Question 1

If the reserve requirement of a bank is 33%, then $100 of M0 will lead to how much of M1?

a.$33

b.$1000

c.$300

d.$330

Question 2

If the MPC is 0.75 and the government increases spending by $100 billion, the effect this change has on the economy will be which of the following?

a.There will be an increase of $400 billion in economic activity.

b.There will be an increase of $100 billion in economic activity.

c.There will be an increase of $133.3 billion throughout the economy.

d.There will be an increase of $75 billion in economic activity.

Question 3

Which of the following makes the Federal Reserve different from central banks in other countries?

a.The Federal Reserve has tools to manage the money supply.

b.The Federal Reserve can expand the money supply during recessions.

c.The Federal Reserve is not directly controlled by the federal government.

d.The Federal Reserve works to combat inflation.

Question 4

Select the example below that is M1 type of money.

a.Time deposit

b.Money market mutual funds

c.Collectible silver coins

d.Checking account balance

Question 5

Which of the following is an example of medium of exchange?

a.A restaurant lists a price for dinner in gold coins.

b.People in the Pacific Islands used cowrie shells as a form of payment for the things they wanted.

c.A chicken farmer who wants a cow needs to find a cattle farmer who wants some chickens.

d.People invest in gold because it stays stable over time and does not tarnish, rust or deteriorate.

Question 6

Select the example below that is part of contractionary monetary policy.

a.Policies that reduce interest rates

b.Lowering the reserve requirement

c.Policies that can reduce excessive inflation

d.Open market purchases of treasury securities

Question 7

Which of the following is true about the federal funds rate?

a.It is the rate that banks pay to borrow money from the Fed.

b.It is the rate at which treasury securities are bought and sold.

c.It is directly set by the Fed.

d.It is one of the many tools the Fed uses to control the money supply.

Question 8

If we look only at the domestic market, GDP is calculated using which equation below?

a.I = Y - C - G

b.Y = C + I + G (X - M)

c.S = (Y - (C + T) + (T - G))

d.Y = C + I + G