1. Which of the following is NOT a tool the Fed uses to manage the money supply?
A) open market operations
B) discount policy
C) deposit insurance
D) reserve requirements 0.4 points
Ā
2. The problem with barter economies is:
A) less time and trouble to trade as compared with a money economy.
B) that there may be a double coincidence of wants.
C) a banking system for trade to occur.
D) that there be a single coincidence of wants.Ā
Ā
3. If banks do not loan out all their excess reserves, then the real world multiplier is
A) smaller than 1/RR.
B) larger than 1/RR.
C) equal to 1/RR.
D) not related to 1/RR.Ā
Ā
4. If the Federal Open Market Committee wants to increase the money supply through open market operations, it will
A) buy U.S. Treasury Securities.
B) sell U.S. Treasury Securities.
C) increase the discount rate.
D) decrease the discount rate.Ā
Ā
5. M1 includes
A) currency in circulation, checking account balances at banks, the value of traveler's checks.
B) currency in circulation, savings accounts, checking account balances at banks.
C) currency in circulation, savings accounts, checking account balances at banks, travelers.
D) coins, savings account balances at banks, traveler's checks.Ā
Ā
6. Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be
A) 19 percent.
B) 15 percent.
C) 11 percent.
D) 6 percent.
Ā
7. According to the quantity theory of money, the inflation rate equals
A) the money supply minus real output.
B) real output minus the money supply.
C) the growth rate of the money supply minus the growth rate of real output.
D) the growth rate of real output minus the growth rate of the money supply.
Ā
8. Suppose that you sold a basketball ticket for the SEC tournament for $750. Assuming that you deposit the entire $750 in your bank and that the RR = 10%, Answer the following questions while also using the same assumptions in the book/lecture slide. Correct answers contain no decimals. Please report them as they are.
a) What is the total change in checking account deposits?
b) How much new money is created? (or what is the change in money supply given the above state conditions?) The total change in the money supply is Blank 2.
c) The amount of new money created in this example would be higher or lower than in the real world. The amount of money created this way would be Bank 3 than in the real world.
