Worksheets

If the reserve requirement is 10% and a bank initially received $20,000 in deposits what is the potential amount of loans

$200,000

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

According to the simple quantity theory of money a change in the money supply of 6.5% would hold velocity constantly to

A 6.5% change in nominal GDP

Reducing reserve requirements other things being equal would tend to

All of the above

Which of the following is considered to be a relatively weak to a monetary policy

Altering the discount rate

A strong euro is less favorable for:

American tourist traveling in France

The P in the quantity Equation of money represents the

Average level of prices of final goods and services in the economy

Any recession appropriate monetary policy would tend to be for the federal reserve to

Buy bonds and increase AD

In order to increase the rate of growth of the money supply the Federal Reserve can

Buy government bonds on the open market

Which of the following institutions determine the quantity of money in the economy as it most important task

Central bank

Which of the following physical asset is included in M1

Checkable deposit

The central bank uses a

Counter cyclical monetary policy to offset business related economic contraction and expansion

Which list ranks assets from most liquid to at least liquid

Currency stocks fine art

A decrease in foreign demand for US exports will __ The demand for US dollars in cost the US dollar to ___ in value

Decrease; depreciate

Required reserves of a bank or a specific percentage of their

Deposits

What term is used to describe the interest rate charged by the Central bank when it makes loans to commercial banks

Discount rate

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will

Dollar to appreciate

Purchasing power parity

Equalizes the prices of internationally traded goods across countries

A central bank must be concerned about whether a large and unexpected Well drive most of the countries existing banks into

Exchange rate depreciation

If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably study interest rate policy

Exchange rates will have less reason to vary

From a macro economic point of view increases in, Are in addition to aggregate demand while increases in _ are a subtraction from aggregate demand

Exports; imports

An expansionary monetary policy can be thought of as an increase in the money supply or an increase in the interest rate

False

An increase in the money supply raises the equilibrium nominal interest rate

False

Historically the Fed has had limited independence from the executive and legislative branches of the government

False

The Fed selling government bonds will tend to cause a multiple expansion of bank deposits.

False

The central bank has only one function controlling the supply of money in a country

False

The central bank implements monetary and fiscal policy for the government

False

Which of the following institutions oversees the safety and stability of the US banking system

Federal Reserve

People are firms use one currency to purchase another currency at the

Foreign exchange market

An increase in demand deposits combined with an equal decrease in currency in circulation would

Have no direct effect on M1 or M2

Which of the following denotes a common Misunderstanding about exchange rates

In appreciating currency must be better than the depreciating currency

To offset an inflationary boom, appropriate Fed policy could be to ____ reserve requirements to ____ AD.

Increase reserve requirements to decrease AD

Contractionary monetary policy will

Increased unemployment but have little effect on inflation

If velocity is relatively stable in the central bank persistently increases the money supply faster than the rate of real I'll put the result will be

Inflation

The quantity equation of money is

M x V = P x Q

The money supply that includes only currency, checkable deposits, and traveler's checks is known as

M1

The money multiplier

Measures the maximum amount the money supply can increase when you deposit into the banking system

Which of the following is a traditional tool used by the federal reserve during recession

Open market operations

Expansionary monetary policy will

Reduce unemployment but have a little effect on invasion

The exchange rate

States the price of one currency in terms of another currency

For firms engage in international meeting and borrowing

Swings and exchange rates can have an wnormous affect on profits

Yolanda took $5000 from her checking account and put the money in her savings account at the same bank

The M1 went down by $5000 but the M2 was unchanged

If the Fed lowers the discount rate what will be affected be on the money supply

The money supply will tend to increase

Which of the following federal reserve actions would most likely counteract an ongoing recession

The purchase of government bonds and a reduction in the discount rate

If an economist devise the level of nominal GDP by the number of dollars in the money supply she has

The velocity of money

The Federal open market committee makes most of the key decisions influencing the direction and size of the changes in the money supply

True

The central bank typically serves as the major bank for the central government.

True

Velocity equals nominal GDP divided by the money supply

True

Which of the following would most likely cause a nations currency to depreciate

an increase in the nation's inflation rate

The most important role of the federal reserve system is

b. Regulating the supply of money

The direct exchange of goods and services is called

barter

If the required reserve ratio were increased then

both the money supply and the outstanding loans of banks would tend to decrease.

If the Fed wishes to expand the money supply it

buys government bonds

Contractionary monetary policy will tend to have what effect

decrease money supply and increase interest rates

An example of near money would be

money market deposit accounts

Fiat money is

money without intrinsic value that is used as money because of government said so

If M increases and V increases,

nominal GDP increases

When the Fed purchases government bonds from a commercial bank the bank

receives reserves that can be used to make additional loans

Short run speculation in currencies can create ________________________, at least for a time, where an expected appreciation leads to a stronger currency and vice versa.

self-fulfilling prophecy

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 Canadian dollar will most likely strengthen against the US dollar if

the Canadian inflation rate becomes extremely low

If a nation merges its currency with another nation to create a single currency, what must it give up?

the ability to determine its own nationally-oriented monetary policy

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

If 1000 Mexican pesos could buy $1.00 U.S. dollar in 2006 and 87 U.S. dollars in 2010, then:

the dollar strengthened against the peso.

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

weakening; less