Multiple choice problems on macro economics.

1. Lowering the

a. decrerase reserves, encourage banks to make less loans, and decrease the money supply.

b. decrerase reserves, encourage banks to make less loans, and increase the money supply.

c. increase reserves, encourage banks to make more loans, and decrease the money supply.

d. increase reserves, encourage banks to make more loans, and increase the money supply.

2. A bank is legally required to keep a certain fraction of its ___ as____ . These are called__

a. deposits;loans;excess reserves

b. deposits;reserves ;required reserves

c. loans;deposits;excess reserves

d. loans;reseves; required reserves

3. The quantity theory of money assumes that

a. the velocity of money is negative.

b. the velocity of money is constant

c. the velocity of money fluctuates unprdicatably.

d. the velocity of money is zero.

4. A farm worket gets paid today in money, but waits to spend the money until next week. This illustrates which function of money?

a. store of value

b.medium of exchange

c. unit of account

d. standard of deffered payment

5. During World War II,Prisoners of war used--------- as money.

a. bullets

b.Chocolate

c. cowrie shells

d. cigarattes

6. Which of the following are an asset of a bank?

a. long-term debt.

b. deposits

c.loans

d. short term borrowing

7. The federal Reserve undertakes------------- to manage the money supply and interest rates to purse economic objectives.

a. financial panics

b.Federal Depositor Insurance

c. check clearing

d. monetary policy

8. Which of the following is not afunction of money?

a. unit of account

b. standard of barter

c. store value

d. medium of exchange

9.Which of the following is a true statement?

a. Excess Reserves = Loans - Required Reserves

b. Excess Reserves = Deposits - Required Reserves

c. Excess Reserves = = Deposits - Loans

d. Excess Reserves = Actual Reserves - Required Reserves

10.Money is

a. one's assets net of one's liabilities at any point in time.

b. an asset that people are willing to accept in exchange for goods and services.

c. the income one earns over aperoid of time.

d. a liability that people are willing to accept in exchange for goods and services.

11. If banks do not loan out all their excess reserves then the real world multiplier is

a. smaller than 1/RR

b.larger than 1/RR

c.not related to 1/RR

d. equal to 1/RR

12. If you open a checking account at Bank of America will record the transaction by increasing its---------- account ang=d increasing its--------- account.

a) reserve;deposit

b. loan;deposit

c.deposit;reserve

d.reserve;loan

13. A bank holds its reserves as --------- and ---------------

a.vault cash;loans

b.securities;deposits at the Federal Reserve

c. vault cash; deposits at the Federal Reserve

d. Securities;loans

14. Which of the following describes what the Fed would do to purse an expansionary monetary policy?

a. Use discount policy to raise the discount rate.

b. The fed would raise the reserve requirement.

c. Use open market operations to buy Treasury bills.

d. Use open market operations to sell Treasury bills.

15. Which of the following is NOT an argument against inflation targeting?

a. inflation targeting holds the fed accountable for an inflation goal, but may make it less likely the fed will achieve other goals.

b. Inflation targeting makes monetary policy ineffective because the targets are publicly announced.

c. Inflation targeting assumes that the Fed can accurately forecast future inflation rates.

d. Inflation targeting reduces the flexability of the Fed to pursue other policy goals.

16.An increase in the domestic interest rate relative to other interest rates should.

a. increase net export.

b. decrease consumptoion spending

c. increase government spending.

d. increase investment spending.

17. The leader of the monetarist school and major proponent of a monetary growth rule is

a.Ben Bernanke

b. Paul Volker.

c. Milton Friedman.

d. Alan Greenspan.

18. A government could use control of a central bank to further its political interests by

a. decreasing the money supply before an election to decrease inflation.

b. decreasing the money supply before an election to increase inflation.

c. increasing the money supply before an election to decrease production and empolyment.

d. increasing the money supply before an election to increase production and empolyment.

19. Federal Reserve Board Chariman Paul Volker, Alan Greenspan , and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

a. Price stability

b.high employment

c.stability of financial markets

d. economic growth

20. The Japanese economy

a. saw an increase in real GDP from 1998 to 2002.

b. grew rapidly from 1992-2000.

c. grew rapidly from 1950-1990.

d. has experienced inflation since the early 1990s.