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FinalSpring2007revMoney - Prof Dohan 101 Practice Final...

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Prof. Dohan 101 Practice Final Monetary Policy Part 1/6 ECONOMICS 101 QUEENS COLLEGE Prof. Dohan Final Spring 2007 Student's Name_____________________________________ _ Student’s ID_________________ It looks long but it is not. Work steadily. Allocate your time carefully. Raise your hand if you have a question. Most of my exams have a curve; so don't worry about missing a few questions. Do try to answer every question, however. Please be fair to your fellow students . Remember that this is a closed book exam. No books, no notes and no similar study aids are permitted. No talking. Do not facilitate or permit other students to benefit from your exam and do not represent other's work as your own. Failure to observe these standards will automatically result in at least an F for the course. Questions on Money and Monetary Policy 1. Which of the following are included in our narrow definition of money (M 1 )? There is more than one item, circle the letter in front of each correct answer. a. Gold b. Currency (paper money and coins) c. Credit cards d. Debit cards or cash cards. e. Blank checks that you carry with you f. The balance in your checking account g. The balance in your money market fund h. Treasury bills (less than 10,000) i. The amount in your savings account 2. Why do people hold M 1 ? a. To earn interest on their money b. To carryout transactions c. As a hedge against inflation d. As a means to have enough liquid assets to buy bonds and other securities and to give liquidity to part of their portfolio. e. Because the bank requires you to keep a certain percent of your checking account in the bank. 3. Money carries out important functions in the economy. Circle the letter next to the answer that is not a function of money? a. Enables a person to carry out transactions b. It eliminates the problem of coincidence of wants in barter c. Money is capital (in the economists sense) and therefore, is used to produce goods. d. Money is a store of value e. Money acts as a unit of account so that we can use prices to compare opportunity costs. 4. The following statements are true or false. a. People and companies hold more of their portfolio as money when interest rates go up. b. The supply of money is determined by the amount of gold reserves the Central Bank has. c. In the United States today, the government has the right to print currency (paper money). d. The velocity of money (the number of times a unit of money changes hands in transactions) has been going down in the last 30 years. e. Credit cards and debit cards are a form of money. f. The amount you have in your money market mutual fund is considered to be part of M 2 . //home/vdimitrov/31830/5266b6ad528ed28a7f60a0cf3425be36fa28d5d7.doc9/25/2009
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Prof. Dohan 101 Practice Final Monetary Policy Part 2/6 Managing the Money Supply 1. If the required reserve ratio is 20% and if the banking system as a whole had 2 trillion
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FinalSpring2007revMoney - Prof Dohan 101 Practice Final...

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