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Exam 22: Money Prices and the Federal Reserve

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Question 31

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If a bank's desired reserve-deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it:

A) has too few reserves and will reduce its lending.
B) has too many reserves and will increase its lending.
C) has the correct amount of reserves and outstanding loans.
D) should increase the amount of its reserves.

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Question 32

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In Macroland there is $1,000,000 in currency that can either be held by the public as currency or deposited into banks. Banks' desired reserve/deposit ratio is 10 percent. If the public of Macroland decides to hold more currency, increasing the proportion they hold from 50 percent to 75 percent, the money supply in Macroland will ________.

A) increase.
B) decrease.
C) remain the same.
D) either increase or decrease.

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Question 33

Multiple Choice

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In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10 percent. 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.

If you post your car on eBay with a Buy-It-Now price of $1,800, you are using money as:

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

Refer to the information in the table. The amount of currency held by the public ________, and the amount of reserves held by banks ________. It must be the case that, in 1932, the Federal Reserve ________.

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 money supply in Econland is 1,000, and currency held by the public equals bank reserves. The desired reserve-deposit ratio is 0.25. Bank reserves equal ________.

Money serves as a basic yardstick for measuring economic value (a unit of account) , allowing:

Money market mutual funds 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:

Banks hold reserves:

The link between the money supply and prices is strongest in:

Based on the information in the table, the total amount of bank deposits decreased from ________ to ________ over the course of 1932.

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:

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

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

Liabilities of the commercial banking system include:

If real GDP equals 3,500, nominal GDP equals 5,250, and the price level equals 1.5, then what is velocity if the money stock equals 2,100?

The three functions of money are: