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| 1 | |
Based on the following information, compute the value of the M1 measure of the money supply.
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| | A) | $800 billion |
| | B) | $850 billion |
| | C) | $1,000 billion |
| | D) | $1,050 billion |
| | E) | $6,850 billion |
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| 2 | |
If the actual reserve/deposit ratio equals 12% and the desired reserve/deposit ratio for this bank is 10%, the bank should: |
| | A) | do nothing because this is a profitable situation. |
| | B) | stop making loans. |
| | C) | send the extra reserves to the central bank. |
| | D) | request that customers withdraw deposits from the bank. |
| | E) | make more loans in order to earn interest. |
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| 3 | |
In Macroland, currency held by the public is 2000 econs, bank reserves are 400 econs, and the desired reserve/deposit ratio is 25%. 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. |
| | A) | 1,600; 2,400 |
| | B) | 2,000; 2,200 |
| | C) | 2,400; 2,600 |
| | D) | 3,600; 4,400 |
| | E) | 4,000; 4,200 |
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| 4 | |
If the public switches from doing most of its shopping with currency to using checks instead and the Fed takes no action, the money supply will: |
| | A) | increase |
| | B) | decrease |
| | C) | not change |
| | D) | either increase or decrease |
| | E) | equal the quantity of currency that is still in use. |
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| 5 | |
Which of the following is an example of the word "money" correctly used as an economic term? |
| | A) | Miguel made a lot of money in the stock market. |
| | B) | The Big Time Corporation makes money selling clocks to businesses. |
| | C) | Katherine won the lottery and is in the money now. |
| | D) | Francine takes a lot of money with her when she goes on business trips to purchase antiques for her store. |
| | E) | Albert made his money in the movies. |
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| 6 | |
When the value of a bushel of corn and a ton of steel is expressed in dollar terms, money is being used as a: |
| | A) | medium of exchange. |
| | B) | unit of account. |
| | C) | store of wealth. |
| | D) | means of barter. |
| | E) | double coincidence of wants. |
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| 7 | |
The membership of the Federal Open Market Committee (FOMC) includes __ Fed governors and ___ presidents of regional Federal Reserve Banks. |
| | A) | 7; 5 |
| | B) | 7; 12 |
| | C) | 7; 14 |
| | D) | 14; 7 |
| | E) | 12; 12 |
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| 8 | |
Deposit insurance is not a perfect solution to the problem of bank panics because depositors know they are protected no matter what happens to their bank. This can result in: |
| | A) | bankers restricting loans to only the most creditworthy borrowers. |
| | B) | lower costs for taxpayers and the government to insure deposits. |
| | C) | large withdrawals by depositors. |
| | D) | more frequent bank panics. |
| | E) | reckless behavior by banks and insured intermediaries. |
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| 9 | |
If real GDP equals 50,000, nominal GDP equals 100,000, and the price level equals 2, then what is velocity if the money stock equals 20,000? |
| | A) | 2 |
| | B) | 2.5 |
| | C) | 4 |
| | D) | 5 |
| | E) | 10 |
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| 10 | |
According to the quantity equation if velocity and real GDP are constant and the Federal Reserve increases the money supply by 2 percent, then the price level: |
| | A) | decreases by 10 percent. |
| | B) | decreases by 2 percent. |
| | C) | is also constant. |
| | D) | increases by 2 percent. |
| | E) | increases by 10 percent. |
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