ECON 131 Chapter 14

Savings account​ balances, small-denomination time​ deposits, and noninstitutional money market fund shares are
A.
included in both M1 and M2.
B.
included only in M2.
C.
included only in M1.
D.
financial assets that are not included in the money supply.
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Savings account​ balances, small-denomination time​ deposits, and noninstitutional money market fund shares are
A.
included in both M1 and M2.
B.
included only in M2.
C.
included only in M1.
D.
financial assets that are not included in the money supply.
B
Jill makes a deposit into her savings account at the local bank with​ $100 in cash. As a result of this​ transaction,
A.
M1 will decrease by​ $100.
B.
M2 will increase by​ $100.
C.
both M1 and M2 will increase by​ $100.
D.
Both B and C are correct.
A
An increase in the amount of excess reserves that banks keep​ _________ the value of the​ real-world deposit multiplier.
A.
leaves unchanged
B.
eliminates
C.
decreases
D.
increases
C
Whenever banks gain reserves and make new​ loans, the money supply​ ___________; and whenever banks lose​ reserves, and reduce their​ loans, the money supply​ __________.
A.
​expands; contracts
B.
​expands; expands
C.
​contracts; expands
D.
​contracts; contracts
A
Money serves as a unit of account when
A.
it can be easily stored and used for transactions in the future.
B.
prices of goods and services are stated in terms of money.
C.
sellers are willing to accept it in exchange for goods or services.
D.
All of the above are examples of money serving as a unit of account.
B
Money serves as a standard of deferred payment when
A.
sellers are willing to accept it in exchange for goods or services.
B.
payments agreed to today but made in the future are in terms of money.
C.
it can be easily stored today and used for transactions in the future.
D.
All of the above are examples of money serving as a standard of deferred payment.
B
The M1 measure of the money supply includes which of the following​ components?
A.
currency in circulation
B.
checking account deposits in banks
C.
holdings of​ traveler's checks​ (included as part of checking account deposits since​ 2019)
D.
All of the above.
D
There are​ ________ members of the Board of​ Governors, who the President of the United States appoints to​ ________. One of the Board members is appointed Chairman for​ ________.
A.
​9; 7-year nonrenewable​ terms; an​ 8-year renewable term
B.
​12; 14-year nonrenewable​ terms; a​ 4-year nonrenewable term
C.
​7; 14-year nonrenewable​ terms; a​ 4-year renewable term
D.
​14; 4-year nonrenewable​ terms; a​ 4-year nonrenewable term
C
Which of the following is the largest liability of a typical​ bank?
A.
deposits
B.
reserves
C.
Treasury bills
D.
loans
A
Which of the following refers to the minimum fraction of deposits banks that are required by law to keep as​ reserves?
A.
the simple deposit multiplier
B.
the cash to deposit ratio
C.
the required reserve ratio
D.
the quantity equation
C
​________ is caused by central banks increasing the money supply at a rate far in excess of the growth rate of real GDP. A. Disinflation B. Deflation C. Securitization D. HyperinflationDIn the definition of the money​ supply, where do credit cards​ belong? A. Both M1 and M2. B. Credit cards are not included in the definition of the money supply. C. M1. D. M2.BThe simple deposit multiplier equals A. the formula used to calculate the total increase in checking account deposits from an increase in bank reserves. B. the ratio of the amount of deposits created by banks to the amount of new reserves. C. the​ inverse, or​ reciprocal, of the required reserve ratio. D. All of the above.DA higher required reserve ratio​ _________ the value of the simple deposit multiplier. A. decreases B. eliminates C. leaves unchanged D. increasesASuppose American Bank has​ $500 in deposits and​ $200 in reserves and that the required reserve ratio is 10 percent. In this​ situation, American Bank has A. ​$50 in required reserves. B. ​$200 in excess reserves. C. ​$50 in excess reserves. D. ​$200 in required reserves.ASuppose that velocity is 3 and the money supply is​ $600 million. According to the quantity theory of​ money, nominal output equals A. ​$180 million. B. ​$200 million. C. ​$1.8 billion. D. ​$2 billion.CVelocity is defined as A. V = M + P + Y B. V = M/(P x Y) C. V = (P x Y)/M D. V = M x P x YCIf Irving Fisher was correct in his prediction about the value of​ velocity, then the quantity equation can be written to solve for the inflation rate as​ follows: A. Inflation rate​ = Growth rate of the money supply​ + Growth rate of velocity. B. Inflation rate​ = Growth rate of the money supply​ + Growth rate of real output. C. Inflation rate​ = Growth rate of the money supply dash Growth rate of velocity. D. Inflation rate​ = Growth rate of the money supply dash Growth rate of real output.DWhich of the following conditions make a good suitable for use as a medium of​ exchange? A. The good should be of standardized​ quality, so that any two units are identical. B. The good should be​ durable, valuable relative to its​ weight, and divisible. C. The good must be acceptable to​ (that is, usable​ by) most buyers and sellers. D. All of the above conditions must be met.DWhat is fiat​ money? A. an asset that has the ability to be easily converted into the medium of exchange B. money issued by financial​ intermediaries, such as​ banks, but not the central bank C. money that has value independent of its use as money D. money that is authorized by a central bank and that does not have to be exchanged for gold or some other commodity moneyDThere is a strong link between changes in the money supply and inflation A. in both the short run and the long run. B. in the long run. C. in the short run. D. in neither the short run nor the long run.BThe process of​ ________ involves creating a secondary market in which loans that have been bundled together can be bought and sold in financial markets. A. open market operations B. securitization C. fractional reserve banking D. discount operationsBWhich of the following is not a factor that helped lead to the financial crisis of 2007-2009? A. deposit insurance for commercial banks B. high leverage of financial firms that purchased mortgage-backed securities C. falling housing prices D. All of the above helped lead to the financial crisis of 2007A