<p>ECON 203 – Quiz 5 - KEY</p><p>1. How many members are there on the Federal Open Market Committee? c. 12</p><p>2. Generally, countries with higher inflation have d. higher money growth than low-inflation countries.</p><p>3. An unanticipated increase in inflation tends to penalize a. people who save money in financial institutions.</p><p>4. The reserve ratio is a bank's reserves as a fraction of its c. deposits.</p><p>5. Which of the following is NOT a policy tool of the Fed? b. The tax rate imposed on interest income. </p><p>6. The quantity theory of money predicts how changes in a. the money supply affect the price level. </p><p>7. M1 includes all the following items except ______. a. saving deposits </p><p>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.</p><p>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</p><p>10. Reserves are ______. d. cash in a bank's vault plus its deposits at Federal Reserve banks</p><p>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.</p><p>12. Inflation is 1 a. a persistent increase in the average price level. </p><p>13. An open market purchase by the Fed a. increases the supply of money </p><p>14. For something to be money it much fulfill the function of d all of the above</p><p>15. The theory of Purchasing Power Parity e. more than one of the above is correct.</p><p>16. According to the neutrality of money, an increase in the money supply will raise ______. b. the price level</p><p>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.</p><p>19. What is the Fisher effect? b. the tendency of nominal interest rates to rise with higher expected inflation rates.</p>