unions?

National Credit Union Administration

In the United States, which institution is primarily responsible for supervising banks?

Office of the Comptroller of the Currency

Which of the following statements best describes the political control of the Federal Reserve?

Policy decisions of the Fed do not require congressional approval, and the president cannot ask for the resignation of a Federal Reserve governor as the president can with cabinet positions.

How are the insurance premiums determined for deposit insurance?

The insurance premium is based on the bank's level of deposits and then adjusted according to the riskiness of a bank's financial situation.

The Central Bank has raised its reserve requirements from 10 percent to 12 percent. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely

borrow for the short term from the central bank.

According to the basic quantity equation of money, if price and output fall while velocity increases, then the quantity of money will

fall *( M(fall) * V(up) = P(down) * Q(down) )

Select whether the statement is true or false. The Federal Reserve has a national staff of bank examiners who conduct on-site reviews of the 1,500 or so of the largest national banks.

false (The U.S. Department of the Treasury)

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

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will

follow tight monetary policy.

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is

following a loose monetary policy.

Fill in the blank with the correct answer by typing in the box. If banks are required to hold a greater amount in reserves, they have ______ money available to lend out.

less

Fill in the blank with the correct answer by typing in the box. The most powerful and commonly used of the three traditional tools of __________ policy—open market operations—works by expanding or contracting the money supply in a way that influences the interest rate.

monetary

If the economy is at equilibrium as shown in the graph, then an expansionary monetary policy will

reduce unemployment and have a relatively small rise in the price level.

Fill in the blank with the correct answer by typing in the box. Depositors racing to the bank to withdraw their deposits is called a bank ______.

run

When the central bank lowers the reserve requirement on deposits,

the money supply increases and interest rates decrease.