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- 1. Open-ended30 seconds1 ptWhich of the following best defines money?
- 2. Open-ended30 seconds1 ptThis graph shows the effect of actions taken by the Central Bank of Hamsterville. Which of the following is a reason that a central bank would take actions that lead to the change shown in this graph?
- 3. Open-ended30 seconds1 ptThe current balance sheet of the Iron Bank is given below. The reserve requirement is 10%. If Hodor deposits$100 in the Iron Bank, what will be the dollar value of new loans that the Iron Bank can make?
- 4. Open-ended30 seconds1 ptWhich of the following best describes the opportunity cost of holding money?
- 5. Open-ended30 seconds1 ptWhich of the following best describes why the money supply curve is vertical?
- 6. Open-ended30 seconds1 ptThe current interest rate in Atlantis is 4% percent. At an interest rate of 4% percent, households want to hold $4 million in cash and $2 million in bonds. However, M1 is currently $3 million. Which of the following best describes what will happen in the money market in Atlantis?
- 7. Open-ended30 seconds1 ptIf the reserve requirement is 5% and banks keep no excess reserves, what is the money multiplier?
- 8. Open-ended30 seconds1 ptWhich of the following would be the FIRST change to occur when a central bank conducts open market purchases of bonds?
- 9. Open-ended30 seconds1 ptWhich of the following best describes the difference between nominal interest rates and real interest rates?
- 10. Open-ended30 seconds1 ptIf a new technology is invented that makes it easier to withdraw money from the bank, which of the following will occur in the money market?
- 11. Open-ended30 seconds1 ptWhich of the following best defines the risk of a financial asset?
- 12. Open-ended30 seconds1 ptWhich of the following best describes the result of a government moving from a budget deficit to a budget surplus?
- 13. Open-ended30 seconds1 ptWhich of the following best describes the monetary aggregate M1?
- 14. Open-ended30 seconds1 ptAssume that people keep all money in banks. What happens if banks decide to start keeping excess reserves instead of fully loaning out?
- 15. Open-ended30 seconds1 ptWhat is the short-run effect of a decrease in the money supply on output and the price level?
- 16. Open-ended30 seconds1 ptWhich of the following interest rates is a central bank MOST LIKELY to target directly when using monetary policy?
- 17. Open-ended30 seconds1 ptThe current balance sheet for the Third Bank of Westeros is shown below. The reserve requirement in Westeros is 25%. If Ygritte deposits $1000 into her checking account in the Third Bank of Westeros, how much will the bank have in excess reserves?
- 18. Open-ended30 seconds1 ptThe Bank of Narayana is one of many banks in the financial system in the nation of Kocherlakota. Rai deposits $1000 in the Bank of Narayana. The reserve requirement in Kocherlakota is 20% percent. How much in new loans can this bank make as a result of this deposit?
- 19. Open-ended30 seconds1 ptWhich of the following is correct about capital inflows?
- 20. Open-ended30 seconds1 ptThe interest rate that the bank paid you on your savings account last year was 18%. One year later you find that you can buy 12% more goods than you could last year. Based on this information, what was the nominal interest rate (n.i.r.), real interest rate (r.i.r.), and the rate of inflation (inf. rate)?
- 21. Open-ended30 seconds1 ptThe government of Burginville currently has a balanced budget. Rampant consumer spending in Burginville has led to a decrease in national savings, which has affected real interest rates in Burginville. Which action could the government of Burginville take to offset the effect of a decrease in national savings on real interest rates?
- 22. Open-ended30 seconds1 ptThe development of online banking has made it easier for people to move wealth to cash from other forms of assets. What change would counteract the effect of this on the nominal interest rate?
- 23. Open-ended30 seconds1 ptThe central bank in Hamsterville has bought $100 in bonds from a bank. The reserve requirement is 25% percent. What is the maximum possible change in the money supply?
- 24. Open-ended30 seconds1 ptThe nation of Kocherlakota has a money supply equal to $10000 and a monetary base equal to $2500. What is the money multiplier in Kocherlakota?
- 25. Open-ended30 seconds1 ptWhich of the following statements is true when the money market is in equilibrium?
- 26. Open-ended30 seconds1 ptThe values of several types of assets in Hamsterville are given in the table below. What is the value of M1 in Hamsterville?
- 27. Open-ended30 seconds1 ptThe graph below shows the effect of a change in the market for loanable funds. Which of the following best describes an event that could cause the change shown in the graph?
- 28. Open-ended30 seconds1 ptWhich of the following best describes an equilibrium in the money market?
- 29. Open-ended30 seconds1 ptThe balance sheet for Chidi Bank is given below. Assume the reserve requirement is 20% If this bank sells all of the bonds it holds to the central bank, how much does this bank have in excess reserves?
- 30. Open-ended30 seconds1 ptWhich of the following is a paper claim that entitles the buyer of that claim to future income from the seller?
- 31. Open-ended30 seconds1 ptIf there is rapid inflation throughout the economy, which of the following is the most likely result?
- 32. Open-ended30 seconds1 ptWhich of the following best describes the use of the money multiplier (1/rr)?
- 33. Open-ended30 seconds1 ptWhen the Central Bank of Montoya increases the money supply, what is the impact?
- 34. Open-ended30 seconds1 ptAn increase in real GDP has changed the demand for money, and the central bank wants to use open market operations to counter the effect of the change in demand on the nominal interest rate using open market operations. Which of the following is an open market operation that would have the desired effect on the nominal interest rate?
- 35. Open-ended30 seconds1 ptHodor borrowed $ 1000. The bank charges him 5% percent interest per year. At the end of one year, he paid $ 50 in interest. During that year, there was a 2% percent increase in the GDP deflator. What was the nominal interest rate?
- 36. Open-ended30 seconds1 ptMesa Verde Bank has $80000 in demand deposits, $20000 in bonds, and no owner's equity. It has a reserve requirement of 5% percent. How much does Mesa Verde need to keep in required reserves?
- 37. Open-ended30 seconds1 ptAll of the following decrease nominal interest rates EXCEPT:
- 38. Open-ended30 seconds1 ptThe central bank in Hamsterville has bought $100 in bonds from a bank. The reserve requirement is 25% percent. What is the maximum possible change in the money supply?
- 39. Open-ended30 seconds1 ptWhich of the following financial assets is the most liquid?
- 40. Open-ended30 seconds1 ptThe central bank of Ile conducted open market operations that changed the money market as shown in this graph. What open market operation did they conduct, and what problem would they be trying to correct?
- 41. Open-ended30 seconds1 ptThe government of Hamsterville has engaged in expansionary fiscal policy, and the central bank has engaged in expansionary monetary policy. Assume that there is not complete crowding out. What will be the effect of these policies on real gross domestic product (GDP) and interest rates in Hamsterville?
- 42. Open-ended30 seconds1 ptFelipe deposits $100 in the bank. The bank stores $20 of his deposit in a vault and will loan out other $80. The $20 stored in the bank vault is part of which of the following?
- 43. Open-ended30 seconds1 ptWhich of the following leads to an increase in the money supply?
- 44. Open-ended30 seconds1 ptWhich of the following best describes why the quantity of loanable funds supplied increases when the real interest rate increases?
- 45. Open-ended30 seconds1 ptWhich of the following scenarios would cause the money multiplier to be smaller than predicted by the calculation below? 1/(reserve ratio)
- 46. Open-ended30 seconds1 ptWhich of the following is the rate that banks in the United States charge each other for overnight loans?
- 47. Open-ended30 seconds1 ptThe reserve requirement in Westeros is 25%. Assume that banks keep no excess reserves and there are no other monetary leakages. What is the increase in the money supply from a new $500 deposit?
- 48. Open-ended30 seconds1 ptWhich of the following is a function of money that is most immediately impacted by hyperinflation?
- 49. Open-ended30 seconds1 ptAll of the following lead to an increase in nominal interest rates EXCEPT
- 50. Open-ended30 seconds1 ptAssume that an economy has an upward-sloping short-run aggregate supply (SRAS) curve. Which of the following would occur as a result of contractionary monetary policy?
- 51. Open-ended30 seconds1 ptWhich of the following best describes how banks determine what interest rate to charge?
- 52. Open-ended30 seconds1 ptIf the interest rate on bonds increases, which of the following is the most likely result?
- 53. Open-ended30 seconds1 ptThe market for loanable funds in Oceania is in equilibrium. Based on this statement, which of the following is true?
- 54. Open-ended30 seconds1 ptThe economy of Marthaland had a balanced budget, but an economic boom increased tax revenues. Which of the following should be used to show the effect of the increase in tax revenues on interest rates in Marthaland?
- 55. Open-ended30 seconds1 ptNominal interest rates increased in Hamsterville, and there is less money available. Which of the following could have caused this change?
- 56. Open-ended30 seconds1 ptIf banks decide to keep fewer excess reserves and instead lend more, which of the following is the most likely effect?
- 57. Open-ended30 seconds1 ptMitoocents Bank's balance sheet is shown below. The central bank currently has a reserve requirement of 50%. If the central bank lowers the reserve requirement to 25%, which of the following is the most likely outcome?
- 58. Open-ended30 seconds1 ptFirst Bank is one of many banks in the banking system in Hamsetrville. The central bank of Hamsterville sells bonds to First Bank. What is the immediate impact of the central bank's action?
- 59. Open-ended30 seconds1 ptWhich of the following would be the appropriate model to use to describe the behavior of borrowers and savers?
- 60. Open-ended30 seconds1 ptAddy deposits $500 in the bank. The reserve requirement is 20%. Assume banks keep no excess reserves. What is the maximum change in the money supply that occurs as a result of her deposit?
- 61. Open-ended30 seconds1 ptSeveral years ago the Golden Company issued bonds to raise funds so that it could buy equipment. Those bonds were purchased by the Bank of Westeros. However, now the Bank of Westeros has decided that it doesn't want to have any assets in the form of bonds, so it is selling off all the bonds that it owns. Which of the following is most likely to be the result of this action?
- 62. Open-ended30 seconds1 ptThe interest rate that the bank charged you on your loan last year was 9%. One year later you find that it costs you 2% more to buy goods and services this year as it did last year. Based on this information, what was the nominal interest rate (n.i.r.), real interest rate (r.i.r.), and the rate of inflation (inf. rate)?
- 63. Open-ended30 seconds1 ptWhat relationship is illustrated using the demand for loanable funds?
- 64. Open-ended30 seconds1 ptThe current interest rate in Atlantis is 4%. At an interest rate of 4%, households want to hold $4 million in cash and $ 2 million in bonds. However, M1 is currently $3 million. Which of the following best describes what will happen in the money market in Atlantis?
- 65. Open-ended30 seconds1 ptWestley is a citizen of Florin. He believes that the investment conditions in the neighboring country of Guilder are much better. Assume both countries have an open economy. If other investors share Westley's opinion, what will happen to net capital inflows and the supply of loanable funds in Guilder?
- 66. Open-ended30 seconds1 ptThe values of several types of assets in Hamsterville are given in the table below. What is the value of M2 in Hamsterville?
- 67. Open-ended30 seconds1 ptWhich of the following is a contractionary monetary policy tool that is NOT an open market operation?
- 68. Open-ended30 seconds1 ptWhich of the following increases the demand for money?
- 69. Open-ended30 seconds1 ptWhich of the following leads to a decrease in the demand for money?
- 70. Open-ended30 seconds1 ptThe reserve requirement is 20%. Excellence Bank's balance sheet is shown below. If this bank sells all of the bonds it holds to the central bank, how much does this bank have in excess reserves?
- 71. Open-ended30 seconds1 ptThe size of the expansion of the money supply depends on which of the following?
- 72. Open-ended30 seconds1 ptA banking innovation has made it easier for people in Hamsterville to convert their assets into money. As a result, the demand for money has decreased, and this has changed the nominal interest rate. If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that?
- 73. Open-ended30 seconds1 ptInterest rates in Hamsterville have fallen and, as a result, the net return to investment projects are higher than before interest rates fell and now firms are more willing to take out loans. Which of the following changes would reflect what is described in the statement above?
- 74. Open-ended30 seconds1 ptFirst National Bank is one of many banks in a banking system. It has no excess reserves, and the reserve requirement is 50%. It has $20000 in bonds. How much in new loans can the bank make if the central bank buys the bank's bonds?
- 75. Open-ended30 seconds1 ptThe Iron Bank wants to make sure that the purchasing power of the interest that they get paid on loans is at least 11%. Real GDP is increasing at 5% per year, and the expected rate of inflation is 7% per year. If all banks in Westeros want to earn the same real return as the Iron Bank, what is the nominal interest rate (n.i.r)?
- 76. Open-ended30 seconds1 ptBurgin National Bank operates under a fractional reserve system and the required reserve ratio is 10%. The bank has $4000 in owner's equity, $20000 in demand deposits, $10000 in business loans, and $7000 in consumer loans. Based on this information, how much does Burgin National Bank need to keep in required reserves?
- 77. Open-ended30 seconds1 ptWhich of the following best defines liquidity?
- 78. Open-ended30 seconds1 ptWhich of the following are included in the monetary base (MB), but NOT in the money supply (M1)?
- 79. Open-ended30 seconds1 ptThe amount of money that people want to hold is greater than the money supply at the current interest rate. Which of the following describes the process that returns the money market to equilibrium when the quantity of money demanded is greater than the money supply?
- 80. Open-ended30 seconds1 ptThe Iron Bank of Westeros charges the Lannister family 12% interest on their loans. The director of finance at the bank collected information about the economy in Westeros over the past year as shown in the table below. What was the real interest rate that the Iron bank earned on these loans?
- 81. Open-ended30 seconds1 ptEliza buried money in the backyard to use in an emergency. Which of the three functions of money is described here?
- 82. Open-ended30 seconds1 ptIf there is an increase in aggregate demand, what happens in the money market?
- 83. Open-ended30 seconds1 ptThe reserve requirement in Florin is 20%. The Central Bank of Florin buys $2000 worth of bonds using open market operations. Which of the following describes the impact of the open market purchase of bonds on the monetary base and the money supply?
- 84. Open-ended30 seconds1 ptWhich of the following leads to a lower real interest rate?
- 85. Open-ended30 seconds1 ptWhich of the following best describes an equilibrium in the loanable funds market?
- 86. Open-ended30 seconds1 ptThe current balance sheet of the Iron Bank is given below. The reserve requirement is 20% If Cersei deposits $100 in the Iron Bank, what will be the dollar value of new loans that the Iron Bank can make?
- 87. Open-ended30 seconds1 ptWhich of the following would most likely limit the ability of monetary policy to quickly correct an output gap?
- 88. Open-ended30 seconds1 ptBread Bank is one of many banks in Fredland and there is a currently a 10% reserve requirement. Its balance sheet is shown below. What happens to required reserves and excess reserves if the reserve requirement is increased to 20%
- 89. Open-ended30 seconds1 ptWhich of the following best describes the impact of a decrease in the demand for capital on the interest rate and the quantity of loans made?
- 90. Open-ended30 seconds1 ptThe economy of Maxistan is in a recession caused by a decrease in consumer confidence, as shown in the model here. How will the change in the price level impact the money market and nominal interest rates?
- 91. Open-ended30 seconds1 ptWhich of the following best explains why a $20 bill is money but a share of stock is not money?
- 92. Open-ended30 seconds1 ptThe nominal interest rate in Maxistan decreased, but there is no change in people's liquidity preferences. Which of the following could have caused this change?
- 93. Open-ended30 seconds1 ptMaxistan's central bank lowered interest rates last month. All else equal, what would we expect to happen to previously issued bonds in Maxistan?
- 94. Open-ended30 seconds1 ptThe Bank of Dodge had several large withdrawals and its reserves have fallen below its required reserves. Other banks are unwilling to lend it money, so it has turned to the emergency lending division of the Federal Reserve for an overnight loan. What is the name of the interest rate this bank will be charged for an overnight loan from the Federal Reserve?
- 95. Open-ended30 seconds1 ptYgritte loaned Mans $100. Mans paid her back $110 one year later. The annual rate of inflation was 3%. What was the nominal interest rate that Ygritte earned on this loan?
- 96. Open-ended30 seconds1 ptThe figure below shows the result of a change in the market for loanable funds. Which of the following is the most likely to have caused the shift shown here?
- 97. Open-ended30 seconds1 ptThe reserve requirement is 20%. Excellence Bank's balance sheet is shown below. If Jianyu withdraws $5000 from his bank account, which of the following is true?
- 98. Open-ended30 seconds1 ptWhich of the following financial assets carries the most risk?
- 99. Open-ended30 seconds1 ptWhich of the following best describes why the expansion of the money supply might be different than is predicted by the simple money multiplier?
- 100. Open-ended30 seconds1 ptWhat is included in the monetary base?
- 101. Open-ended30 seconds1 ptMance wants to borrow money, but he doesn't want to pay more than 11% real interest per year. He expects the annual rate of inflation to be 3% each year during the life of the loan. Based on this information, what is the highest nominal interest that he will be willing to pay?
- 102. Open-ended30 seconds1 ptEconomic conditions in Fredland have caused the demand for money to increase which has changed the nominal interest rate. If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that?
- 103. Open-ended30 seconds1 ptThe economy of Burginville prohibits the exchange of goods, services, or capital flows between itself and other countries. Which of the following best describes national savings in Burginville?
- 104. Open-ended30 seconds1 ptThe current balance sheet of the Iron Bank is given below. The reserve requirement is 10%. If Hodor deposits $100 in the Iron Bank, what is the maximum change in the money supply that can occur as a result of his deposit?
- 105. Open-ended30 seconds1 ptThe central bank of Hamsterville decided to decrease the money supply. Which of the following is the most likely reason that the central bank decreased the money supply?
- 106. Open-ended30 seconds1 ptThe reserve requirement in Westeros is 25% percent. Assume that banks keep no excess reserves and there are no other monetary leakages. What is the maximum possible increase in the money supply if an additional $500 is added to the monetary base?
- 107. Open-ended30 seconds1 ptTahani Bank is one of many banks in a banking system. The required reserve ratio is 25%, and the balance sheet for Tahani Bank is shown here: Michael deposits $4000 in the bank. How much in new loans can this bank make if it decides to fully loan out?
- 108. Open-ended30 seconds1 ptWhich of following best describes national savings in a closed economy?
- 109. Open-ended30 seconds1 ptWhich of the following best describes the federal funds rate?
- 110. Open-ended30 seconds1 ptWhat happens to the price and interest rate of a bond if the demand for that bond increases?
- 111. Open-ended30 seconds1 ptThe Third Bank of Chidi is one of many privately owned banks in Anagonye. It sells $200 worth of government securities that it had previously been holding Which of the following best describes the initial effect of this sale on the bank's balance sheet ?
- 112. Open-ended30 seconds1 ptIn response to a particularly exciting speech by the president of Hamsterville, business optimism is at an all time high, and the demand for capital has increased. What will be the impact of this increase in the demand for capital on the market for loanable funds and the stock of capital in Hamsterville?
- 113. Open-ended30 seconds1 ptWhich of the following decreases the money supply?
- 114. Open-ended30 seconds1 ptYgritte loaned Mans $100. Mans paid her back $110 one year later. The annual rate of inflation was 3%. What was the real interest rate that Ygritte earned on this loan?
- 115. Open-ended30 seconds1 ptAssume all banks in Susanland fully loan out, all money is redeposited in banks, and there are no other monetary leakages. If the monetary base increases by $200 and this leads to an increase in the money supply of $1000, what is the reserve requirement in Susanland?
- 116. Open-ended30 seconds1 ptThe Central Bank of Hamsterville and the government of Hamsterville are trying to control inflation by engaging in contractionary monetary policy and contractionary fiscal policy, respectively. Assume that the budget of Hamsterville was balanced prior to engaging in contractionary fiscal policy. What will be the impact of contractionary fiscal policy and contractionary monetary policy on real gross domestic product(GDP) and the interest rate of Hamsterville?
- 117. Open-ended30 seconds1 ptThe values of several types of assets in Hamsterville are given in the table below. What is the value of the monetary base in Hamsterville?
- 118. Open-ended30 seconds1 ptGrey Worm borrowed $20 from Daenerys and promised to pay her back $25 a year later. What is the nominal interest rate that Daenerys expects to earn if the rate of inflation is 10%?
- 119. Open-ended30 seconds1 ptWhich of the following best describes how the money supply responds to changes in the nominal interest rate?
- 120. Open-ended30 seconds1 ptThe economy of Burginville had a balanced budget, but a recession decreased tax revenues. Which of the following should be used to show the effect of the decrease in tax revenues on interest rates in Burginville?
- 121. Open-ended30 seconds1 ptWhat is the dollar value of new loans that this bank can make?
