Copyright

Central Bank and the Money Supply 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!

Page 1

Question 1 1. 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 2 2. Which of the following statements is FALSE about the monetary tools of the Federal Reserve?

Question 3 3. Which of the following is FALSE regarding the Federal Reserve?

Question 4 4. What happens when the government provides a tax incentive for people to save more?

Question 5 5. How would economists graphically illustrate a decrease in the money supply?

Page 2

Question 6 6. Which of the following is true about private investment?

Question 7 7. The Federal Reserve achieves its monetary goals by doing which of the following?

Question 8 8. The purchases and sales of government securities in the open market by the Federal Reserve are referred to as which of the following?

Question 9 9. What determines the demand for loanable funds?

Question 10 10. Why do banks choose to borrow directly from the Fed?

Page 3

Question 11 11. Which of the following statements BEST explains the velocity of money?

Question 12 12. How would buying or selling government bonds affect the federal funds rate, if it was the government that initiated the sale?

Question 13 13. What is the interest rate that the Federal Reserve charges on loans it makes to member banks called?

Question 14 14. When does investment demand increase?

Question 15 15. If the Federal Reserve lowers reserve requirements, nominal GDP will most likely do which of the following?

Page 4

Question 16 16. The Fed's monetary policy has the greatest positive effect on real Gross Domestic Product under what set of conditions?

Question 17 17. What are some of the objectives of the Fed?

Question 18 18. 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 19 19. What is the prime rate?

Question 20 20. Monetarism is the economic viewpoint that states which of the following?

Page 5

Question 21 21. 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?

Question 22 22. What is directly connected with taking a loan for private investment in the market for loanable funds?

Question 23 23. Why is the Fed referred to as 'the lender of last resort'?

Question 24 24. According to the quantity theory of money, increasing the money supply will lead to what?

Question 25 25. Which of the following statements BEST explains how a high velocity of monetary exchange effects the economy?

Page 6

Question 26 26. 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 27 27. According to the quantity theory of money, an increase in the money supply results in an increase in which of the following?

Question 28 28. When the central bank raises the reserve ratio from 20% to 25%, how does the multiplier change?

Question 29 29. Which of the following accurately describes the discount rate?

Question 30 30. Which of the following statements is true about the quantity theory of money?

Central Bank and the Money Supply 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!

Economics 102: Macroeconomics  /  Business Courses
Support