Raymond Hayden Economics

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1. Which of the following statements is least accurate? The existence and use of money:

A. permits individuals to perform economic calculations.

B. requires the central bank to control the supply of currency.

C. increases the efficiency of transactions as against a barter system.

2. The Ml measure of the money supply is least likely to include:

A. savings account deposits.

B. checking account deposits.

C. currency held by the public.

3. Depository institutions least likely include:

A. growth funds.

B. credit unions.

(,. commercial banks.

4. Banks and savings institutions lower the cost of funds for borrowers by saving them the time and expense of finding numerous individuals who are willing to lend to them. This statement best describes the depository institutions' function as:

A. exchange media.

B. liquidity creators.

C. financial intermediaries.

5. Assume the Federal Reserve purchases Si billion in securities in the open market. What is the maximum increase in the money supply that can result from this action, if the required reserve ratio is 15% and there is no currency drain?

B. Si billion.

6. The policy tool the Federal Reserve uses most often is:

A. the discount rate.

B. reserve requirements.

C. open market operations.

7. The goals and targets of Federal Reserve policy least likely include:

A. promoting economic growth and full employment.

B. maintaining stable exchange rates.

C. managing the monev supplv in such a way as to keep inflation low.

8. The money demand schedule slopes downward to the right showing that:

A. an expansion in the money supply increases interest rates.

B. as the opportunity cost of holding money rises, people want to hold less money.

C. a reduction in the money supply reduces the interest rate.

9. The money supply schedule is vertical because the:

A. money supply is dependent upon interest rates.

B. demand schedule is downward sloping.

C. money supply is independent of interest rates.

1 0. Which of the following statements is most likely accurate? Money:

A. demand rises with nominal interest rates.

B. demand rises with nominal income.

C. supply rises with nominal interest rates.

11. If money supply and demand are in equilibrium and the central bank sells securities in the open market:

A. bank reserves will increase.

B. short-term interest rates will decrease.

C. firms and households will sell securities for cash.

12. The most likely long-term effect of an increase in the monev supplv when the economy is at full-employment GDI' is:

A. higher output.

B. higher prices.

C. lower unemployment.

3 3. If the monev supply is rising and velocity is falling:

A. prices will fall.

B. real GDP will rise.

C. the impact on prices and real GDP is uncertain.

14. According to the quantity theory of money:

A. real output and velocity are independent of the money supply.

B. real output and velocity increase with the money supply.

C. an increase in the money stock will decrease gross domestic product.

1 5. According to the quantity theory of money, if nominal GDP is $7.0 trillion and the money supply is SI .0 trillion, then the velocity of the money supply is closest to:

0 0