EC_3220_HW_3_Ch4

EC_3220_HW_3_Ch4 - ECONOMICS 3220 INTERMEDIATE...

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Page 1 ECONOMICS 3220 INTERMEDIATE MACROECONOMICS Homework 3: Ch 4 1. The quantity of money in the United States is essentially controlled by the: A) president of the United States. B) Department of the Treasury. C) Federal Reserve. D) system of commercial banks. 2. To increase the money supply, the Federal Reserve: A) buys government bonds. B) sells government bonds. C) buys corporate stocks. D) sells corporate stocks. 3. Open-market operations are: A) Commerce Department efforts to open foreign markets to international trade. B) Federal Reserve purchases and sales of government bonds. C) Securities and Exchange Commission rules requiring open disclosure of market trades. D) Treasury Department purchases and sales of the U.S. gold stock. 4. All of the following assets are included in M 1 except : A) currency. B) demand deposits. C) traveler's checks. D) money market deposit accounts. 5. Money market mutual fund shares are included in: A) M 1only. B) M 2 only. C) both M 1 and M 2. D) neither M 1 nor M 2.
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Page 2 6. Credit card balances are included in: A) M 1 only. B) M 2 only. C) both M 1 and M 2. D) neither M 1 nor M 2. 7. Checking account balances that are linked to debit cards are included in: A) M 1. B) M 2 only. C) both M 1 and M 2. D) neither M 1 nor M 2. 8. The definition of the transactions velocity of money is: A) money multiplied by prices divided by transactions. B) transactions divided by prices multiplied by money. C) money divided by prices multiplied by transactions. D) prices multiplied by transactions divided by money. 9. If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is ______ times per year. A) 0.2 B) 2 C) 5 D) 10 10. The income velocity of money: A) is defined in the identity MV = PY . B) is defined in the identity MV = PT . C) is the same thing as the transactions velocity of money. D) will be smaller than the transactions velocity of money if the quantity of transactions is greater than income. 11. If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal: A) 10. B) 20,000. C) 200,000. D) 2,000,000.
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Page 3 12. The demand for real money balances is generally assumed to: A) be exogenous. B) be constant. C) increase as real income increases. D) decrease as real income increases. 13. When the demand for money parameter, k , is large, the velocity of money is ______ and money is changing hands ______. A) large; frequently B) large; infrequently C) small; frequently D) small; infrequently 14. Consider the money demand function that takes the form ( M / P ) d = kY , where M is the quantity of money, P is the price level, and Y is real output. If the money supply is growing at a 10 percent rate, real output is growing at a 3 percent rate, and k is constant, what is the rate of inflation in this country? A) 3 percent
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EC_3220_HW_3_Ch4 - ECONOMICS 3220 INTERMEDIATE...

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