Question(TCO 7) If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

(TCO 7) If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

a medium of exchange.

a store of value.

a unit of account.

an economic investment.

Question 2. Question :

(TCO 7) The amount of money reported as M2

is smaller than the amount reported as M1.

is larger than the amount reported as M1.

excludes coins and currency.

includes large ($100,000 or more) certificates of deposit.

Question 3. Question :

(TCO 7) Answer the question on the basis of the following list of assets:

1. Large-denominated ($100,000 and more) time deposits

2. Noncheckable savings deposits

3. Currency (coins and paper money) in circulation

4. Small-denominated (less than $100,000) time deposits

5. Stock certificates

6. Checkable deposits

7. Money market deposit accounts

8. Money market mutual fund balances held by individuals

9. Money market mutual fund balances held by businesses

10. Currency held in bank vaults

Refer to the above list. The M1 definition of money comprises item(s)

Question 4. Question :

(TCO 7) Assume Company X deposits $100,000 in cash in Commercial Bank A. If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent, Bank A, by itself, can initially increase the money supply by a maximum of

$50,000.

$180,000.

$80,000.

$500,000.

:

Question 5. Question :

(TCO 7) A bank temporarily short of required reserves may be able to remedy this situation by

borrowing funds in the federal funds market.

granting new loans.

shifting some of its vault cash to its reserve account at the Federal Reserve.

buying bonds from the public.

:

Question 6. Question :

(TCO 7) Which of the following is correct?

Both the granting and repaying of bank loans expand the aggregate money supply.

Granting and repaying bank loans do not affect the money supply.

Granting a bank loan destroys money; repaying a bank loan creates money.

Granting a bank loan creates money; repaying a bank loan destroys money.

:

Question 7. Question :

(TCO 7) The asset demand for money

is unrelated to both the interest rate and the level of GDP.

varies inversely with the rate of interest.

varies inversely with the level of real GDP.

varies directly with the level of nominal GDP.

Question 8. Question :

(TCO 7) If the quantity of money demanded exceeds the quantity supplied

: the supply-of-money curve will shift to the left.

the demand-for-money curve will shift to the right.

the interest rate will rise.

the interest rate will fall.

Question 9. Question :

(TCO 7) Which of the following is not a tool of monetary policy?

Open market operations

Changes in banking laws

Changes in the amount of reserves available at the term auction facility

Changes in the reserve ratio

Question 10. Question :

(TCO 7) In the latter end of 2001 the Fed cut the federal funds rate several times. The Fed’s purpose was to

prevent rising inflation.

stop a banking crisis.

stimulate economic growth.

strengthen the international value of the dollar.

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