Download Practice Quiz 3 1A

Practice Quiz 3 Chapters 11-13
Chapter 11
1. Total deposits are $500,000 and required reserves are $100,000. The required
reserve ratio is:
A.
B.
C.
D.
E.
10%
0.05
0.15
5%
0.2
2. The bank has a required reserve ratio of 5%, and deposits of $50,000. The bank
has $10,000 in total reserves.
A.
B.
C.
D.
E.
The bank has excess reserves of $2,500
This bank has zero excess reserves
The bank has excess reserves of $7,500
This bank is not meeting its reserve requirement
All of their reserves are excess reserves
3. To reduce financial instability (such as bank failures), banks can _________ while
government can __________.
A.
B.
C.
D.
create the FDIC; increase their holdings of excess reserves
pursue conservative lending practices; introduce deposit guarantees
create the FDIC; introduce deposit guarantees
pursue conservative lending practices; loan money more carefully
4. Total reserves minus required reserves =
A.
B.
C.
D.
Loans
Excess reserves
Deposits
Required reserve ratio
5. In the absence of currency, which does NOT describe trade in the economy:
A.
B.
C.
D.
double coincidence of demand
debased money
goods-for-goods exchange
a barter system
6. Which is in M2 (but not in M1):
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Practice Quiz 3 Chapters 11-13
A.
B.
C.
D.
E.
M3
Traveler’s checks
Checking accounts
Savings accounts
Currency in circulation
7. Gresham’s Law says __________ will drive _________out of usage for exchanges in
the economy.
A. currency; debased
B. gold coins; fiat money
C. debased; paper money
D. fiat money; paper money
E. debased; gold coins
8. The required reserve ratio is 10%
The banks are holding (at all times) 7% of deposits in excess reserves
The public is holding 8% of their loans borrowed in the form of cash
If there is $1 million newly deposited, the change in M1 after all rounds of lending
are complete is:
A.
B.
C.
D.
E.
$80,000
$800,000
$4 million
$10 million
$5 million
Chapter 12
9. If the holders of U.S. treasury bonds start to think we have a hard time repaying that
debt, so they sell massive amounts of these bonds on the open market, the result will be
that interest rates in the U.S. will:
A. Increase
B. Decrease
10. If the deposit multiplier is 15, what should the Fed do to increase money supply by
$300 billion?
A.
B.
C.
D.
E.
Sell $20 million in bonds
Buy $20 million in bonds
Buy $20 billion in bonds
Buy $300 billion in bonds
Sell $300 billion in bonds
11. Which is fixed on a given bond?
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Practice Quiz 3 Chapters 11-13
A.
B.
C.
D.
E.
Quantity purchased
Bond price
Effective current interest rate
Yield
Coupon Payment
12. Which is a characteristic of the Fed that differs from all other government regulatory
agencies?
A.
B.
C.
D.
The Fed Chairman is confirmed (approved for the position) by the U.S. Senate
Some Board members are appointed by the President
One of the goals of the Fed is the overall health of the economy
Some District Bank Board members are chosen by banks
13. If the Taylor Rule is being used and GDP falls 4% below potential, the Fed Funds
Rate will:
A.
B.
C.
D.
E.
Rise 6%
Fall 2%
Fall 4%
Rise 4%
Rise 2%
14. The rate the Fed charges banks directly for borrowing is called the:
A. Fed Funds Rate
B. Margin Requirement on stocks
C. Interest Rate
D. Discount Rate
E. Yield
15. Which is a general power of the Fed?
A.
B.
C.
D.
Length limits on mortgage loans
Open market operations
Margin requirement on stocks
Interest rate limits on savings accounts
16. Which is a specific power of the Fed
A.
B.
C.
D.
E.
Buying and selling bonds
Setting the overall interest rate target
Interest rate limits on mortgage loans
Required Reserve Ratio
Open Market Operations
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Practice Quiz 3 Chapters 11-13
Chapter 13
17. The rule of thumb is that if productivity is increasing at 7% per year, and nominal
wage growth is 5% per year, inflation will be:
A.
B.
C.
D.
E.
-2%
3%
11%
-4%
-11%
18. Velocity of money is NOT:
A.
B.
C.
D.
Impacted by the number of ATM machines and debit cards in the economy
the number of times a dollar circulates, on average, in a year
The amount of real GDP supported by a given amount of Money
Nominal GDP divided by M1
19. Monetarists and institutional theorists can both agree on:
A.
B.
C.
D.
E.
The idea that the economy is extremely competitive
Incomes policy
The equation of exchange being a useful tool
Minimizing unemployment as the top priority
Generally favoring low interest rates over high rates
20. Which is not an obstacle for the Fed as it enacts a loose money policy?
A.
B.
C.
D.
E.
Currency held by public increases
Implementation lag
Recognition lag
Velocity is rising
Excess reserves increase
21. Quantity Theorists hold that a 5% increase in money supply results in:
A.
B.
C.
D.
a 5% increase in M1
a 5% increase in Velocity
a 5% increase in Prices
a 5% increase in RGDP
22. Institutional theorists are most likely to support:
A. Incomes policy
B. Inflation hawks
C. Monetarism
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Practice Quiz 3 Chapters 11-13
D. Quantity Theory
E. Rules-based monetary policy
23. The central bank of a developing country, when facing inflation in an election year,
may print money, buy bonds, and lower interest rates even though they believe they
should do the opposite due to the fact they:
A.
B.
C.
D.
Believe expansionary policies will raise borrowing costs
Lack independence
Lack dependence
Have credibility
24. If people act in such a way to confirm the economists’ consensus estimates of
inflation, this is called __________ expectations.
A.
B.
C.
D.
Historical
Extrapolative
Adaptive
Rational
25. Which is not a problem facing the Fed during a recession:
A.
B.
C.
D.
E.
Cost-push inflation
Deflation
Debit card usage increases
Liquidity trap
Stagflation
26. The Keynesian concept of “pushing on a string” means that in a recession,
_____________ policy will be ineffective at restoring full-employment GDP:
A.
B.
C.
D.
Contractionary monetary
Expansionary fiscal
Contractionary fiscal
Expansionary monetary
Answers:
1E
2C
3B
4B
5B
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Practice Quiz 3 Chapters 11-13
6D
7E
8C
9A
10C
11E
12D
13B
14D
15B
16C
17A
18C
19C
20D
21C
22A
23B
24D
25C
26D
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