1. The ability of banks to create money has its source in which of the following _____?

A. The 100 percent reserve requirement.

B. The ability of the government to mint as much currency as it wishes.

C. The banks' ability to issue currency (bank notes) of their own.

D. Fractional-reserve banking (less than 100 percent reserve requirement).

2. Which of the following items is assets of a bank _____?

A. Loans

B. Checking account deposits

C. Saving account deposits

D. Money borrowed from Federal Reserve

3. What would happen to money supply, if the Federal Reserve (Fed) raises the discount rate or the reserve requirement ____?

A. When the Fed raises the discount rate, total money supply increases.

B. When the Fed raises the reserve requirement, total money supply increases.

C. When the Fed raises the discount rate, total money supply decreases.

D. When the Fed raises the reserve requirement, total money supply is unchanged.

4. Which of the following statements is true regarding the natural unemployment rate ____?

A. It is always at zero percent.

B. It reflects unemployment when an economy is in "full employment".

C. It is decided upon by the federal government.

D. It is the amount of unemployment in the economy, adjusted for the effects of inflation.

5. Inflation will be reflected as the directly proportional change of ____?

A. Total money supply increase

B. Nominal wage growth and nominal interest rates.

C. Nominal wage growth, but not nominal interest rates

D. Banks that have market power and refuse to lend money

6. In a closed economy, income equals expenditure because of which of the following ____?

A. The influence of governments on individual markets.

B. GDP does include all expenditures.

C. GDP does not include intermediate goods in some cases.

D. The expenditure of the buyer must be equal to the income of the seller.

7. Recall different interest rates we have talked about in this class. What is the rate of interest that the Fed Reserve pays commercial banks on their deposits with the Fed ____?

A. Federal fund rateB. Discount rate

C. Rate on reservesD. Real interest rate

8. For the classical dichotomy, which of the following is NOT influenced by changes in the quantity of money ____?

A. Nominal GDPB. Unemployment

C. Nominal interest ratesD. Hourly wages

9. Which of the following description of the natural rate of unemployment is NOT correct ___?

A. It fluctuates noticeably around short-term business cycles.

B. It reflects the whole economy gravitates toward the long run.

C. It can be measured by averaging all the unemployment rates over several years.

D. It has important implications for public policy.

10. Marginal propensity to consume (MPC) measures ____?

A. The change of consumption when total investment changes.

B. The change of consumption when disposable income changes.

C. The change of investment when disposable income changes.

D. The change of total output when total consumption changes.

11. In macroeconomics, the $2.2 trillion Covid-19 stimulus package in the US during the first half of 2020 is an application of ____?

A. Monetary Policy

B. Consumer Policy

C. Fiscal Policy

D. None is correct.

12. As the central bank of the US, the Federal Reserve System have multiple policy goals, which of the following is one of the goal(s) ____?

A. Keep interest rates at a moderate level.

B. Protect financial system when crisis happens.

C. Promote price stability (e.g. prevent inflation or deflation).

D. All of the above.

13. Which of the following statement about monetary policy is NOT correct ____?

A. To implement monetary policy, the Federal Reserve can change money multiplier by changing reserve-deposit ratio.

B. In the US, commercial banks cannot set up the amount of deposit as reserves beyond the required level (reserve requirement).

C. A central bank cannot perfectly control total money supply because consumers can decide how much money they prefer to deposit at commercial banks.

D. As benchmark interest rate in the US, the federal funds rate the interest rate that banks charge each other on short-term loans of reserves.

14. If the nominal interest rate is 2.5 percent and the inflation rate is 3.5 percent, what is the real interest rate ____?

A. -1 percentB. 1 percentC. 2.5 percentD. 6 percent

15. In a country, if the job separation rate is about 2.4% per quarter and job finding rate is 27.6% per quarter. Then, how much is the steady rate of unemployment in this country ____?

A. 2.4% per quarterB. 9.5% per quarterC. 8.0% per quarterD. Unknown