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Central Bank and the Money Supply: Help and Review Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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Question 1 1. What is the prime rate?

Question 2 2. Economists use the _____ to explain the link between inflation and the money supply.

Question 3 3. What will happen if the Federal Reserve sells a significant amount of government securities in the open market?

Question 4 4. If the Federal Reserve suddenly decreases the growth rate of the money supply from 6% to 4% per year, what is likely to happen to aggregate demand and real Gross Domestic Product in the short-run?

Question 5 5. How can government overspending cause hyperinflation?

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Question 6 6. Which of the following is FALSE regarding real interest rates?

Question 7 7. How would buying or selling government bonds affect the federal funds rate, if it was the government that initiated the sale?

Question 8 8. What is the reserve requirement?

Question 9 9. Monetarism is the economic viewpoint that states which of the following?

Question 10 10. All of the following impacts the velocity of money except

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Question 11 11. The real interest rate for a consumer loan is 5%, and the expected inflation rate is 3%. What is the nominal interest rate on this consumer loan?

Question 12 12. Assume that the Federal Reserve increases the monetary base by $1 billion when the reserve requirement is 10 percent. The money supply will increase by:

Question 13 13. The quantity theory of money describes the relationship between what fiscal components?

Question 14 14. In a fractional reserve banking system, how does a decrease in reserve requirements affect the money supply?

Question 15 15. According to the quantity theory of money, an increase in the money supply results in an increase in which of the following?

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Question 16 16. An increase in the money supply will likely

Question 17 17. When the central bank raises the reserve ratio from 20% to 25%, how does the multiplier change?

Question 18 18. What's hyperinflation?

Question 19 19. In order to adjust a nominal interest rate for inflation, which of the following formula should be used?

Question 20 20. If nominal GDP = $5,000 billion and the money supply is $1,000 billion, assuming a constant price level, what is the velocity of money?

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Question 21 21. What is the interest rate that the Federal Reserve charges on loans it makes to member banks called?

Question 22 22. When the reserve ratio is 20%, the Fed buys $500,000 worth of government bonds in the open market. What is the maximum amount that the money supply could increase?

Question 23 23. What happens if the Federal Reserve sells a large amount of government securities in the open market?

Question 24 24. How would economists graphically illustrate a decrease in the money supply?

Question 25 25. What is directly connected with taking a loan for private investment in the market for loanable funds?

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Question 26 26. When does investment demand increase?

Question 27 27. What is the most important determinant of saving?

Question 28 28. If a country has a money supply of 20 billion dollars, a real GDP of 100 billion dollars, and a price level of 1, then what's the velocity of money in this country?

Question 29 29. Which of the following statements BEST explains the velocity of money?

Question 30 30. How will an increase in national saving affect the real interest rate and therefore investment?

Central Bank and the Money Supply: Help and Review Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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