Question 1

Which money measure is helpful for understanding liquidity in the economy?

Accepted Answer

A)   Monetary base
B)   M1
C)   M2
D)   M3

Question 2

In the simple liquidity preference model, if the money-demand curve is elastic, then:

Accepted Answer

A)   small changes to the money supply will greatly affect interest rates.
B)   only large changes to the money supply will greatly affect interest rates.
C)   small changes to the money supply will minimally affect interest rates.
D)   large changes to the money supply will minimally affect interest rates.

Question 3

Any amount that a bank chooses to keep on hand beyond what it is required to is called:

Accepted Answer

A)   excess reserves.
B)   excess deposits.
C)   federal funds.
D)   extra holdings.

Question 4

Which of the following tools is used most often by the Fed to change the supply of money?

Accepted Answer

A)   Open market operations
B)   Reserve requirement
C)   Discount window
D)   Interest rate

Question 5

If a good with intrinsic value loses value as money, the good:

Accepted Answer

A)   is still useful for other reasons.
B)   loses its intrinsic value.
C)   is no longer useful for other reasons.
D)   tends to gain in intrinsic value.

Question 6

One of the difficulties the Fed experiences when implementing monetary policy is:

Accepted Answer

A)   frequent shifts in the economy, which make it difficult to choose between expansionary and contractionary policy.
B)   the time it takes for monetary policy to affect the economy once enacted.
C)   avoiding political interference from Congress.
D)   deciding whether to use open market operations, the discount window, or reserve requirements to adjust the money supply.

Question 7

Which entity carries full responsibility for setting the overall direction of monetary policy and guiding the money supply?

Accepted Answer

A)   The Federal Open Market Committee
B)   The chairman of the Federal Reserve
C)   The Board of Governors
D)   The Cabinet

Question 8

Money can serve as a:

Accepted Answer

A)   store of value.
B)   valuation tool.
C)   less efficient alternative to bartering.
D)   completely fixed unit of measurement.

Question 9

A certificate of deposit would be counted in which measure of money?

Accepted Answer

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

Question 10

Commodity-backed money is:

Accepted Answer

A)   any form of money that can be legally exchanged into a fixed amount of an underlying commodity.
B)   money created by the sale of commodities.
C)   money used for the exchange of large commodities.
D)   any form of money that also has a role as a commodity.

Question 11

We use paper money instead of gold coins in the Unites States today because it:

Accepted Answer

A)   is more convenient.
B)   has no intrinsic value.
C)   has a worth that is easier to control.
D)   has a more stable value.

Question 12

Liquidity refers to how:

Accepted Answer

A)   easy an asset is to convert immediately to cash without losing value.
B)   quickly the same dollar changes hands in the economy.
C)   quickly the average household spends its disposable income.
D)   easy money converts to assets in an economy.

Question 13

If the reserve ratio was 100 percent, then:

Accepted Answer

A)   no lending would occur using deposits.
B)   maximum lending would occur.
C)   banks would create money in the economy.
D)   banks would lend all of their deposits.

Question 14

The graph shown displays the relationship between money and the interest rate.. S2, to engage in contractionary policy the Fed would use open market operations to move the money supply to which point? A)  M S1 B)  M S3 C)  M S4 D)  The money supply would remain at M S2." class="answers-bank-image d-inline" rel="preload" > If the money supply in the economy is currently at MS2, to engage in contractionary policy the Fed would use open market operations to move the money supply to which point?

Accepted Answer

A)   M S1
B)   M S3
C)   M S4
D)   The money supply would remain at M S2.

Question 15

The chair of the Federal Reserve is considered one of the most important economic positions in the world because this person has significant direct control over the conduct of _______ in the United States.

Accepted Answer

A)   fiscal policy
B)   monetary policy
C)   international trade policy
D)   the government budget

Question 16

In the United States, the dollar was commodity backed by:

Accepted Answer

A)   gold.
B)   silver.
C)   oil.
D)   diamonds.

Question 17

If the reserve ratio is 5 percent, the money multiplier will be:

Accepted Answer

A)   20.
B)   5.
C)   10.
D)   2.

Question 18

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

Accepted Answer

A)   convenience.
B)   exchange value.
C)   intrinsic value.
D)   physical shape.

Question 19

In the United States, the central bank is the:

Accepted Answer

A)   Federal Reserve.
B)   Congressional Budgeting Office.
C)   Treasury.
D)   National Bank of the United States.

Question 20

Which of the following would cause the money demand curve to shift to the left?

Accepted Answer

A)   An increase in interest rates
B)   Inflation
C)   A technological advance
D)   An increase in GDP

Exam 15: Moneyand the Monetary System

Which entity carries full responsibility for setting the overall direction of monetary policy and guiding the money supply?

Correct AnswerverifiedShow Answer

In the United States, the dollar was commodity backed by:

Correct AnswerverifiedShow Answer

In the United States, the central bank is the:

Correct AnswerverifiedShow Answer

If a good with intrinsic value loses value as money, the good:

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, to engage in contractionary policy the Fed would use open market operations to move the money supply to which point?

Correct AnswerverifiedShow Answer

Which of the following tools is used most often by the Fed to change the supply of money?

Correct AnswerverifiedShow Answer

The chair of the Federal Reserve is considered one of the most important economic positions in the world because this person has significant direct control over the conduct of _______ in the United States.

Correct AnswerverifiedShow Answer

A certificate of deposit would be counted in which measure of money?

Correct AnswerverifiedShow Answer

Liquidity refers to how:

Correct AnswerverifiedShow Answer

Which money measure is helpful for understanding liquidity in the economy?

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, the money multiplier will be:

Correct AnswerverifiedShow Answer

Money can serve as a:

Correct AnswerverifiedShow Answer

One of the difficulties the Fed experiences when implementing monetary policy is:

Correct AnswerverifiedShow Answer

Which of the following would cause the money demand curve to shift to the left?

Correct AnswerverifiedShow Answer

Any amount that a bank chooses to keep on hand beyond what it is required to is called:

Correct AnswerverifiedShow Answer

If the reserve ratio was 100 percent, then:

Correct AnswerverifiedShow Answer

We use paper money instead of gold coins in the Unites States today because it:

Correct AnswerverifiedShow Answer

Commodity-backed money is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the simple liquidity preference model, if the money-demand curve is elastic, then:

Correct AnswerverifiedShow Answer

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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, to engage in contractionary policy the Fed would use open market operations to move the money supply to which point?

Correct Answer
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