<p>Name: ______Date: ______</p><p>1. Money is: A) paper money and coins, but not checks.</p><p>B) currency and stocks.</p><p>C) anything that can easily be used to buy goods and services.</p><p>D) not represented by any of the above.</p><p>2. Which of the following combination of assets are considered to be money? A) currency in circulation, checkable bank deposits, and credit cards</p><p>B) currency in circulation, checkable bank deposits, and travelers' checks</p><p>C) currency in circulation and in bank vaults, checkable bank deposits, and travelers' checks</p><p>D) currency in circulation and in bank vaults, checkable bank deposits, and credit cards</p><p>3. Commodity-backed money is: A) a medium of exchange with no intrinsic value.</p><p>B) equivalent to commodity money.</p><p>C) a medium of exchange which has alternative economic uses.</p><p>D) gold and silver coins used for exchange.</p><p>4. When we keep part of our wealth in a savings account, money is playing the role of: A) medium of exchange. B) unit of account C) barter D) store of value</p><p>Use the following to answer question 5:</p><p>Table: Monetary Aggregates</p><p>5. (Table: Monetary Aggregates) The value of M1 is: A) $880 billion. B) $ 895 billion C) $2005 billion D) $920 billion</p><p>Page 1 6. The U.S. dollar is defined as: A) fiat money, because it was created by an act of law.</p><p>B) faith money, because we trust the government to defend its value.</p><p>C) commodity-backed money, because it is convertible into gold.</p><p>D) commodity money, because it is widely used to buy commodities.</p><p>7. If a bank has deposits of $100,000, loans of $75,000, cash on hand of $10,000, and $15,000 on deposit at the Federal Reserve, then its reserve ratio is: A) 5%.</p><p>B) 10%.</p><p>C) 12.5%.</p><p>D) 25%.</p><p>Use the following to answer questions 8-9:</p><p>Table: ABC Bank's Balance Sheet</p><p>8. (Table: ABC Bank's Balance Sheet) Refer to the balance sheet. If the minimum reserve ratio for ABC Bank is 10%, then the bank is required to maintain minimum reserves of: A) $10 million. B) $15 million C) $9.5 million D) $ 7.5 million</p><p>9. (Table: ABC Bank's Balance Sheet) Using the information in ABC Bank's Balance sheet, the bank is holding excess reserve of: A) $17 million. B) $15 million C) $5 million D) $25 million</p><p>10. A bank run can “break a bank” because: A) borrowers default on their loans, and the bank's assets become worthless.</p><p>B) banks can not convert quickly illiquid loans into liquid assets without facing a large financial loss. C) depositors' panic spreads to borrowers, who want to take additional loans from the bank.</p><p>D) the bank's reserves kept with the Federal Reserve are in the form of illiquid U.S. Treasury bonds.</p><p>Page 2 11. Which of the following is a component of BOTH the monetary base and the money supply? A) bank reserves at the Fed</p><p>B) currency in bank vaults</p><p>C) demand deposits</p><p>D) currency in circulation</p><p>12. The Federal Reserve Bank of the United States is: A) a purely private central bank.</p><p>B) a purely public central bank.</p><p>C) is part of the U.S. government.</p><p>D) is not exactly part of the U.S. government but not really a private institution either.</p><p>13. All of the following are responsibilities of the Fed EXCEPT: A) control the monetary base.</p><p>B) mint bills and coins.</p><p>C) oversee and regulate the banking system.</p><p>D) set the discount rate.</p><p>14. Which of the following is a tool used by the Fed in the conduct of monetary policy? A) changes in the prime rate</p><p>B) issuing new government bonds and retiring old ones</p><p>C) buying and selling corporate bonds</p><p>D) buying and selling federal government bonds</p><p>15. If the Fed increases the discount rate: A) the money supply is likely to decrease.</p><p>B) the money supply is likely to increase.</p><p>C) the money supply is not likely to change.</p><p>D) the federal funds rate must decrease.</p><p>16. To ______the money supply, the Fed could ______. A) increase; lower the reserve requirements</p><p>B) decrease; lower the discount rate</p><p>Page 3 C) increase; raise the federal funds rate</p><p>D) decrease; conduct open-market purchases</p><p>17. To ______the money supply, the Fed could ______. A) increase; decrease the money multiplier</p><p>B) decrease; lower the reserve requirements</p><p>C) increase; conduct open-market purchases</p><p>D) decrease; lower the discount rate</p><p>18. The money demand curve shows the relationship between the: A) the money supply and the quantity of money demanded.</p><p>B) aggregate price level and the nominal quantity of money demanded.</p><p>C) interest rate and the nominal quantity of money demanded.</p><p>D) real GDP and the nominal quantity of money demanded.</p><p>19. The demand curve for money will shift to the right because of a: A) fall in the interest rate.</p><p>B) rise in real GDP.</p><p>C) rise in the interest rate</p><p>D) fall in real GDP.</p><p>20. A 30% increase in the aggregate price level will: A) increase money demand by 30%.</p><p>B) increase money demand by the money multiplier.</p><p>C) decrease money demand by 30%.</p><p>D) not affect the demand for money.</p><p>21. Now that fast food places such as McDonald's are accepting credit card payments: A) the demand for money has increased.</p><p>B) the demand for money has decreased.</p><p>C) the demand for money has not been affected because credit cards are not considered to be money. D) the supply for money has increased as there is unused cash.</p><p>Page 4 Use the following to answer questions 22-25:A Money Market</p><p>22. The accompanying graph shows the money market. In this market, the equilibrium interest rate is:</p><p>A) r1. </p><p>B) r2.</p><p>C) r3.</p><p>D) M0.</p><p>23. The accompanying graph shows the money market. In this market, if the current interest rate is </p><p> r3, we would expect to see the interest rate _____ because there is a ______of money in the market. A) fall; surplus B) fall; shortage C) rise; surplus D) rise; shortage</p><p>24. The accompanying graph shows the money market. In this market, if the current interest rate is </p><p> r1, we would expect to see the interest rate _____ because there is a ______of money in the market. A) fall; surplus</p><p>B) fall; shortage</p><p>C) rise; surplus</p><p>D) rise; shortage</p><p>25. The accompanying graph shows the money market in equilibrium at an interest rate of r2. Holding money supply constant, which of the following might cause the interest rate in the </p><p> market to decrease to r1? A) The inflation rate falls to historically low levels.</p><p>B) Higher payroll taxes cause employers to pay workers cash “under the table.”</p><p>C) There is a recession that decreases real GDP.</p><p>Page 5 D) There is a significant increase in the stock market.</p><p>26. The money demand curve is ______because a lower interest rate ______. A) upward-slopping; increases the opportunity cost of holding money</p><p>B) downward-slopping; increases the opportunity cost of holding money</p><p>C) upward-slopping; decreases the opportunity cost of holding money</p><p>D) downward-slopping; decreases the opportunity cost of holding money</p><p>Page 6</p>