What Is Macro Economics?

*** IF IMAGES FOR THE EXHIBITS DONT SHOW UP I HAVE PLACED THEM INTO THE UPLOADED FILES PORTION LABELED AFTER THE EXHIBIT # AND QUESTION. I.E. EX1Q4(EXHIBIT 1 QUESTION 4). EXHIBIT FOR 36-38 IS THE SAME IMAGE. PLEASE MAKE SURE THE ACCURACY OF THE ANSWERS GIVEN. I HAVE INCLUDED CHAPTER PDF’S IF NEEDED AS WELL.*** 1. Buying a cup of coffee with a dollar bill represents the use of money as a: Group of answer choices medium of exchange. unit of account. store of value. all of the answers are correct. 2. Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a: Group of answer choices medium of exchange. unit of account. store of value. store of coincidence. 3. Which of the following items does not provide a store of value? Group of answer choices Currency Checkable deposits Credit cards All of the answers are correct. 4. Anything can be money if it acts as a: Group of answer choices unit of account. store of value. medium of exchange. All of the other answers must be correct. 5. The ease with which an asset can be converted into a medium of exchange is known as: Group of answer choices volatility. liquidity. currency. speculative exchange. 6. Which of the following items is included when computing M1? Group of answer choices Coins in circulation. Currency in circulation. Checking accounting entries. All of the other answers are correct. 7. Which of the following statements is true? Group of answer choices Money must be relatively “scarce” if it is to have value. Money must be divisible and portable. M1 is the narrowest definition of money. All of the other answers are correct. 8. M1 money includes all but which one of the following? Group of answer choices Checkable deposits Savings accounts Paper money Coins 9. Which definition of the money supply includes credit cards? Group of answer choices M1. M2. Each of the answers includes credit card balances. None of the answers include credit card balances. 10. With respect to controlling the money supply, the law requires the Fed to take orders from: Group of answer choices the President. the Speaker of the House. the Secretary of the Treasury. no one-the Fed is an independent agency. 11. The Fed’s principal decision-making body, which directs buying and selling U. S. government securities, is known as the: Group of answer choices Federal Deposit Insurance Corporation. District Board of Governors. Federal Open Market Committee. Reserve Requirement Regulation Conference. 12. The major protection against a sudden mass attempt to withdraw cash from banks is the: Group of answer choices Federal Reserve. Consumer Protection Act. deposit insurance provide by the FDIC. gold and silver backing the dollar. 13. The Monetary Control Act of 1980: Group of answer choices created less competition among various financial institutions. allowed fewer institutions to offer checking account services. restricted savings and loan associations to long-term loans. none of the answers are correct. 14. The Monetary Control Act of 1980 extended the Fed’s authority to: Group of answer choices impose required reserve ratios on all depository institutions. control the discount rate. control the federal funds rate. all of the answers are correct 15. Which of the following does not appear on the asset side of a bank’s balance sheet? Group of answer choices Required reserves Checkable deposits Loans Excess reserves 16. Which of the following is not an interest bearing asset of commercial banks? Group of answer choices Required reserves Securities Loans All of the above are interest bearing assets of commercial banks. 17. Banks would be expected to minimize holding excess reserves because this practice is: Group of answer choices illegal. not profitable. technically difficult. subject to a stiff excess reserves tax. 18. Assume a simplified banking system in which all banks are subject to a uniform reserve requirement of 20 percent and checkable deposits are the only form of money. A bank that received a new checkable deposit of $10,000 would be able to extend new loans up to a maximum of: Group of answer choices $2,000. $8,000. $9,000. $10,000. 19. If the required reserve ratio is a uniform 25 percent on all deposits, the money multiplier will be: Group of answer choices 4.00 2.50 0.40 0.25 20. Assume a simplified banking system subject to a 20 percent required reserve ratio. If there is an initial increase in excess reserves of $100,000, the money supply: Group of answer choices increases $100,000. increases $500,000. increases $600,000. decreases $500,000. 21. If the required reserve ratio decreases, the: Group of answer choices money multiplier increases. money multiplier decreases. amount of excess reserves the bank has decreases. money multiplier stays the same. 22. The cost to a member bank of borrowing from the Federal Reserve is called the: Group of answer choices reserve requirement. price of securities in the open market. discount rate. yield on government bonds. 23. Which of the following policy actions by the Fed would cause the money supply to decrease? Group of answer choices An open-market purchase of government securities. A decrease in required reserve ratios. An increase in the discount rate. A decrease in the discount rate. 24. Which of the following actions by the Fed would increase the money supply? Group of answer choices Reducing the required reserve ratio. Selling government bonds in the open market. Increasing the discount rate. None of the answers are correct. 25.  In Exhibit 1, if the required reserve ratio is 20 percent for all banks, and every bank in the banking system loans out all of its excess reserves. Then a $10,000 deposit from Mr. Brown in checkable deposits could create for the entire banking system: Group of answer choices $8,000 worth of new money. $2,000 worth of new money. $10,000 worth of new money. $40,000 worth of new money. 26. Assume we have a simplified banking system in balance-sheet equilibrium. Also assume that all banks are subject to a uniform 10 percent reserve requirement and demand deposits are the only form of money. A commercial bank receiving a new demand deposit of $100 would be able to extend new loans in the amount of: Group of answer choices $10. $90. $100. $1,000. 27. The demand for money that households keep for emergency purposes is known as the: Group of answer choices precautionary demand. emergency demand. speculative demand. temporary demand. 28. The quantity of money held in response to interest rates is the: Group of answer choices transactions motive for holding money. precautionary motive for holding money. speculative motive for holding money. unit-of-account motive for holding money. 29. The speculative demand for money: Group of answer choices varies inversely with income. is only concerned with active money. involves holding money for unexpected problems. varies directly with the transactions demand for money. varies inversely with the interest rate. 30. Other things being equal, the quantity of money that people wish to hold can be expected to: Group of answer choices increase as the interest rate increases. decrease as the interest rate increases. decrease as real GDP increases. none of the answers are correct.. 31. A decrease in the interest rate, other things being equal, causes a(an): Group of answer choices upward movement along the demand curve for money. downward movement along the demand curve for money. rightward shift of the demand curve for money. leftward shift of the demand curve for money. 32. Which of the following statements is true? Group of answer choices The speculative demand for money at possible interest rates gives the demand for money curve its upward slope. There is an inverse relationship between the quantity of money demanded and the interest rate. According to the quantity theory of money, any change in the money supply will have no effect on the price level. All of the answers are correct. 33.  In Exhibit 1, assume an equilibrium with an interest rate of 15 percent and the money supply at $100 billion. The Fed uses its policy tools to move the economy to a new equilibrium at E2 with money supply of $150 billion and an interest rate of 10 percent. This change could be the result of a(an): Group of answer choices open market sale of securities by the Fed. higher discount rate set by the Fed. higher required reserve ratio set by the Fed. open market purchase of securities by the Fed. 34. According to Keynesians, an increase in the money supply will: Group of answer choices decrease the interest rate, and increase investment, aggregate demand, prices, real GDP, and employment. decrease the interest rate, and decrease investment, aggregate demand, prices, real GDP, and employment. increase the interest rate, and decrease investment, aggregate demand, prices, real GDP, and employment. only increase prices. 35. While the classicists believed that both velocity and output are stable, Keynesians believe: Group of answer choices velocity is stable and output is variable. velocity and output are both variable. output is stable and velocity is variable the same as the classical economists, that both output and velocity are stable 36.  In Exhibit 2, when the money supply increases from S1 to S2, the equilibrium interest rate: Group of answer choices remains unchanged. increases from i2 to i1, increasing investment spending from I1 to I2. increases from i2 to i1, decreasing investment spending from I2 to I1. decreases from i1 to i2, increasing investment spending from I1 to I2. 37. In Exhibit 2, if the interest rate falls from i1 to i2, investment spending will: Group of answer choices increase, and aggregate demand will shift from AD1 to AD2. decrease, and aggregate demand will shift from AD2 to AD1. remain the same, and aggregate demand will shift from AD2 to AD3. increase, and aggregate demand will shift from AD2 to AD1. 38. In Exhibit 2, a shift in aggregate demand from AD1 to AD2: Group of answer choices cannot raise real GDP because the economy is at full employment. cannot raise real GDP because the aggregate supply curve is upward sloping at GDP2. will raise real GDP because the economy is operating below the full-employment level. will cause the interest rate to increase from i2 to i1. 39. The Monetarist transmission mechanism through which monetary policy affects the price level, real GDP, and employment depends on the: Group of answer choices indirect impact of changes on the interest rate. indirect impact of changes on profit expectations. direct impact of changes in fiscal policy on aggregate demand. direct impact of changes in the money supply on aggregate demand. 40. The quantity theory of money assumes that the velocity of money: Group of answer choices is constant. will rise if the money supply rises and fall if the money supply falls. will rise if the money supply rises, but it will not change if the money supply falls. will fall if the money supply rises, and it will rise if the money supply falls.

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