Practice_Exam_2__student_

Practice_Exam_2__student_ - Practice Exam 2 1.Changes in...

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Practice Exam 2 1.Changes in the quantity of money affect a.interest rates b.prices c.production d.All of the above are correct 2. Which of the following best illustrates the unit of account function of money? a.You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. b.You pay for your WNBA tickets with dollars. c.You keep $10 in your backpack for emergencies. d.None of the above is correct. 3. Liquidity refers to a.the ease with which an asset is converted to the medium of exchange. b.a measurement of the intrinsic value of commodity money. c.the suitability of an asset to serve as a store of value. d.how many time a dollar circulates in a given year. 4. Which of the following is included in M2 but not in M1? a.demand deposits b.corporate bonds
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c.large time deposits d.money market mutual funds 5. The agency responsible for regulating the money supply in the United States is a.the Comptroller of the Currency. b.the U.S. Treasury. c.the Federal Reserve. d.the U.S. Bank. 6. The Fed can increase the price level by conducting open market a.sales and raising the discount rate. b.sales and lowering the discount rate. c.purchases and raising the discount rate. d.purchases and lowering the discount rate. 7. Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits. Its reserves are a.$5. b.$50. c.$95. d.$950. 8. Suppose that the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the required reserve ratio is 10%, how much more money can banks create if they lend out the remaining amount? a.$55 million b.$50 million c.$45 million
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d.$40 million 9. The interest rate that the Fed charges banks that borrow reserves from it is the a.federal funds rate. b.discount rate. c.reserve requirement. d.prime rate. 10. When the money market is drawn with the value of money on the vertical axis, as the price level increases, the value of money a.increases, so the quantity of money demanded increases. b.increases, so the quantity of money demanded decreases.
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This note was uploaded on 05/04/2009 for the course ECON 202 taught by Professor Amsler during the Spring '08 term at Michigan State University.

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Practice_Exam_2__student_ - Practice Exam 2 1.Changes in...

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