Macroeconomics Exam II (HW Drills)

If the required reserve ratio is 18%, what is the simple money multiplier?

5.56

Which of the following situations represents commodity-backed money? Choose one: A. Dollars are printed on paper and have value because the government says they have value. B. Coins are minted with a type of metal that has little to no intrinsic value. C. Coins are minted with gold and have a value based on the amount of gold the coin contains. D. Dollars are printed on paper and have value because they can be converted at a fixed rate into a valuable commodity. E. Checks are printed on paper and can be cashed in for printed currency.

A. Dollars are printed on paper and have value because they can be converted at a fixed rate into a valuable commodity.

During the Great Recession, the Federal Reserve made use of a new tool, quantitative easing, to adjust the money supply. Which of the following statements are true about quantitative easing? Choose one or more: A. Quantitative easing was designed to increase the money supply. B. Quantitative easing was designed to increase interest rates. C. Quantitative easing is a type of open market operation. D. During the Great Recession, quantitative easing was immediately successful in stimulating economic growth. E. Quantitative easing was designed to lower interest rates.

A. Quantitative easing was designed to increase the money supply. C. Quantitative easing is a type of open market operation. E. Quantitative easing was designed to lower interest rates.

Which of the following statements are true about M1 and M2? A. M2 includes credit cards, whereas M1 does not. B. M1 is always larger than M2. C. M2 is always larger than M1. D. M1 includes less-liquid assets like savings deposits, whereas M2 includes liquid assets like currency. E. Everything counted in M1 is also counted in M2.

C. M2 is always larger than M1. E. Everything counted in M1 is also counted in M2.

What would be an appropriate way to calculate owner's equity for a bank? A. liabilities minus reserves B. assets divided by liabilities C. assets minus liabilities D. assets plus reserves E. liabilities minus assets

C. assets minus liabilities

Unable to borrow from other banks, University Bank is forced to turn to the Federal Reserve for needed funds. The interest rate that the Federal Reserve will charge University Bank is called the Choose one: A. required reserve ratio. B. federal funds rate. C. discount rate. D. open market operation. E. simple money multiplier.

C. discount rate.

(1) You go to Greater's Ice Cream and see the price of a cone quoted as $3.00. (2) You buy the cone and pay with $3.00 in cash. In the first instance money serves as ___________, while in the second instance money serves as ___________.

a unit of account; a medium of exchange

Federal funds are

deposits held by private banks on reserve at the Federal Reserve.

You transfer $100 from your savings account to your checking account. As a result, M1 will ____________ and M2 will ____________.

increase by $100; remain unchanged