econ QUIZ # 9
Suppose you decide to withdraw $100 in currency from your checking account. 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 Ignore any actions the bank may take as a result of your having withdrawn the $100.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
Suppose that velocity is 3 and the money supply is $600 million. According to the quantity theory of money, nominal output equals
$1.8 billion
The U.S. dollar can best be described as
fiat money
Which of the following would be the least desirable candidate to be a good medium of exchange?
milk
If the money supply is growing at a rate of 4 percent per year, real GDP (real output) is growing at a rate of 4 percent per year, and velocity is constant, what will the inflation rate be?
0%
Currency and coin held by the public $300 Checking account balances $900 Traveler's checks $10 Savings account balances $2,600 Small denomination time deposits $5,000 Money market deposit accounts in banks $1,000 Noninstitutional money market fund shares $2,000 The M1 money supply is equal to
1210
Currency and coin held by the public $400 Checking account balances $1,900 Traveler's checks $10 Savings account balances $1,800 Small denomination time deposits $5,000 Money market deposit accounts in banks $1,000 Noninstitutional money market fund shares $2,000 The M2 money supply is
12110
Money supply $900 Price level 1.47 Real GDP $10,000 The velocity of money is equal to
16.33
Suppose the required reserve ratio is 9% and a bank has the following balance sheet: Assets Liabilities Reserves $4,000 Deposits $20,000 Loans $16,000 This bank keeps required reserves of ____ and excess reserves of _____
1800..........2200
Suppose you deposit $500 cash into your checking account. By how much will checking deposits in the banking system increase as a result when the required reserve ratio is 0.20? The change in checking deposits is equal to
2500
If the money supply is growing at a rate of 4 percent per year, real GDP (real output) is growing at a rate of 4 percent per year, and velocity is growing at 3 percent per year instead of remaining constant, what will the inflation rate be?
3%
Suppose that Deja owns a McDonald's franchise. She decides to move her restaurant's checking account to Wells Fargo, which causes the changes shown on the following T-account. Assets Liabilities Reserves +$100,000 Deposits $100,000 If the required reserve ratio is 0.15, or 15 percent, and Wells Fargo currently has no excess reserves, the maximum loan Wells Fargo can make as result of this transaction is
85000
The formula for the simple deposit multiplier is
Simple Deposit Multiplier = 1/RR
Suppose that the Federal Reserve engages in an open market sale of $46 million in U.S. Treasury bills to banks. In the T-accounts for the Fed and for the banking system shown here, fill in the missing information. Federal Reserve Assets Liabilities _______ -$46 million Reserves -$46 million Banking System Assets Liabilities Treasury bills $46 million _________ -$46 million
Treasury Bills......Reserves
Velocity is defined as
V = (P × Y)/M
Excess reserves
are reserves banks keep above the legal requirement.
An asset would be usable as a medium of exchange for all of the following reasons except:
the asset should be a commodity that has intrinsic value.
If the required reserve ratio is 0.20, the maximum increase in checking account deposits that will result from an increase in bank reserves of $10,000 is
$50000
