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Exam 9: Money, Prices, and the Financial System

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Question 41

Multiple Choice

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The M2 measure of money consists of the sum of:

A) savings deposits, small time deposits, and money market mutual funds.
B) currency, checking and savings deposits, and small time deposits.
C) currency, checking and savings deposits.
D) M1, savings deposits, small time deposits, and money market mutual funds.

E) A) and B)
F) B) and C)

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Question 42

Multiple Choice

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Banks help savers find productive uses for their funds because banks are specialized in:

A) gathering information about and evaluating potential borrowers.
B) obtaining preferential tax treatment for savers.
C) securing government guarantees for loans.
D) evaluating the riskiness of stocks.

E) All of the above
F) B) and C)

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Question 43

Multiple Choice

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The central bank of the United States is:

If the desired reserve/deposit ratio is 0.25 and the banking system receives an additional $10 million in reserves, bank deposits will increase by:

M1 differs from M2 in that:

According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to ______ in inflation.

An open-market purchase of government securities by the Fed will:

Savings deposits are ______ the M1 measure of money and ______ the M2 measure of money.

If the public switches from using cash for most transactions to using checks instead, then all else equal, the money supply will:

The direct trade of goods and services for other goods and services is called:

If real GDP equals 5,000, nominal GDP equals 10,000, and the price level equals 2, then what is velocity if the money stock equals 2,000?

In Macroland there is $10,000,000 in currency.The public holds half of the currency and banks hold the rest as reserves.If banks'desired reserve/deposit ratio is 10%, deposits in Macroland equal ______ and the money supply equals _______.

In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10%.If the Central Bank prints an additional 200 econs and uses this new currency to buy government bonds from the public, the money supply in Macroland will increase from ______ econs to ______ econs, assuming that the public does not wish to change the amount of currency it holds.

The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks'desired reserve/deposit ratio is 0.10.Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ______ government bonds.

In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ____.

If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as:

Liabilities of the commercial banking system include:

After the Federal Reserve increases reserves in the banking system, banks create new deposits through multiple rounds of lending and accepting deposits until the:

The quantity equation is always true because it:

When the Fed sells government securities, the banks':