Macroeconomics Chapter 14
Which of the following best explains the difference between commodity money and fiat money?
Fiat money has no value except as money, whereas commodity money has value independent of its use as money.
Whenever banks gain reserves and make new loans, the money supply ___________; and whenever banks lose reserves, and reduce their loans, the money supply __________.
expands; contracts
There are ________ members of the Board of Governors, who the President of the United States appoints to ________. One of the Board members is appointed Chairman for ________.
7; 14-year nonrenewable terms; a 4-year renewable term
Which of the following is not a policy tool the Federal Reserve uses to manage the money supply?
Changing income tax rates
Suppose you withdraw $100 from the bank. What is the effect on M1? Ignore any actions the bank may take as a result of your having withdrawn the $100.
M1 remains unchanged
Jill makes a deposit into her savings account at the local bank with $100 in cash. As a result of this transaction,
M1 will decrease by $100.
The quantity equation states:
M×V=P×Y, where M = M1; V = Velocity; P = GDP deflator; and Y = Real GDP.
According to the quantity theory of money, inflation results from which of the following?
The money supply grows faster than real GDP.
How do the banks "create money"?
When there is an increase in checking account deposits, banks gain reserves and make new loans, and the money supply expands.
An increase in the amount of excess reserves that banks keep _________ the value of the real-world deposit multiplier.
decreases
Savings account balances, small-denomination time deposits, and noninstitutional money market fund shares are
included only in M2.
