Econ unit 6 Exam
Based on the information in the above table, the value of M1 is
$1,700
If a bond sells for $2,000 and pays $200 per year in interest, the interest rate on the bond is
10 percent.
If the total money supply is $3 trillion, real GDP is $8 trillion and the price level is 1.5, then the equation of exchange tells us that velocity equals
4
Which of the following is NOT included using the transactions approach to measuring the money supply (M1)?
Certificates of deposit
The part of the Federal Reserve System that determines monetary policy actions is the
Federal Open Market Committee
Which of the following is true of M2?
It is larger than M1.
Which of the following is NOT part of M1 but is included in M2?
Small-denomination certificates of deposits
Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?
The Federal Reserve System
Who appoints the Federal Reserve System's Board of Governors?
The President of the United States
Which of the following actions by the Fed would lead to an increase in the money supply?
The purchase of government securities
An appreciation of the U.S. dollar is most likely a result that
U.S. interest rates have increased.
For barter to occur there must be
a double coincidence of wants for each good to be exchanged.
According to the quantity theory of money,
a given proportionate increase in the money supply leads to an equal proportionate increase in the price level
An increase in the money supply typically leads to
a reduction in the rate of interest.
Money functions as a(n)
all of the above and/or below are correct
Which of the following is a factor influencing the demand for money?
all of the above and/or below are correct
The short-run effect of an increase in the supply of money is
an increase in both real Gross Domestic Product (GDP) and the price level.
An item to which a business holds legal claim is called a(n)
asset.
If knowledge possessed by one party in a financial transaction is not known to the other party, ________ exists.
asymmetric information
Which of the following is the most liquid?
cash
Suppose the economy currently has an inflationary gap. The Fed engages in contractionary monetary policy. The impact of contractionary monetary policy will be to
decrease aggregate demand, decrease prices, and decrease real GDP.
Financial intermediation is best defined as the process by which
financial institutions accept savings from savers and make loans to investors
When the U.S. dollar appreciates,
foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase more foreign goods.
Compared to a barter economy, an economy that uses money will
have more output.
An increase in the interest rate would induce people to
hold a smaller fraction of their wealth in the form of money.
An increase in the money supply will
increase aggregate demand.
To close a recessionary gap, the Fed would
increase the money supply.
Other things being equal, an increase in the supply of money
increases the price level.
The price of bonds and the interest rate are
inversely related
The value of a dollar varies
inversely with the price level.
One of the economic costs of holding currency is that
it earns no interest income.
To the extent that the value of money is less predictable, it becomes
less acceptable as a medium of exchange.
A depreciation of the U.S. dollar
makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, increasing net exports.
When money is accepted as payment in a market transaction, it is functioning as a
medium of exchange.
A business owner applies for a bank loan to launch a fairly low-risk project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of
moral hazard.
The money demand function implies that money demand is
negatively related to interest rates
Holding money to meet unplanned expenditures and emergencies is known as
precautionary demand
An expansionary monetary policy results in lower interest rates, which in turn
reduces the international price of the dollar and increases net exports
Money is a ________ and a transaction is a ________.
stock; flow
The ability of an asset to hold its value over time is a(n)
store of value.
Which panel is consistent with the Fed selling bonds?
supply shifts right, demand stays the same
The designate M1 measure of money consists of
the most liquid types of money in the U.S. system.
The cost of holding money is
the opportunity cost.
Open market operations by the Fed cause
the prices of bonds to change.
In a fiduciary monetary system, money is backed by
the public's confidence that the assets will continue to be accepted as money.
When people want to hold money to make regular planned expenditures, this is
the transaction demand for money.
When we examine the U.S. money supply, the smallest component of M1 is
traveler's checks.
When money serves as a standard for comparing values of different things, it is functioning as a
unit of accounting
The transactions demand for money
varies directly with nominal Gross Domestic Product (GDP)
An assumption used in the quantity theory of money is that
velocity is constant.
