front 1 In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds, | back 1 reserves increase by $100 million and the money supply increases by more than $100 million. |
front 2 To decrease the money supply, the Fed could | back 2 a. increase the discount rate. b. increase the reserve requirement. c. sell government bonds. All of the above are correct |
front 3 When the Fed buys government bonds, | back 3 the money supply increases and the federal funds rate decreases. |
front 4 When the Fed conducts open-market purchases, | back 4 it buys Treasury securities, which increases the money supply. |
front 5 Which of the following can the Fed do to change the money supply? | back 5 change reserves or change the reserve ratio |
front 6 Which of the following is correct? | back 6 A bank’s deposits at the Federal Reserve counts as part of the bank’s reserves. The Federal Reserve pays interest on these deposits. |
front 7 The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $375 million dollars in loans. Given this information you find that the reserve requirement must be | back 7 15/400. |
front 8 If the reserve ratio is 4 percent, then the money multiplier is | back 8 25 |
front 9 The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change? | back 9 $528 |
front 10 According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases | back 10 inflation and nominal interest rates, but does not change real interest rates. |
front 11 Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of | back 11 three percent and prices fell one percent. |
front 12 Monetary neutrality implies that an increase in the quantity of money will | back 12 increase the price level. |
front 13 Open-market purchases by the Fed make the money supply | back 13 increase, which makes the value of money decrease. |
front 14 When the money market is drawn with the value of money on the vertical axis, an increase in the price level causes a | back 14 movement to the right along the money demand curve. |
front 15 When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an | back 15 excess supply of money, so the price level will rise. |
front 16 When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve | back 16 shifts left, causing the price level to fall. |
front 17 When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an | back 17 excess supply of money which causes the price level to rise. |
front 18 When the price level falls, the number of dollars needed to buy a representative basket of goods | back 18 decreases, so the value of money rises. |
front 19 Which of the following can a country increase in the long run by increasing its money growth rate? | back 19 the nominal wage. |
front 20 Which of the following is correct? | back 20 If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. |
front 21 Which of the following is not implied by the quantity equation? | back 21 With constant money supply and velocity, an increase in output creates a proportional increase in the price level. |
front 22 You put money in the bank. The increase in the dollar value of your savings | back 22 is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable. |