2. Generally, Countries with Higher Inflation Have
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ECON 203 – Quiz 5 - KEY
1. How many members are there on the Federal Open Market Committee? c. 12
2. Generally, countries with higher inflation have d. higher money growth than low-inflation countries.
3. An unanticipated increase in inflation tends to penalize a. people who save money in financial institutions.
4. The reserve ratio is a bank's reserves as a fraction of its c. deposits.
5. Which of the following is NOT a policy tool of the Fed? b. The tax rate imposed on interest income.
6. The quantity theory of money predicts how changes in a. the money supply affect the price level.
7. M1 includes all the following items except ______. a. saving deposits
8. The catch-up effect says that countries with low income can grow faster than countries with higher income. c. evidence supports this theory for countries with similar institutional infrastructure.
9. The following table shows the balance sheet for Ralph's Bank. If the required ratio on deposits is 15 percent, Ralph's Bank has excess reserves of ______million. a. $200
10. Reserves are ______. d. cash in a bank's vault plus its deposits at Federal Reserve banks
11. Which of the following is a danger of higher rates of inflation? a. Price changes can affect the purchasing poser of those that have saved over time.
12. Inflation is 1 a. a persistent increase in the average price level.
13. An open market purchase by the Fed a. increases the supply of money
14. For something to be money it much fulfill the function of d all of the above
15. The theory of Purchasing Power Parity e. more than one of the above is correct.
16. According to the neutrality of money, an increase in the money supply will raise ______. b. the price level
17. The discount rate is the interest rate c. banks pay when they borrow directly from the Fed. 18. The velocity of money is d. the average number of times a dollar is spent on final goods and services.
19. What is the Fisher effect? b. the tendency of nominal interest rates to rise with higher expected inflation rates.