1. M1 money supply
2. includes items that fit the economic definition of "money."
3. has not increased by much during COVID-19.
4. is not impacted by monetary policy.
5. includes all liquid assets, including certificates of deposits and money market mutual funds.

1 points

QUESTION 5

1. Which of the following is true about banks in a fractional reserve banking system?
2. Banks are unable to meet withdraw demand if all depositors want their deposits back at the same time, causing the bank to fail.
3. Banks are legally required to hold all deposits as reserves.
4. Banks play no role in determining the size of the M1 money supply.
5. Bank reserves are primarily gold reserves held at the Federal Reserve.

1 points

QUESTION 6

1. In class, we said that crowding out
2. reduces how much monetary policy can influence the interest rate.
3. means that wages adjust to AD changes quickly.
4. reduces the effectiveness of fiscal policy.
5. is how you get rebounds in basketball. Oh wait, that is "boxing out."

1 points

QUESTION 7

1. The U.S. dollar is
2. commodity money backed by gold.
3. commodity money backed by silver.
4. fiat money backed by the government's real assets.
5. fiat money only backed by people's confidence.

1 points

QUESTION 8

1. Steve deposits his monthly paycheck from his scuba instructor job into his checking account at the local bank. Suppose his monthly paycheck is $1,000 and the reserve requirement is 10%. How much does the money supply instantly increase if the bank only holds the required reserves and loans the rest out?
2. $0
3. $100
4. $900
5. $1,000

1 points

QUESTION 9

1. Refer to question #8. Suppose that banks hold no excess reserves and individuals hold no excess cash balances. As the result of Scuba Steve's deposit, the money supply will increase to
2. $0
3. $4,500
4. $9,000
5. $10,000

1 points

QUESTION 10

1. If the Federal Reserve implements restrictive monetary policy, the supply of loanable funds will _________ which will ________ the real interest rate.
2. decrease, decrease
3. decrease, increase
4. increase, increase
5. increase, decrease

1 points

QUESTION 11

1. Suppose the nominal interest rate increases from 2% to 4%. This will ________ the opportunity cost of holding money.
2. increase
3. decrease
4. not affect.
5. affect, but in an ambiguous direction

1 points

QUESTION 12

1. Han Solo sees an imperial cruiser, gets scared, and drops his cargo and thus breaks the contract he has with Jabba the Hutt. Solo goes into hiding after Jabba puts a bounty on Solo to collect the debt. While in hiding, Solo lives on money he had saved for emergencies. When Solow was saving this money, it was an example of the ____________ demand for money.
2. transactions
3. asset
4. precautionary
5. double-coincidence of wants

1 points

QUESTION 13

1. When the Federal Reserve engages in expansionary monetary policy
2. the interest rate rises.
3. asset prices rise.
4. the money supply falls.
5. the SRAS curve shifts right.

1 points

QUESTION 14

1. Which of the following would be an example of an unfavorable supply shock?
2. increase in oil prices
3. a stock market crash
4. an increase in foreign income
5. very good weather

1 points

QUESTION 15

1. The Keynesians say that because of sticky wages
2. recessions will be short.
3. economic booms will not result in inflation in the long-run.
4. expansionary fiscal policy will have no impact on aggregate demand.
5. the SRAS curve is slow to shift to the right.

1 points

QUESTION 16

1. If the economy is in long-run equilibrium and then followed by an increase in aggregate demand,
2. a short-run economic boom will result.
3. the unemployment rate will exceed the natural rate of unemployment.
4. GDP will equal potential GDP in the short-run.
5. a short-run recession will result.

1 points

QUESTION 17

1. Refer to your answer to question #17, the long-run effect of this will be,
2. deflation
3. positive cyclical unemployment
4. inflation
5. a permanent economic boom.

1 points

QUESTION 18

1. Suppose there the expansionary monetary policy is permanent, rather than a short-run thing. What will the effect of this be?
2. people's inflation expectation's rise.
3. GDP remains permanently above potential GDP.
4. the general price level falls.
5. there is no long-run change to unemployment or inflation.

1 points

QUESTION 19

1. On February 3, 2020, the M1 money supply was $4.1 trillion while GDP was $21.5 trillion. What was the velocity of money?
2. 0.19
3. 4.1
4. 5.2
5. 17.4

1 points

QUESTION 20

1. Suppose the money supply is increasing by 10% each year while real GDP is increasing by 2%. The Quantity Theory of Money says the rate of inflation will be
2. 2%
3. 5%
4. 8%
5. 10%

1 points

QUESTION 21

1. If the Federal Reserve is concerned about inflation, what is the appropriate monetary policy action?
2. open market sale of government securities.
3. open market purchase of government securities.
4. no monetary policy action.
5. open market purchase of government securities along with lowering the reserve requirement.