Question 1

When deciding what to use as money, one characteristic to look for is its:

Accepted Answer

A)   stability of value.
B)   physical shape.
C)   intrinsic value.
D)   exchange value.E) A) and B)
F) B) and C)

Question 2

The Fed classifies different types of money depending on their:

Accepted Answer

A)   liquidity.
B)   resale value.
C)   commodity backing.
D)   intrinsic value.E) C) and D)
F) All of the above

Question 3

The Federal Open Market Committee includes:

Accepted Answer

A)   the Board of Governors.
B)   all regional bank presidents.
C)   the Chairman of the Treasury.
D)   the Secretary of State.E) B) and C)
F) A) and C)

Question 4

The zero lower bound refers to:

Accepted Answer

A)   the fact that the reserve requirement must always be greater than zero.
B)   the Federal Reserve's inability to push the nominal interest rate below zero.
C)   the Federal Reserve's goal of maintaining full employment.
D)   None of these describe the zero lower bound.E) A) and B)
F) A) and C)

Question 5

Expansionary monetary policy involves actions that _______ the money supply in order to _______ aggregate demand.

Accepted Answer

A)   decrease; decrease
B)   increase; decrease
C)   decrease; increase
D)   increase; increaseE) B) and C)
F) A) and D)

Question 6

When contractionary monetary policy increases the interest rate, the price level _______ and output _______.

Accepted Answer

A)   decreases; decreases
B)   increases; increases
C)   decreases; increases
D)   increases; decreasesE) None of the above
F) C) and D)

Question 7

The money multiplier is approximated as being equal to:

Accepted Answer

A)   one divided by the reserve ratio.
B)   one divided by the federal funds.
C)   demand deposits multiplied by the interest rate.
D)   demand deposits multiplied by the reserve ratio.E) B) and C)
F) A) and D)

Question 8

The regulation that sets the minimum fraction of deposits banks must hold in reserve is called the:

Accepted Answer

A)   reserve requirement.
B)   money multiplier.
C)   interest rate.
D)   dual mandate.E) A) and C)
F) B) and C)

Question 9

The amount of money available in the economy:

Accepted Answer

A)   is called the money supply.
B)   is managed by the Federal Reserve.
C)   varies depending on what is considered money.
D)   All of these are true.E) All of the above
F) B) and C)

Question 10

The discount rate is typically _______ the federal funds rate.

Accepted Answer

A)   higher than
B)   lower than
C)   equal to
D)   not correlated withE) B) and C)
F) A) and B)

Question 11

Assets that have intrinsic value:

Accepted Answer

A)   retain a more steady value than assets without intrinsic value.
B)   get traded more often than assets without intrinsic value.
C)   generally have a lower value than other goods.
D)   are not well-suited to being used as money.E) None of the above
F) A) and C)

Question 12

The smaller the reserve ratio, the:

Accepted Answer

A)   less a bank can loan out.
B)   smaller the money multiplier.
C)   more the government is able to borrow.
D)   more money is created in the economy.E) B) and D)
F) A) and B)

Question 13

The graph shown displays the relationship between money and the interest rate. S2, and the Fed uses open market operations to move the money supply to MS1, what is the overall effect on the economy? A)  Aggregate demand decreases, causing GDP to fall. B)  Aggregate supply decreases, causing GDP to fall. C)  Aggregate demand increases, causing GDP to rise. D)  The LRAS curve moves to the FE level of output." class="answers-bank-image d-inline" rel="preload" > If the money supply in the economy is currently at MS2, and the Fed uses open market operations to move the money supply to MS1, what is the overall effect on the economy?

Accepted Answer

A)   Aggregate demand decreases, causing GDP to fall.
B)   Aggregate supply decreases, causing GDP to fall.
C)   Aggregate demand increases, causing GDP to rise.
D)   The LRAS curve moves to the FE level of output.E) A) and B)
F) A) and C)

Question 14

Your savings account balance would be counted in which measure of money?

Accepted Answer

A)   M1
B)   M2
C)   The monetary base
D)   Both M1 and M2E) A) and B)
F) C) and D)

Question 15

The chair of the Federal Reserve System:

Accepted Answer

A)   is approved by the House of Representatives and the Senate.
B)   serves a four-year term.
C)   acts independently from the Board of Governors to maintain objectivity.
D)   All of these are true.E) B) and C)
F) C) and D)

Question 16

Which country has used adjustments to the required reserve ratio as a primary tool of monetary policy?

Accepted Answer

A)   United States
B)   China
C)   Mexico
D)   IndiaE) A) and D)
F) A) and C)

Question 17

Which measure of money would be used to look at spending in the economy?

Accepted Answer

A)   The monetary base
B)   M1
C)   M2
D)   ReservesE) A) and D)
F) B) and C)

Question 18

One of the main roles of a central bank is:

Accepted Answer

A)   managing the nation's money supply.
B)   coordinating the relationship between the banking system and federal government.
C)   ensuring that banks provide enough loans.
D)   monitoring federal spending.E) None of the above
F) C) and D)

Question 19

Compared to the other tools the Fed uses to change the money supply, the discount window is used _______ open market operations and _______ the reserve requirement.

Accepted Answer

A)   less often than; more often than
B)   more often than; more often than
C)   as often as; more often than
D)   more often than; as often asE) All of the above
F) B) and C)

Question 20

Monetary policy primarily influences the economy through changes in:

Accepted Answer

A)   the interest rate.
B)   government spending.
C)   spending by the Fed.
D)   the discount rate.E) B) and D)
F) All of the above

Exam 15: Moneyand the Monetary System

One of the main roles of a central bank is:

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Assets that have intrinsic value:

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Monetary policy primarily influences the economy through changes in:

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The smaller the reserve ratio, the:

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Compared to the other tools the Fed uses to change the money supply, the discount window is used _______ open market operations and _______ the reserve requirement.

Correct AnswerverifiedShow Answer

Which country has used adjustments to the required reserve ratio as a primary tool of monetary policy?

Correct AnswerverifiedShow Answer

The discount rate is typically _______ the federal funds rate.

Correct AnswerverifiedShow Answer

The amount of money available in the economy:

Correct AnswerverifiedShow Answer

The graph shown displays the relationship between money and the interest rate. If the money supply in the economy is currently at MS2, and the Fed uses open market operations to move the money supply to MS1, what is the overall effect on the economy?

Correct AnswerverifiedShow Answer

Which measure of money would be used to look at spending in the economy?

Correct AnswerverifiedShow Answer

When contractionary monetary policy increases the interest rate, the price level _______ and output _______.

Correct AnswerverifiedShow Answer

The zero lower bound refers to:

Correct AnswerverifiedShow Answer

Your savings account balance would be counted in which measure of money?

Correct AnswerverifiedShow Answer

When deciding what to use as money, one characteristic to look for is its:

Correct AnswerverifiedShow Answer

The money multiplier is approximated as being equal to:

Correct AnswerverifiedShow Answer

Expansionary monetary policy involves actions that _______ the money supply in order to _______ aggregate demand.

Correct AnswerverifiedShow Answer

The Federal Open Market Committee includes:

Correct AnswerverifiedShow Answer

The Fed classifies different types of money depending on their:

Correct AnswerverifiedShow Answer

The regulation that sets the minimum fraction of deposits banks must hold in reserve is called the:

Correct AnswerverifiedShow Answer

The chair of the Federal Reserve System:

Correct AnswerverifiedShow Answer

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Compared to the other tools the Fed uses to change the money supply, the discount window is used _ open market operations and _ the reserve requirement.

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The graph shown displays the relationship between money and the interest rate. If the money supply in the economy is currently at M^S2, and the Fed uses open market operations to move the money supply to M^S1, what is the overall effect on the economy?

Correct Answer
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Correct Answer
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When contractionary monetary policy increases the interest rate, the price level _ and output _.

Correct Answer
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Expansionary monetary policy involves actions that _ the money supply in order to _ aggregate demand.

Correct Answer
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