Reference no: EM13316172

1. Which of the following combination of assets are considered to be money? 

 

a. currency in circulation, checkable bank deposits, and credit cards 

b. currency in circulation, checkable bank deposits, and travelers'checks 

c. currency in circulation and in bank vaults, checkable bank deposits, and travelers'checks 

d. currency in circulation and in bank vaults, checkable bank deposits, and credit cards 

 

2. When countries replaced gold and silver coins with paper money exchangeable for certain amounts of precious metals, the monetary system evolved from _______. 

 

a. using commodity money to using fiat money 

b. using commodity-backed money to using fiat money 

c. using commodity money to using commodity-backed money 

d. using fiat money to using commodity-backed money 

 

3. Banks can lend money because ______. 

 

a. they have so much to lend 

b. they know not everyone wants their deposits back at the same time 

c. there is a high demand for loans 

d. they know how much cash they have in their vault 

 

4. Banks create money when they ______. 

 

a. make loans 

b. take deposits 

c. hold excess reserves 

d. pay withdrawals to depositors 

 

5. To change the money supply, the Fed most frequently uses _______. 

 

a. changes in the required reserve ratios 

b. changes in the discount rate 

c. open-market operations 

d. none of the above 

 

6. An increase in the aggregate price _______. 

 

a. increases the nominal demand for money 

b. decreases the nominal demand for money 

c. does not affect the nominal demand for money 

d. shifts the nominal demand for money to the left 

 

7. The loanable funds model focuses on the ______. 

 

a. demand for money 

b. supply of funds from lenders 

c. supply of funds from borrowers and the demand by lenders 

d. supply of funds from lenders and the demand from borrowers 

 

8. Expansionary monetary policy _______. 

 

a. increases the money supply, interest rates, consumption, and investment 

b. decreases the money supply, interest rates, consumption, and investment 

c. increases the money supply, decreases interest rates, and increases consumption and investment 

d. decreases the money supply, increases interest rates, and decreases consumption and investment 

 

9. In the long run, changes in the money supply _______. 

 

a. affect both the aggregate price level and aggregate output 

b. affect only the price level but they do not change aggregate output 

c. affect aggregate output but not the aggregate price level 

d. have no impact on either the aggregate price level or aggregate output 

 

10. All of the following factors shift the real money demand curve to the right except a(n) _______. 

 

a. decrease in the number of stores accepting credit cards 

b. increase in the price level 

c. breakdown in information technology that disables ATMs 

d. increase in real aggregate spending

 

11. The Federal Reserve was established in 1913 and is, therefore, a “creature of Congress.” The President of the United States nominates members of the Board of Governors of the Federal Reserve, subject to confirmation by the Senate. However, the Federal Reserve is basically free to pursue monetary policy independent of Congress or the President. Should the Federal Reserve remain independent of the President and Congress or should the President and Congress control monetary policy? Why?