Question 1

-Which of the following statements best describes Figure ?

Accepted Answer

A)  As the Fed increases reserves and with them the money supply, the interest rate tends to increase.
B)  As the Fed decreases available reserves and decreases the money supply, the interest rate tends to increase.
C)  As consumer incomes fall, consumers become more frugal. As a result they increase their demand for money and the interest rate increases.
D)  An increase in household incomes is likely to increase the demand for money. As money demand increases, the interest rate rises.E) B) and C)
F) A) and D)

Question 2

When credit flows decline, DNFD

Accepted Answer

A)  increases.
B)  declines.
C)  remains the same.
D)  declines then increases.E) A) and C)
F) None of the above

Question 3

If the supply of money increases ceteris paribus, interest rates will

Accepted Answer

A)  rise.
B)  fall.
C)  rise, and then stabilize.
D)  remain the same.E) None of the above
F) B) and C)

Question 4

If the interest rate is above the equilibrium rate, there is an

Accepted Answer

A)  excess demand for money and downward pressure on the interest rate.
B)  excess quantity supplied of money and upward pressure on the interest rate.
C)  excess supply of money and upward pressure on the interest rate.
D)  excess quantity supplied of money and downward pressure on the interest rate.E) B) and C)
F) A) and B)

Question 5

If there is a leftward shift in the demand curve for money, interest rates will

Accepted Answer

A)  fall.
B)  remain the same.
C)  rise, and then stabilize.
D)  rise.E) A) and D)
F) C) and D)

Question 6

A leftward shift of the supply curve of money illustrates that the

Accepted Answer

A)  quantity supplied of money has increased.
B)  quantity supplied of money has decreased.
C)  supply of money has increased.
D)  supply of money has decreased.E) B) and D)
F) A) and B)

Question 7

Domestic nonfinancial debt is a measure of which of the following?

Accepted Answer

A)  bankers' acceptances
B)  outstanding foreign loans
C)  outstanding loans and debts, accumulated in the present and past excluding the debt of financial institutions
D)  debt of financial institutions used for relending purposesE) None of the above
F) A) and B)

Question 8

The unique and most primary function of money is that it serves as a

Accepted Answer

A)  unit of account.
B)  generally acceptable means of payment.
C)  store of value.
D)  means for barter.E) A) and B)
F) A) and C)

Question 9

In the early 1990s, the Fed was most interested in which aggregate for an indicator of the level of economic activity?

Accepted Answer

A)  U.S. Savings Bonds
B)  domestic nonfinancial debt (DNF
D)  
C)  money market mutual funds
D)  money market deposit accountsE) A) and B)
F) A) and C)

Question 10

The difference between other checkable deposits and demand deposits can best be described as follows:

Accepted Answer

A)  Checkable deposits are a subset of demand deposits.
B)  Demand deposits are checkable deposits that are non-interest-earning.
C)  Demand deposits earn interest; checkable deposits do not.
D)  Demand deposits are part of M1; checkable deposits are not.E) C) and D)
F) None of the above

Question 11

Checkable deposits are included in which monetary aggregate?

Accepted Answer

A)  M1
B)  M2
C)  DNFD
D)  Both a and b contain checkable deposits.E) A) and B)
F) A) and C)

Question 12

If the supply of money falls ceteris paribus, interest rates will

Accepted Answer

A)  fall.
B)  rise.
C)  remain the same.
D)  fall, and then stabilize.E) A) and B)
F) None of the above

Question 13

Compared to a monetary system of exchange, the barter system does which of the following?

Accepted Answer

A)  increases transaction costs
B)  lowers the volume of exchange in the economy
C)  promotes inefficient use of time and energy
D)  The barter system does all of the above.E) None of the above
F) B) and C)

Question 14

The specific amount of money that net spenders wish to hold at a specific interest rate is the

Accepted Answer

A)  quantity supplied of money.
B)  quantity demanded of money.
C)  demand for money.
D)  supply of money.E) A) and B)
F) A) and C)

Question 15

If significant costs are required to convert a particular type of asset to money, it is usually referred to as

Accepted Answer

A)  a checkable deposit.
B)  a savings account.
C)  liquid.
D)  illiquid.E) A) and C)
F) B) and C)

Question 16

A rightward shift of the supply curve of money means that

Accepted Answer

A)  the supply of money has increased.
B)  the supply of money has decreased.
C)  the demand for money has increased.
D)  the quantity supplied of money has decreased.E) C) and D)
F) A) and C)

Question 17

During the late 1980s, which measure gained importance to the Fed?

Accepted Answer

A)  M1
B)  small time deposits
C)  money market deposit accounts
D)  M2E) All of the above
F) None of the above

Question 18

Graphically, a decrease in the provision of reserves would

Accepted Answer

A)  shift the quantity supplied of money upward.
B)  shift the quantity supplied of money downward.
C)  shift the money supply curve to the left.
D)  shift the money supply curve to the right.E) None of the above
F) A) and B)

Question 19

If a commercial bank has checkable deposit liabilities of $50,000 and the required reserve ratio is set at 12%, the commercial bank must hold how much in reserves assets?

Accepted Answer

A)  None. It is not mandatory to hold reserves.
B)  $3,000
C)  $6,000
D)  $44,000E) A) and C)
F) A) and B)

Question 20

The intent of an electronic funds transfer system is to

Accepted Answer

A)  eliminate overdrafts that check writing allows.
B)  expand written check use.
C)  strengthen the dollar as a means of payment.
D)  increase convenience and service to the public and reduce the costs of making payments.E) A) and D)
F) A) and C)

Exam 2: Money and Its Role in the Economy

A rightward shift of the supply curve of money means that

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If the supply of money increases ceteris paribus, interest rates will

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Domestic nonfinancial debt is a measure of which of the following?

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A leftward shift of the supply curve of money illustrates that the

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If the supply of money falls ceteris paribus, interest rates will

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Checkable deposits are included in which monetary aggregate?

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Compared to a monetary system of exchange, the barter system does which of the following?

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Graphically, a decrease in the provision of reserves would

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The specific amount of money that net spenders wish to hold at a specific interest rate is the

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If significant costs are required to convert a particular type of asset to money, it is usually referred to as

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The difference between other checkable deposits and demand deposits can best be described as follows:

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The unique and most primary function of money is that it serves as a

Correct AnswerverifiedShow Answer

During the late 1980s, which measure gained importance to the Fed?

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-Which of the following statements best describes Figure ?

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When credit flows decline, DNFD

Correct AnswerverifiedShow Answer

If there is a leftward shift in the demand curve for money, interest rates will

Correct AnswerverifiedShow Answer

In the early 1990s, the Fed was most interested in which aggregate for an indicator of the level of economic activity?

Correct AnswerverifiedShow Answer

If a commercial bank has checkable deposit liabilities of $50,000 and the required reserve ratio is set at 12%, the commercial bank must hold how much in reserves assets?

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If the interest rate is above the equilibrium rate, there is an

Correct AnswerverifiedShow Answer

The intent of an electronic funds transfer system is to

Correct AnswerverifiedShow Answer

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