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Which of the following is the best example of money used as a store of value?

A farmer stores \$100 dollar bills in a strong box under the floor in a barn

Which of the following is the best example of money used as a medium of exchange?

In a prisoner of war camp cigarettes are traded for socks, candy and/or food, even by nonsmokers.

Percentage change in P is approximately equal to the percentage change in

M minus the percentage change in Y plus the percentage change in velocity

The M2 measure of money consists of the sum of

M1, savings deposits, small time deposits, and money market mutual funds

When money is used to purchase goods and services, it serves as a:

Medium of exchange

To an economist, ................ is anything that is generally accepted in payment for goods and services or in the repayment of debt.

Money

An important factor in the evolution of commodity money to fiat money is

a desire to reduce transaction costs

A trade in a barter economy requires

a double coincidence of wants

Banks create money in

a fractional-reserve banking system but not in a 100-percent-reserve banking system

When your grandfather keeps a bundle of \$100 dollar bills behind a brick in the basement, this is an example of dollars serving as

a store of value

In a small open economy, if the world interest rate is r3, then the economy has

a trade deficit

When the price of a pizza is quoted in dollars, this is an example of dollars serving as:

a unit of account

The direct trade of goods and services for other goods and services is called

barter

If the demand for real money balances is proportional to real income, velocity will:

be constant

In a small open economy, if domestic investment exceeds domestic saving, then the extra investment will be financed by:

borrowing from abroad

In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to:

make loans to foreigners

In a 100-percent-reserve banking system, banks

cannot affect the money supply

The minimum amount of owners' equity in a bank mandated by regulators is called a _____ requirement

capital

The value of a bank's owners' equity is called bank

capital

All of the following are considered money in the United States EXCEPT

credit cards

The money supply consists of

currency plus demand deposits

The M1 measure of money consists of the sum of

currency, checking deposits, and travelers' checks

The money supply will decrease if the

currency-deposit ratio increases

If a U.S. corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a U.S. government bond, then U.S. net exports ______, and net capital outflows ______.

decrease; decrease

Bank reserves equal:

deposits that banks have received but have not lent out

The U.S. dollar exchange rate (units of foreign currency per U.S. dollar) for currencies of countries with high inflation rates relative to the United States has tended to ______, and the U.S. dollar exchange rate (units of foreign currency per U.S. dollar) for currencies of countries with low inflation rates relative to the United States has tended to ______.

depreciate; appreciate

Net capital outflow is equal to the amount that

domestic investors lend abroad minus the amount that foreign investors lend here.

Finding both parties to a trade who have something the other party wishes to trade for is called a

double coincidence of wants

Small time deposits are .............. the M1 measure of money and .............. the M2 measure of money

excluded from; included in

Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase

exports by the small open economy

When the real exchange rate rises

exports will decrease and imports will increase

In a small open economy, when foreign governments reduce national saving in their countries, the equilibrium real exchange rate (measured in units of the home currency divided by units of foreign currency)

falls, and home country net exports rise

If the nominal interest rates in the United States and Canada are 8 percent and 12 percent, respectively, the real interest rates are the same, and the real exchange rate is fixed, then the market's expectation about the number of Canadian dollars to be received for a U.S. dollar a year from now will be that it will

increase by 4 percent

If the real exchange rate depreciates from 1 Japanese good per U.S. good to 0.5 Japanese good per U.S. good, then U.S. exports ______, and U.S. imports ______.

increase; decrease

Starting from a trade balance, if the world interest rate falls, then, holding other factors constant, in a small open economy the amount of domestic investment will _____, and net exports will _____

increase; decrease

If a U.S. corporation sells a product in Europe and uses the proceeds to purchase shares in a European corporation, then U.S. net exports ______, and net capital outflows ______.

increase; increase

In a small open economy, if the world interest rate falls, then domestic investment will _____, and the real exchange rate will _____, holding all else constant.

increase; increase

In a small open economy with perfect capital mobility, a reduction in the government's budget deficit ______ net exports, and the real exchange rate ______.

increases; depreciates

If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal?

increasing taxes

In a small open economy, policies that increase

investment tend to cause a trade deficit

The world interest rate

is the interest rate prevailing in world financial markets

Money serves as a unit of account when

it is a basic measure of economic value

Money serves as a store of value when

it is a means of holding wealth

A small open economy with perfect capital mobility is characterized by all of the following except that:

its domestic interest rate always exceeds the world interest rate

When people want to hold _____ money, the income velocity of money increases, and the money demand parameter k ______

less; decreases

The lower the real exchange rate is, the ______ expensive domestic goods are relative to foreign goods, and the ______ the demand is for net exports.

less; greater

Money performs each of the functions listed EXCEPT serving as a(n)

liability of the nonbank public

The costs of reprinting catalogs and price lists because of inflation are called

menu costs

The ex ante real interest rate is equal to the nominal interest rate

minus the expected inflation rate

The money supply will increase if the

monetary base increases

Macroeconomists call assets used to make transactions

money

All of the following assets are included in M1 except:

money market deposit accounts

If a country has a high rate of inflation relative to the United States (holding the real exchange rate fixed), the dollar will buy:

more of the foreign currency over time

Hyperinflations ultimately are the result of excessive growth rates of the money supply; the underlying motive for the excessive money growth rates is frequently a government's

need to generate revenue to pay for spending

In a large open economy, the exchange rate adjusts so that net exports equal

net capital outflow

The real exchange rate is determined by the equality of

net capital outflow and the demand for net exports

If income velocity is assumed to be constant, but no other assumptions are made, the level of ______ is determined by M

nominal GDP

The opportunity cost of holding money is the

nominal interest rate

The real interest rate is equal to the

nominal interest rate minus the inflation rate

The nominal exchange rate between the U.S. dollar and the Japanese yen (measured in $ / yen) is the

number of yen you can get for one dollar

The rate of inflation is the

percentage change in the level of prices

The major source of government revenue in most countries that are experiencing hyperinflation is:

seigniorage

According to purchasing-power parity, if the dollar price of oil is higher in New York than in London, arbitrageurs will _____ oil in New York and _____ oil in London to drive _____ the price of oil in New York

sell; buy; down

The three functions of money are

serving as a medium of exchange, unit of account, and store of value

When money is used as a means to hold wealth, it serves as a

store of value

In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade ______ and ______ net capital outflow

surplus; positive

In a small open economy, starting from a position of balanced trade, if the government increases the income tax, this produces a tendency toward a trade ______ and ______ net capital outflow

surplus; positive

According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by:

the Federal Reserve

The theoretical separation of real and monetary variables is called

the classical dichotomy

The value of net exports is also the value of

the difference of national saving and domestic investment

A depreciation of the real exchange rate in a small open economy could be the result of:

the expiration of an investment tax-credit provision

The ratio of the money supply to the monetary base is called

the money multiplier

In the classical model, according to the quantity theory of money and the Fisher equation, an increase in money growth increases:

the nominal interest rate

If velocity is constant and, in addition, the factors of production and the production function determine real GDP, then

the price level is proportional to the money supply

In the long run, according to the quantity theory of money and classical macroeconomic theory, if velocity is constant, then ______ determines real GDP and ______ determines nominal GDP

the productive capability of the economy; the money supply

If net capital outflow is positive, then:

the trade balance must be positive

When money is the basic measure of economic value, it serves as a

unit of account

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a

unit of account.

People use money as a unit of account when they:

use money as a measure of economic transactions

The quantity theory of money assumes that

velocity is constant

Barter is

. the direct trade of goods and services for other goods and services

The central bank in the United States is the

Federal Reserve

Open-market operations are

Federal Reserve purchases and sales of government bonds.

Which of the following is the best example of money used as a unit of account?

The prices of construction jobs, real estate, and cars on the island of Yap are quoted in cases of beer to purchase each

The ex post real interest rate will be greater than the ex ante real interest rate when the

actual rate of inflation is less than the expected rate of inflation

If nominal wages cannot be cut, then the only way to reduce real wages is by

adjustments via inflation

In a system with fractional-reserve banking

all banks must hold reserves equal to a fraction of their deposits

If the purchasing-power parity theory is true, then

all changes in the nominal exchange rate result from changes in price levels.

Net exports equal GDP minus domestic spending on

all goods and services

An appreciation of the real exchange rate in a small open economy could be the result of

an increase in government spending

Money is

any asset used to make purchases

If the number of dollars per yen rises, this is called a(n):

appreciation of the yen

Credit card balances are not considered to be money primarily because they

are not part of people's wealth

"Inflation tax" means that

as the price level rises, the real value of money held by the public decreases

The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate plus the

foreign inflation rate minus the domestic inflation rate

People use money as a store of value when they

hold money to transfer purchasing power into the future

If domestic saving exceeds domestic investment, then net exports are ______ and net capital outflows are ______

positive; positive

The currency-deposit ratio is determined by

preferences of households about the form of money they wish to hold

The definition of the transactions velocity of money is

prices multiplied by transactions divided by money

The right of seigniorage is the right to

print money.

Purchasing-power parity theory:

provides a reason to expect that movements in the real exchange rate will typically be small or temporary


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