ECO121 ( 201 - 220 )

A

QN=201 (17913) Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the a. money supply to fall. To reduce the impact of this the Fed could lower the discount rate. b. money supply to fall. To reduce the impact of this the Fed could raise the discount rate. c. money supply to rise. To reduce the impact of this the Fed could lower the discount rate. d. money supply to rise. To reduce the impact of this the Fed could raise the discount rate.

A

QN=202 (17912) If you deposit $100 of currency into a demand deposit at a bank, this action by itself a. does not change the money supply. b. increases the money supply. c. decreases the money supply. d. has an indeterminate effect on the money supply.

A

QN=203 (17920) If an economy used gold as money, its money would be a. commodity money, but not fiat money. b. fiat money, but not commodity money. c. both fiat and commodity money. d. functioning as a store of value and as a unit of account, but not as a medium of exchange.

B

QN=204 (17906) When the Fed conducts open-market sales, a. it sells Treasury securities, which increases the money supply. b. it sells Treasury securities, which decreases the money supply. c. it borrows from member banks, which increases the money supply. d. it lends money to member banks, which decreases the money supply.

A

QN=205 (17901) The measure of the money stock called M1 includes a. wealth held by people in their checking accounts. b. wealth held by people in their savings accounts. c. wealth held by people in money market mutual funds. d. everything that is included in M2 plus some additional items.

B

QN=206 (17908) An increase in the money supply might indicate that the Fed had a. purchased bonds in an attempt to increase the federal funds rate. b. purchased bonds in an attempt to reduce the federal funds rate. c. sold bonds in an attempt to increase the federal funds rate. d. sold bonds in an attempt to reduce the federal funds rate.

C

QN=207 (17907) The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 4 percent. If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion of bonds, then by how much does the money supply change? a. (i) It rises by $600 billion. b. (ii) It rises by $125 billion. c. (iii) It falls by $2,500 billion. d. None of (i), (ii), and (iii) is correct.

B

QN=208 (17915) At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply a. increased. The central bank could have reduced the size of this increase by buying bonds. b. increased. The central bank could have reduced the size of this increase by selling bonds. c. decreased. The central bank could have reduced the size of this decrease by buying bonds. d. decreased. The central bank could have reduced the size of this decrease by selling bonds.

D

QN=209 (17924) The manager of the bank where you work tells you that your bank has $5 million in excess reserves. She also tells you that the bank has $300 million in deposits and $255 million dollars in loans. Given this information you find that the reserve requirement must be a. 50/255. b. 40/255. c. 50/300. d. 40/300.

C

QN=210 (17903) In a system of 100-percent-reserve banking, the purpose of a bank is to a. make loans to households. b. influence the money supply. c. give depositors a safe place to keep their money. d. buy and sell gold.

B

QN=211 (17928) During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits a. Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. b. Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. c. The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. d. The decision to hold relatively more currency would make the money supply decrease. The decision to hold relatively more excess reserves would make the money supply increase.

D

QN=212 (17955) Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then a. the value of money is lower than its equilibrium level. b. the price level is higher than its equilibrium level. c. the quantity of money demanded is greater than the quantity of money supplied. d. the quantity of money supplied is greater than the quantity of money demanded.

C

QN=213 (17957) The classical dichotomy argues that changes in the money supply a. affect both nominal and real variables. b. affect neither nominal nor real variables. c. affect nominal variables, but not real variables. d. do not affect nominal variables, but do affect real variables.

B

QN=214 (17930) When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a a. movement to the right along the money demand curve. b. movement to the left along the money demand curve. c. shift to the right of the money supply curve. d. shift to the left of the money supply curve.

B

QN=215 (17956) Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds? a. $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. b. 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. c. $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. d. 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

D

QN=216 (17958) Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then how many times per year is the typical dollar bill used to pay for a newly produced good or service? a. 4 b. 6 c. 8 d. 12

C

QN=217 (17932) Refer to Figure 30-3. What quantity is measured along the vertical axis? a. the price level b. the velocity of money c. the value of money d. the quantity of money

D

QN=218 (17947) Refer to Figure 30-2. At the end of 2007 the relevant money-demand curve was the one labeled MD2. At the end of 2008 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2008? a. -43 percent b. -57 percent c. 57 percent d. 75 percent

D

QN=219 (17936) According to the quantity theory of money, a 2 percent increase in the money supply a. causes the price level to fall by 2 percent. b. leaves the price level unchanged. c. causes the price level to rise by less than 2 percent. d. causes the price level to rise by 2 percent.

C

QN=220 (17952) You bought some shares of stock and, over the next year, the price per share increased by 5 percent and the price level increased by 8 percent. Before taxes, you experienced a. both a nominal gain and a real gain, and you paid taxes on the nominal gain. b. both a nominal gain and a real gain, and you paid taxes only on the real gain. c. a nominal gain and a real loss, and you paid taxes on the nominal gain. d. a nominal gain and a real loss, and you paid no taxes on the transaction.