answer+page--unit+four

**Answer Page--Unit Four**

Click here to go back to the Question Page for Unit 4

Laura Goydich 1. All of the following are direct or indirect results of an increase in the money supply except: B) government spending increases

Laura Goydich 2. Which of the following are assumptions of the money multiplier? I. Banks will hold no excess reserves. II. Customers will keep some money as cash instead of in the bank. III. Banks must keep some money for transactions. A) I only

Laura Goydich 3. Which of the following is mismatched with the motive behind the demand for money? B) I keep some money for medical bills or car repairs in the future; speculative motive

Laura Goydich 4. Which of the following are not included in the M2 money supply? D) large-time deposits

Laura Goydich 5. All of the following are tools of monetary policy except: E) taxes

Laura Goydich 6. Which of the following monetary policies should be undertaken when the economy is in a recession? A) buying bonds

Laura Goydich 7. Which of the following is a correct example of the catch-up effect? B) Nigeria has a lower GDP than the USA, so Nigeria will have a faster economic rate of growth.

JoyEllen 8. When a customer compares the price of a Honda Civic vs. a Toyota Camry, the customer is using money as a(n) c) Unit of account

JoyEllen 9. All of the following are functions of the FED except e) Lending money to common citizens

JoyEllen 10. When a customer makes a checkable deposit worth 2,000 dollars into Bank of America, the 2,000 dollars becomes d) A liability to Bank of America

JoyEllen 11. If the reserve requirement is 20% and the Federal Reserve sells 20 million dollars worth of bonds in an open market operation, the money supply can potentially d) Decrease by 100 million

JoyEllen 12. To combat a recession, the Federal Reserve could use monetary policy to b) Expand the money supply to lower interest rates

JoyEllen 13. The term “legal tender” is most likely associated with e) The acceptability of money

Sarah Flanagan 14. Which of the following is NOT counted as a part of M2? d) deposits greater than $100,000

Sarah Flanagan 15. Which of the following could be considered fiat money? I) U.S. dollar II) Gold III) Beaver pelts a) I only

Sarah Flanagan 16. If you were to compare different prices for a sofa using money, you would be using the dollar as a(n): b) standard of value

Sarah Flanagan 17. A bank receives a deposit of $500. If the reserve requirement is 10%, how much could this bank loan out and how much will the total money supply eventually increase by?  Sarah Flanagan 18. If the economy pictured above was operating at MD' rather than at MD, what steps should the Federal Reserve take to alleviate the situation and how would this affect interest rates?  Sarah Flanagan 19. A contractionary monetary policy would lead to which of the following options in the short run? I) Bond prices would decrease. II) The money supply would decrease. III) The nominal interest rate would increase. c) I, II, and III
 * =  ||= __Loans Out__  ||= __Total Change in Money Supply__  ||
 * = c) ||= <span style="font-family: Arial,Helvetica,sans-serif;">$450  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">$4,500  ||
 * = <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;"> ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Federal Reserve__  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Interest Rates__  ||
 * = <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">e) ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">Buy bonds  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">Decrease  ||

Sarah Flanagan 20. If each dollar is spent 3 times per year and nominal GDP for this year is $900 billion, then how much money will be demanded for transaction purposes? a) $300 billion

Sarah Flanagan 21. If the country were facing a recession, what actions should the Federal Reserve take in order to combat the situation? <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;"> Sarah Flanagan 22. The nominal interest rate is stated as the e) real interest rate plus the expected inflation rate
 * = <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;"> ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Bonds__  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Discount Rate__  ||
 * = <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">d) ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">Buy bonds  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">Decrease rate  ||

Sarah Flanagan 23. Refer to the graph above. What can the Federal reserve do to shift D1 to D2? b) sell bonds

Laura Goydich 24. When the velocity of money is constant, an increase in the supply of money will have what effect on nominal GDP? D) It will increase by the same factor as the increase in the money supply.

JoyEllen 25. The shift in the supply/demand graph shown above could be a result of which monetary policy? d) Increase in the reserve requirement

JoyEllen 26. “Near-monies” are: a) Assets that can be readily converted into currency or checkable deposits

JoyEllen 27. When a commercial bank pays a reserve requirement to the Federal Reserve, the reserve requirement becomes: d) Both a and c

JoyEllen 28. Due to an increase in money demanded, the interest rate increased. To lessen the effects of a higher interest rate, the Federal Reserve should: c) Buy bonds from commercial banks

Anna Purugganan <span style="font-family: Arial,Helvetica,sans-serif;">29. Which is a true statement about the M3 definition of money? I. It consists of large-time deposits owned primarily by the government. II. The certificates of deposit in the M3 money supply can be liquidated at any time. III. As it includes M1 and M2, the M3 definition of money includes assets of basically all degrees of liquidity. B) II only<span style="font-family: Arial,Helvetica,sans-serif;">

Anna Purugganan 30. What action does the Fed most frequently take to directly regulate the money supply? B) Open market operations

Anna Purugganan 31. What is the most important determining factor in the value of money? A) It is generally accepted and constantly demanded as a figure of exchange.

Anna Purugganan 32. Currency and deposits owned by which of the following are included in the M1 measure of the money supply? I. Firms II. Households III. Commercial banks IV. Federal Reserve Banks C) I and II only

Anna Purugganan 33. The recent increase in the use of technology for transactions has affected which component of the monetary equation of exchange? E) The velocity of money

Anna Purugganan 34. When someone is determining national GDP, they are using money as: C) Unit of account

Anna Purugganan 35. What function of money is most directly linked to asset demand for money? B) Store of value

Anna Purugganan 36. If in a given year the money supply is $200 billion and nominal GDP is $800 billion, how many times must each dollar be spent? D) 4 times

<span style="font-family: Arial,Helvetica,sans-serif;">Frank Buckman 37. If the legal reserve requirement is 20%, the value of the simple deposit expansion multiplier is: e) 5

Frank Buckman 38. You purchase a used Jeep Wrangler for $11,000 by writing a check. How have you used money? c) as a medium of exchange

Frank Buckman 39. What is money that is considered money because the government asserts that it is? a) fiat money

Frank Buckman 40. If nominal GDP is $800 billion and, on the average, each dollar is spent 4 times per year, then the amount of money demanded for transactions purposes will be: c) $200 billion <span style="font-family: Arial,Helvetica,sans-serif;"> Frank Buckman 41. Keeping wealth in ready supply to spend for future use is using money as: b) a store of value

Frank Buckman 42. Which of the following combinations of monetary policy would cause an increase in aggregate demand? <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;"> Frank Buckman 43. As the interest rate decreases, c) investment increases and aggregate demand increases
 * <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;"> ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Discount Rate__  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Open Market Operations__  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">__Reserve Rate__  ||
 * <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">c) ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">decrease  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">buy bonds  ||= <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">decrease  ||

Frank Buckman 44. If bond prices rise, the c) interest rate will fall

Frank Buckman 45. Which of the following would occur if the money supply increased in the money market graph depicted above? I. interest rates would fall II. interest rates would rise III. the Fed would be enacting an expansionary monetary policy IV. aggregate demand would decrease a) I and III

Frank Buckman 46. Which of the following would **NOT** happen if the Fed enacted the tight monetary policy pictured above? e) interest rates would decrease

Josh Coons 47. In the equation MV=PQ, V stands for: a) the rate at which money cycles through the economy

Josh Coons 48. If the Fed buys bonds on the open market and all other factors remain constant, price level will: b) increase

Josh Coons 49. In an economic recession, the Fed should _ to increase the money supply. d) buy bonds

Josh Coons 50. In the long run, an expansionary monetary policy during a non-recessionary period will cause: b) high inflation

Josh Coons 51.

Given the graph of the economy above, what action should the Fed take? c) sell bonds

Josh Coons 52. In the equation MV=PQ, what does M stand for? e) amount of money in circulation

Josh Coons 53.

In the graph above, what action has the Fed taken? a) sold bonds

Josh Coons 54. What does the Fed require of banks to ensure enough money is in the bank at a given time? a) reserve requirement

Josh Coons 55. In the equation MV=PQ, P stands for: d) price level

Josh Coons 56. Federal Reserve notes and checkable deposits are considered:

I. M1 II. M2 III. M3

e) I, II, and III <span style="font-family: Arial,Helvetica,sans-serif;"> Laura Goydich 57. If the Fed undertakes the monetary policy shown in the graph, which of the following could most directly be a result? a) inflation

Laura Goydich 58. Suppose the intersection point of the SRAS and AD curves occurs at a real GDP value of 100 billion dollars. When the economy is operating on its production possibilities curve, its real GDP is 150 billion dollars. Which of the following would not help increase the real GDP to 150 billion dollars? e) increasing the federal funds rate

Anna Purugganan 59. In the graph above, the Fed has taken action to combat economic troubles. Which of the following actions the Fed could have taken would NOT have caused the marked shift in the graph? C) Reducing taxes

Anna Purugganan 60. Refer to the graph above. What action did the Federal Reserve most likely take?
 * <span style="font-family: Arial,Helvetica,sans-serif;"> || <span style="font-family: Arial,Helvetica,sans-serif;">__Reserve ratio__ || <span style="font-family: Arial,Helvetica,sans-serif;">__Discount rate__ ||
 * <span style="font-family: Arial,Helvetica,sans-serif;">D) || <span style="font-family: Arial,Helvetica,sans-serif;">Decrease || <span style="font-family: Arial,Helvetica,sans-serif;">Decrease ||