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Exam 11: The Monetary System

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Question 51

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Physical currency in circulation makes up approximately what percentage of the U.S.money supply (as measured by M2) ?

A) ~5 percent
B) ~10 percent
C) ~25 percent
D) ~50 percent

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Question 52

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Which of the following is true of the quantity of reserves demanded?

A) The quantity of reserves demanded is constant over time for almost every bank.
B) The quantity of reserves demanded increases as the federal funds rate falls.
C) The quantity of reserves demanded increases as the inflation rate increases.
D) The quantity of reserves demanded increases at a constant rate over time.

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Question 53

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The paper currency used by the United States at the beginning of the Civil War was referred to as a demand note because ________.

As a goal for the Federal Reserve,price stability is usually interpreted as annual inflation of approximately ________.

Which of the following methods for influencing the federal funds rate was first approved by Congress for use by the Federal Reserve during the 2007−2009 recession?

Which of the following is a role played by the Fed in the U.S.economy?

Suppose that inflation were 6 percent and unemployment were 4 percent.Which of the elements of the Fed's dual mandate would it be failing?

Which of the following statements is true of the federal funds market?

Economists believe that ________ is useful to stimulate the economy in the short run by cutting real wages and real interest rates.

The paper currency that is currently used in the United States is an example of ________ money.

When the Fed buys or sells government bonds to private banks in exchange for reserves,it is referred to as ________.

If there are no changes in inflation expectations,a fall in the federal funds rate ________.

Suppose that the money supply increases by 10 percent while real GDP increases by 6 percent.What does the quantity theory of money predict the inflation rate will be?

A business's cost of changing prices is referred to as ________.

The supply curve of reserves is a(n) ________ line.

The slope of the supply curve of reserves can be attributed to the fact that ________.

Which of the following is likely to happen when the interest rate falls?

Everything else remaining unchanged,what will happen if the Fed sells government bonds in the open market and the value of borrowed reserves is zero?

Scenario: An economy produces only cell phones. In 2015, the economy manufactured 275 cell phones, and each cell phone sold for $200. In 2016, the economy manufactured 280 cell phones, but the price of each cell phone fell to $180. -Refer to the scenario above.Using 2015 as the base year,what was the real GDP of the economy in 2016?

When prices rise,________.