(11)In our Circular Flow example we see the Feds __________________ tool labeled as Reserve Adjustments.

AweakestBmost powerful Csecond most powerfulDnext to weakest

An increase in interest rates generated by theFEDselling bonds will, ceteris paribus, ___________ bond prices.AdecreaseBincreaseCnot changeDnone of the aboveThe money multiplier process also works in reverse when a loan is repaid since fewer checkable funds are then available to generate excess reserves.TrueFalseMonetary policy is considered easy when the money supply is increasing rapidly, but considered ________ when the money supply is growing slowly.AlooseBhardCtightAssume prices increase by 20 percent from a base year in 2010 to 2011.The price index moves from 100 to 120 and therefore 1/120 x 100=_________for the value (purchasing power) of a dollar.A90 centsB83 centsC20 centsD11 centsDnone of the aboveIn the United States, the fractional reserve policy that governs commercial banking is controlled by the ______________.ATreasury DepartmentBComptroller of the CurrencyCBureau of Engraving and the U.S. MintDFederal ReserveWith the multiplier effects in this example, Consumers obtained the income to spend an additional $________ billion on new and efficiently produced products and services.

A100B200C400D500A requirement for maintaining a bank is that ____________ of depositors funds must be kept in a legal reserve account .AallBnoneCsome (a relatively small portion)Dsome ( a relatively large portion)In our Circular Flow example we see the Feds __________________ tool labeled as Reserve Adjustments.

AweakestBmost powerful Csecond most powerfulDnext to weakesthe equation of exchange is:M x ____ = P x QASBTCUDVCredit cards are __________ according to the Feds definition since they are actually a debt instrument for short term loans.Apart of M1Bpart of M2Cnot money DmoneyIn an inflationary period the money supply can be restrained by the Fed _______________ securities.AsellingBbuyingCeither a. or b.Dnone of the aboveA bank holds the required reserve off of a new loan / deposit for one customer and then lends the excess reserve to someone else, repeating the _______________ process many times.Amoney creationBmoney destructionCboth a. and b.Dnone of the aboveIn the graph below, the equilibrium is at an interest rate is approximately __________ where the quantity of money demanded is equal to quantity of money supplied.

A2%B4%C6% D8%______________ believe that there is only a small amount of crowding-out if any at all.AMonetaristsBKeynesiansCAll the aboveDNone of the aboveMonetary policy is determined by the Fed, but must be coordinated with the _________ policy through U.S. Treasury operations.AfiscalBenvironmentalCforeignDdomestic

_______________is the application of suggestion pressure and not force to encourage banks to increase or decrease loan activity as is appropriate for the national economy.AReserve ratiosBMargin requirementsCCredit controlsDMoral suasionOne reason that monetary policy is believed to bevery significant is because of its speed and flexibility in implementation.TrueFalseOnly funds inside a banks vault are counted as part of the M1 money supply.TrueFalseAssume $1,000 is deposited in a checkable account by Mr. Y in Bank A.Assume further that the reserve requirement is 0.20.The total amount of money which can be createdthrough the entire banking systemis $__________ .A9000B8000C4000D1000In this Circular Flow example the Fed set about the task of cooling a powerful inflation that resulted from too much __________________ .

AConsumer credit card bingingBBusiness borrowing and spendingCBuying of Foreign importsDGovernment borrowing and spendingAs a result of the rising interest rates in this example, Businesses had to reduce their Investment Spending on _____________________.

Aimproved products, training and facilitiesBthe stock marketCgoldDTreasury bondsMoney functions as a _______________ when it is used to make purchases.AMedium of exchangeBStandard of valueCStore of valueDAll the aboveIn the middle portion of this decade, the $$$ value of currency as well as checkable deposits was about $___________ billion each.A7000B3500C1400D700The Fed can target both the growth in M1 and M2 as well as the _________________ (the interest rate banks charge each other on overnight loans).APrime rateBDiscount rateCFed Funds rateDNone of the aboveThequantity theory of moneyassumes there is a _________ relationship between the quantity of money and the price level.AstrongBweakCvery looseDnone of the aboveThe transactions demand for money varies __________ with nominalGDP, i.e. more money is held for transactions whenGDPis higher.AreciprocallyBinverselyCdirectlyDindirectlyThe ______________ demand for money is the quantity of money demanded at various interest rate levels.AtransactionsBassetCreciprocalDinverse________________ invested or made loans with 95 percent of the deposits that were being held.AAdam SmithBMilton FriedmanCJohn SayDGoldsmithsApproximately ___________ of commercial banks in theU.S.are chartered by state banking commissions with the remainder being chartered by the Federal Comptroller of the Currency.Aone-thirdBone-fourthCtwo-thirdsDnine-tenthsThe multiple by which the banking system can lend on the basis of __________ reserves is the reciprocal of the reserve ratio.AexcessBlegalCrequiredDnone of the abovePaper money and coins in theUnited Statesis known as ____________ money since the intrinsic value (commodity value) of the metal or paper is less than the face (purchasing power) value.AtokenBfunnyCsillyDnone of the aboveA banks balance sheet follows the accounting format that Assets = _______________ + Net WorthACashBBuildings & Real EstateCLiabilitiesDNone of the aboveA higher Discount Rate tends to ___________ the price of loans because the overall supply of bank reserves tends to be smaller.AincreaseBstabilizeCdecreaseDnone of the above

Most of all, the American dollar is backed by ______________________ .Athe goods and services (GDP) produced by the economyBthe gold stored in Ft. KnoxCthe gold stored by the New York Federal Reserve BankDnone of the aboveWhen a loan is repaid to a bank there are __________ funds available in the M1 money supply.AmoreBstill the same amount ofCfewerDnone of the aboven this final Circular Flow example for our course, the starting point was a deep recession with 5 million cyclically unemployed people.A ______________ approach would suggest an active approach by Government and might suggest that deficit spending be used to correct the problem.

AUtopian SocialistBClassicalCKeynesianDMonetaristWhen a customer deposits $100 of cash into their checking account at a bank, there is an increase within the banks equation (A = L + NW), but there is ______________ in the aggregate M1.Aa decreaseBalso an increaseCno changeDnone of the aboveThe level of reserves (depositor funds held back from making loans) is very important in determining the money supply.TrueFalseThe functions of the Federal Reserve System are diverse.Among the functions performed by the Fed are which of the following:AActs as a bankers bank by holding commercial bank deposits and lending money to commercial banks.BProvides a check clearinghouse for commercial banks by electronic crediting and debiting of those banks accountsCProvides banking services for the U.S. federal government and supervises commercial banks in accordance with banking lawDAll the aboveAn increase in interest rates generated by theFEDselling bonds will, ceteris paribus, ___________ bond prices.AdecreaseBincreaseCnot changeDnone of the aboveThe money multiplier process also works in reverse when a loan is repaid since fewer checkable funds are then available to generate excess reserves.TrueFalseMonetary policy is considered easy when the money supply is increasing rapidly, but considered ________ when the money supply is growing slowly.AlooseBhardCtightDnone of the above