1.According to the classical dichotomy, which of the following is not influenced by monetary factors? (Points : 1)
nominal GDP and nominal interest rates
real wages and real GDP
the price level and nominal GDP
None of the above is correct.
2. When the money supply and the price level in countries that experienced hyperinflation are plotted on a graph against time, we see that (Points : 1)
the price level grew at about the same rate as the money supply.
the price level grew at a much faster rate than the money supply.
the price level grew at a much slower rate than the money supply.
the inflation rate and the money supply growth rate do not appear to be related.
3. Consider the following traders who meet.
Bob has an apple wants an orange
Ted has an orange wants a peach
Mary has a pear wants an apple
Alice has a peach wants an orange
Which, if any, pairs of traders has a double coincidence of wants? (Points : 1) Bob with Alice
Ted with Alice
Bob with Mary, Ted with Bob, and Ted with Alice
None of the pairs above has a double coincidence of wants.
4. In which of the following sets of assets are the assets correctly ranked from most liquid to least liquid? (Points : 1)
money, bonds, cars, houses
money, cars, houses, bonds
bonds, money, cars, houses
bonds, cars, money, houses
5. Shawn puts money into an account. One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods. (Points : 1) The nominal interest rate was 11 percent and the inflation rate was 5 percent.
The nominal interest rate was 6 percent and the inflation rate was 5 percent.
The nominal interest rate was 5 percent and the inflation rate was -1 percent.
None of the above is correct.
6. Currently, U.S. currency is (Points : 1)
fiat money with intrinsic value.
fiat money with no intrinsic value.
commodity money with intrinsic value.
commodity money with no intrinsic value.
7. Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your (Points : 1) nominal wage is higher.
nominal wage is lower.
real wage is higher.
real wage is lower.
8. If the reserve ratio is 12.5 percent, the money multiplier is (Points : 1) 6.25.
8.
12.5.
25.
9. If R represents the reserve ratio for all banks in the economy, then the money multiplier is (Points : 1) 1/(1-R).
1/R.
1/(1+R).
(1+R)/R.
10. An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year. (Points : 1) Her real and nominal salary have risen.
Her real and nominal salary have fallen.
Her real salary has risen and her nominal salary has fallen.
Her real salary has fallen and her nominal salary has risen.
11. Interest rates adjusted for the effects of inflation (Points : 1) and inflation are nominal variables.
and inflation are real variables.
are real variables; inflation is a nominal variable.
are nominal variables; inflation is a real variable.
12. Table 29-6.
Bank of Springfield
Assets Liabilities
Reserves $19,200 Deposits $240,000
Loans 228,000
Refer to Table 29-6. Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase? (Points : 1)
$50,200
$72,000
$80,000
$106,000
13. Writing in The New York Times in 2004, economist Hal R. Varian likens the network effects associated with dollars to the network effects associated with (Points : 1)
fax machines.
carbonated beverages.
televisions and radios.
jewelry and works of art.
14. According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then (Points : 1)
nominal and real GDP would rise by 5 percent.
nominal GDP would rise by 5 percent; real GDP would be unchanged.
nominal GDP would be unchanged; real GDP would rise by 5 percent.
neither nominal GDP nor real GDP would change.
15. Based on past experience, if a country is experiencing hyperinflation, then which of the following would be a reasonable guess? (Points : 1) The country has high money supply growth.
Inflation is acting like a tax on everyone who holds money.
The government is printing money to finance its expenditures.
All of the above are correct.
16.
Table 29-1. The information in the table pertains to an imaginary economy.
Type of Money Amount
Large time deposits $80 billion
Small time deposits $75 billion
Demand deposits $75 billion
Other checkable deposits $40 billion
Savings deposits $10 billion
Travelers' checks $1 billion
Money market mutual funds $15 billion
Currency $110 billion
Credit card balances $10 billion
Miscellaneous categories of M2 $25 billion
Refer to Table 29-1. What is the M1 money supply? (Points : 1)
$215 billion
$216 billion
$226 billion
$301 billion
17. Regulations on the (Points : 1)
maximum amount of reserves that banks can hold against deposits are called reserve requirements.
minimum amount of reserves that banks must hold against deposits are called reserve requirements.
extent to which banks can buy and sell bonds are called open-market requirements.
extent to which banks can make new loans are called open-market requirements.
18. The 12 regional Federal Reserve Banks (Points : 1)
are not allowed to make loans to banks in their districts.
regulate banks in their districts.
have more voting members on the FOMC than does the Board of Governors.
are each headed by a member of the Board of Governors.
19. If the reserve ratio is 10 percent, the money multiplier is (Points : 1) 100.
10.
9/10.
1/10.
20. Which tool of monetary policy does the Federal Reserve use most often? (Points : 1) adjustments to long-term interest rates
open-market operations
changes in reserve requirements
changes in the discount rate
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