1) Fiat money is

a. money, which is "resting"in a commercial bank vault

b. money because the government asserts that it is

c. comprised of only checkable deposits

d. money that can be redeemed for a commodity such as gold

2) "near monies" are important for all the following reasons but:

a. because they can be converted into checkable deposits and thereby affect macroeconomic stability

b. because they complicate defining money and therefore complicate the formulation of monetary policy

c. because they are likely to affect the level of consumer spending

d. because they represent the amount of available money in circulation

3) The opportunity cost of holding money as opposed to holding bonds:

a. is zero because money is not an economic resource

b. varies inversely with the interest rate

c. varies directly with the interest rate

d. varies inversely with the level of economic activity

4) The twelve Federal Reserve Banks:

a. exercise supervisory power over member banks

b. act as fiscal agents for the federal government

c. provide for the collection of checks

d. hold the deposits of commercial banks

e. all the above

5) Banks create money when they

a. add to the reserves in the federal reserve bank

b. Exchange checkable deposits for the IOUs of businesses and individuals

c. sell government bonds

d. accept deposits of cash

6) which of the following statements is correct?

a. The actual reserves of a commercial bank equal its excess plus legal reserves

b. A bank's assets plus it's net worth equals its liabilities

c. when borrowers repay bank loans, the supply of money is increased

d. A single commercial bank in safely land an amount equal to its legal reserves

7) if the reserve ratio were 10% per cent, the value of the monetary multiplier would be:

a. 0

b. 1

c. 10

d. 100

8) which of the following is not a tool of monetary policy?

a. changes in the discount rate

b. changes in tax rates

c. Open market operations

d. changes in reserve requirements

9) when the FED sells government securities to the public, the money supply:

a. contracts and commercial bank reserves increased

b. expands and commercial bank reserves decrease

c. contracts and commercial bank reserves decrease

d. expands and commercial bank reserves increased

10) an increase in the reserve ratio:

a. increases the size of the income multiplier

b. decreases the size of the income multiplier

c. increases the size of the money multiplier

d. decreases the size of the money multiplier

11) assuming government wishes to increase the level of RGDP, which of the following pairs is the consistent policy measures?

a. lower government spending and an increase in the money supply

b. A tax reduction and an increase in the money supply

c. A reduction in government exponentials and a decline in the money supply

d. A tax increase and an increase in the interest rate

e. none of these choices

12) A contraction of the money supply tends to:

a. increase the interest rate, but decrease our GDP

b. increase the interest rate and our RGDP

c. lower the interest rate, but increase RGDP

d. lower both the interest rate and RGDP

13) The purpose of a tight money policy is to:

a. move the economy out of recession

b. raise interest rates and restrict the availability of bank credit

c. shift the aggregate demand curve right

d. increase investment spending

14) monetary policy is:

a. less politically acceptable then is fiscal policy

b. Will be weekend if the velocity of money changes in the same direction as the money supply

c. Will be weekend of the velocity of money changes in the opposite direction as the money supply

d. is designed primarily to alter the velocity of money