宏观经济学chap09习题

Macroeconomics, 8e (Parkin) Testbank 1Chapter 9 Money, the Price Level, and Inflation9.1 What is Money?1) T he functions of money areA) m edium of exchange and the ability to buy goods and services.B) m edium of exchange, unit of account, and means of payment.C) p ricing, contracts, and means of payment.D) m edium of exchange, unit of account, and store of value.Answer: DTopic: W hat is Money?Skill: R ecognition*2) W hich of the following does NOT describe a function of money?A) a unit of accountB) a hedge against inflationC) a medium of exchangeD) a store of valueAnswer: BTopic: W hat is Money?Skill: R ecognition3) W hich of the following is a primary function of money?A) t o serve as a unit of accountB) t o serve as an encouragement to workC) t o reduce the burden of excessive importsD) t o raise funds for the governmentAnswer: ATopic: W hat is Money?Skill: R ecognition4) B arter isA) a nother type of money.B) p rinting too much money.C) t he exchange of goods and services directly for other goods and services.D) t he exchange of goods and services for any type of money.Answer: CTopic: M edium of ExchangeSkill: R ecognition*5) T he most direct way in which money replaces barter is through its use as aA) m edium of exchange.B) r ecording device.C) s tore of value.D) u nit of account.Answer: ATopic: M edium of ExchangeSkill: R ecognition*6) T he most direct way in which money eliminates the need for a double coincidence of wants isthrough its use as aA) m edium of exchange.B) s tandard of deferred payment.C) s tore of value.D) u nit of account.Answer: ATopic: M edium of ExchangeSkill: R ecognition7) I n a barter system, we would seeA) m any different units of money.B) m oney and goods exchanged for each other.C) w ide-spread depository institutions.D) g oods traded directly for other goods and services.Answer: DTopic: M edium of ExchangeSkill: C onceptual8) W hen you buy a hamburger for lunch, you are using money as aA) s tore of value.B) s tandard of deferred payment.C) m edium of exchange.D) u nit of accounting.Answer: CTopic: M edium of ExchangeSkill: C onceptual9) T he unit of account function occurs when money serves as aA) m eans of payment.B) m edium of exchange.C) p ricing mechanism.D) d ouble coincidence of wants.Answer: CTopic: U nit of AccountSkill: R ecognition*10) W hich of the following applies to the use of money as a unit of account?I. A unit of account is an agreed measure for stating the prices of goods and services.II. Using money as a unit of account creates a simplified pricing system.III. Economies choose many goods as units of account.A) I onlyB) I I onlyC) I and IIID) I and IIAnswer: DTopic: U nit of AccountSkill: C onceptual11) A $25,000 price tag on a new car is an example of money asA) m edium of exchange.B) a unit of account.C) a store of value.D) a time deposit.Answer: BTopic: U nit of AccountSkill: C onceptual12) I n a world with no money, costs are expressed in terms of other goods. If one video gamecosts two hamburgers, and a hamburger costs three sodas, how many sodas would it take to buy a video game?A) 6B) 5C) 3D) 3/2Answer: ATopic: U nit of AccountSkill: A nalytical*13) W hich of the following is an example of using money as a store of value?A) p aying for a new dress with a credit cardB) p aying cash for a new automobileC) p aying rent with a check on a demand depositD) k eeping $200 on hand for an emergencyAnswer: DTopic: S tore of ValueSkill: C onceptual14) W hen you keep money in a change jar to be used later, what function is it fulfilling?A) m edium of exchange.B) r ecording device.C) s tore of value.D) u nit of account.Answer: CTopic: S tore of ValueSkill: C onceptual*15) I n the United States today, money consists ofA) c urrency only.B) d eposits at banks only.C) c oins only.D) c urrency and deposits at banks.Answer: DTopic: M oney in the United States TodaySkill: R ecognition*16) W hich of the following correctly completes this statement? Money in the United StatesincludesA) t he sum of all money incomes.B) t he cash in banks plus the sum of all checks written.C) t he currency and bank deposits outside of banks.D) t he sum of currency, deposits, and bonds held by the public and by the bankingindustry.Answer: CTopic: M oney in the United States TodaySkill: R ecognition17) C hecking deposits at banks areA) m oney.B) n ot money because they are an intangible.C) m oney only because they are insured by the FDIC.D) n ot money until they are converted into currency.Answer: ATopic: M oney in the United States TodaySkill: R ecognition*18) M1 is a measure ofA) m oney and includes both currency and checking deposits.B) l iquidity and in which the most liquid asset is money.C) m oney and includes both savings deposits and currency.D) m oney and includes both savings deposits and money market mutual funds.Answer: ATopic: M oney in the United States Today, M1Skill: R ecognition*19) W hich of the following is NOT included in the M1 definition of money?A) c urrency held outside banksB) t ime depositsC) t raveler's checksD) c hecking deposits at savings and loansAnswer: BTopic: M oney in the United States Today, M1Skill: R ecognition20) T he largest component of M1 isA) c urrency.B) c hecking deposits.C) c oins.D) s avings deposits.Answer: BTopic: M oney in the United States Today, M1Skill: R ecognition*21) T he definition of M2 includesA) M1.B) s avings deposits.C) t ime deposits.D) a ll of the aboveAnswer: DTopic: M oney in the United States Today, M2Skill: R ecognition22) W hich of the following is NOT included in the M2 definition of money?A) c urrency held by banksB) m oney market mutual fund balancesC) s avings depositsD) c heckable depositsAnswer: ATopic: M oney in the United States Today, M2Skill: C onceptual23) T he largest component of M2 isA) d epositsB) c urrencyC) m oney market mutual fundsD) t ravelers checksAnswer: ATopic: M oney in the United States Today, M2Skill: R ecognition*24) W hich of the following is part of M2?A) c hecksB) c redit cardsC) c urrency held inside a bankD) n one of these are part of M1 or M2Answer: DTopic: M oney in the United States Today, M2Skill: R ecognition*25) C omparing M1 and M2 we know thatA) M1 is larger because it contains currency.B) M2 is approximately equal to M1.C) M2 is larger because it contains M1 and other assets.D) M2 is larger because it contains more liquid assets than does M1.Answer: CTopic: M oney in the United States Today, M1 and M2Skill: C onceptual*26) I f you use $500 of currency to purchase a saving deposit,A) M1 decreases, but M2 is unchangedB) M1 decreases and M2 increasesC) M1 is unchanged, but M2 increasesD) M1 and M2 both increaseAnswer: ATopic: M oney in the United States Today, M1 and M2Skill: C onceptual*27) L iquidity is theA) s peed with which the price of an asset changes as its intrinsic value changes.B) i nverse of the velocity of money.C) s ame as the velocity of money.D) e ase with which an asset can be converted into money.Answer: DTopic: L iquiditySkill: R ecognition28) L iquidity is theA) d egree to which an asset acts as money without a loss of value.B) e ase with which an asset can be converted into a means of payment with little loss ofvalue.C) d egree to which money can be converted into an asset with little loss of value.D) e ase with which credit cards are accepted as a means of payment.Answer: BTopic: L iquiditySkill: R ecognition*29) A n individual wanting the most liquid asset possible will holdA) c urrency.B) a savings account.C) c heckable deposits at a bank.D) U.S government bonds.Answer: ATopic: L iquiditySkill: R ecognition30) G iven the list of assets below, which is the most liquid?A) $500 worth of General Motors common stockB) $500 worth of General Motors bondsC) a $500 traveler's checkD) a one-ounce gold coinAnswer: CTopic: L iquiditySkill: R ecognition31) C hecks areA) m oney, as are credit cards.B) n ot money, but credit cards are.C) m oney, but credit cards are not.D) n ot money, and neither are credit cards.Answer: DTopic: C hecks Are Not MoneySkill: C onceptual32) C hecks areA) t he largest component of the money supply.B) n ot money.C) o nly part of M2 but not part of M1.D) p art of M1 but not part of M2.Answer: BTopic: C hecks Are Not MoneySkill: C onceptual*33) C hecks ________ money and checking deposits ________ money.A) a re; areB) a re; are notC) a re not; areD) a re not; are notAnswer: CTopic: C redit Cards Are Not MoneySkill: C onceptual*34) C hecks are NOT money because theyA) a re issued by banks, not by the government.B) a re merely instructions to transfer money.C) h ave value in exchange but little intrinsic value.D) a re not backed by either gold or silver.Answer: BTopic: C hecks Are Not MoneySkill: C onceptual35) C redit cards areA) m oney but are not a large part of the money supply.B) n ot money.C) m oney and are the largest part of the money supply.D) n ot money because they are not made of paper.Answer: BTopic: C redit Cards Are Not MoneySkill: C onceptual*36) U sing a credit card can best be likened toA) t aking out a loan.B) a barter exchange.C) u sing any other form of money because you immediately get to take the goods home.D) w riting a check on your demand deposit account.Answer: ATopic: C redit Cards Are Not MoneySkill: C onceptual37) C redit cards are NOT money because theyA) h ave a value in exchange but little intrinsic value.B) a re not issued by the government.C) d o not serve as a unit of account.D) a re ID cards that make borrowing easier.Answer: DTopic: C redit Cards Are Not MoneySkill: C onceptual38) W hich of the following is NOT a function of money?A) m edium of exchangeB) b arterC) u nit of accountD) s tore of valueAnswer: BTopic: S tudy Guide Question, BarterSkill: C onceptual39) T he fact that money can be exchanged for goods reflects money's role as aA) c ause of inflation.B) m edium of exchange.C) u nit of account.D) s tore of value.Answer: BTopic: S tudy Guide Question, Medium of ExchangeSkill: C onceptualA) i s always composed of coins and paperB) l oses its value as it becomes olderC) r equires a double coincidence of wantsD) i s any commodity that is generally acceptable as a means of paymentAnswer: DTopic: W hat is Money?Skill: R ecognition41) I f an economy has no money, then all transactions must be conducted through the use of________.A) c redit cardsB) b arterC) d ebit cardsD) t obacco or wampumAnswer: BTopic: M edium of ExchangeSkill: C onceptual42) U.S. currency ________.A) i s less efficient than barterB) i ncludes tobaccoC) i s the sum of M1 and M2D) i s composed of the bills and coins that we use todayAnswer: DTopic: M oney in the United States TodaySkill: R ecognition43) M1 includes all the following items except ________.A) c hecking deposits owned by individuals and businessesB) t raveler's checksC) d eposits in money market mutual fundsD) c urrency owned by individuals and businessesAnswer: CTopic: M oney in the United States Today, M1Skill: R ecognition44) M2 ________.A) d oes not include currencyB) d oes not include traveler's checksC) i s a broader measure of money than M1D) d oes not include checking deposits held at credit unionsAnswer: CTopic: M oney in the United States Today, M2Skill: R ecognitionA) i ncreases when a country owns goldB) i ncreases when a consumer has more credit cardsC) i s how quickly an asset loses its worthD) i s the property of being instantly convertible into moneyAnswer: DTopic: L iquiditySkill: R ecognition46) I n an economy, there is $200 million in currency held outside banks, $100 million in traveler'schecks, $250 million in currency held inside the banks, $300 million in checking deposits, and $600 million in savings deposits. The value of M1 is ________.A) $750 millionB) $1,200 millionC) $1,150 millionD) $600 millionAnswer: DTopic: M oney in the United States Today, M1Skill: A nalytical47) S am has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into hischecking account at a Savings and Loan Association, and deposits the remaining $250 into asavings account at a credit union. Immediately, ________.A) M1 decreases by $250 and M2 does not changeB) M1 decreases by $400 and M2 increases by $250C) M1 does not change and M2 increases by $250D) M1 and M2 do not changeAnswer: ATopic: M oney in the United States Today, M1 and M2Skill: A nalytical48) A new financial innovation results in people switching their funds from checking deposits tosavings accounts. The quantity of M1 ________ and the quantity of M2 ________.A) d ecreases; decreasesB) i ncreases; decreasesC) d ecreases; does not changeD) d ecreases; increasesAnswer: CTopic: M oney in the United States Today, M1 and M2Skill: C onceptual9.2 Depository Institutions1) W hich of the following institutions is NOT a depository institution?A) t he U.S. TreasuryB) a commercial bankC) a money market mutual fundD) a thrift institution, such as a savings and loan associationAnswer: ATopic: D epository InstitutionsSkill: R ecognition2) A firm that takes deposits from households and firms and makes loans to other householdsand firms is aA) u surer.B) d epository institution.C) c redit company.D) s tockbroker.Answer: BTopic: D epository InstitutionsSkill: R ecognition3) A depository institution is best defined asA) a s the lender of last resort.B) a n insurance agency, such as the FDIC.C) t he most powerful body within the Federal Reserve.D) a s an institution that accepts deposits and makes loans.Answer: DTopic: D epository InstitutionsSkill: R ecognition*4) D epository institutionsA) m ake profit from the spread between the interest rate they pay on deposits and theinterest rate they receive on loans.B) e arn profit according to how much the Federal Reserve pays them.C) e arn money by charging the government for their services.D) e arn zero profit but receive compensation by the government because their services areso valuable.Answer: ATopic: T he Economic Functions of Depository institutionsSkill: R ecognition*5) T he major role of a commercial bank is toA) m ake mortgage loans.B) s ell shares and use the proceeds to buy stocks.C) r eceive deposits and make loans.D) r estrain the growth of the quantity of money.Answer: CTopic: C ommercial BanksSkill: R ecognition6) C ommercial banks do notA) b uy U.S. government Treasury bills.B) a ccept deposits from their customers.C) m ake loans to creditworthy individuals and businesses.D) d etermine what assets are money.Answer: DTopic: C ommercial BanksSkill: C onceptual7) B anks are in businessA) b ecause they keep all their assets as reserves.B) t o maximize their reserves.C) t o make a profit.D) t o make as many loans as possible.Answer: CTopic: C ommercial BanksSkill: R ecognition8) F or a commercial bank, the term "reserves" refers toA) a banker's concern ("reservation") in making loans to an individual without a job.B) t he profit that the bank retains at the end of the year.C) t he cash in its vaults and its deposits at the Federal Reserve.D) t he net interest that it earns on loans.Answer: CTopic: C ommercial BanksSkill: R ecognition9) A bank's reserves includeA) t he cash in its vault plus the value of its depositors' accounts.B) t he cash in its vault plus its deposits held at a Federal Reserve bank.C) t he cash in its vault plus any gold held for the bank at Fort Knox.D) i ts common stock holdings, the cash in its vault, and any deposits at a Federal Reservebank.Answer: BTopic: B anks' ReservesSkill: C onceptual10) B ank reserves includeI. the cash in the bank's vaultII. the bank's deposits at the Federal ReserveA) O nly I.B) O nly II.C) B oth I and II.D) N either I nor II.Answer: CTopic: B anks' ReservesSkill: C onceptual*11) B ank managers lend excess reserves because they want toA) m ake a profitB) c reate new money in the economyC) c urry favor with borrowersD) b orrow money from the Federal ReserveAnswer: ATopic: B anks' ReservesSkill: C onceptual*12) O f the following, the riskiest assets held by commercial banks areA) r eserves.B) U.S. government bonds.C) U.S. government Treasury bills.D) c ommercial loans.Answer: DTopic: C ommercial BanksSkill: C onceptual13) A n asset category that caries the highest interest rate isA) c heckable deposit accounts.B) l oans.C) c ash in the bank vault.D) s avings deposits.Answer: BTopic: C ommercial BanksSkill: C onceptual14) W hich of the following statements concerning commercial banks is true?A) B anks need to maintain cash reserves equal to their deposits.B) M ost banks maintain cash reserves equal to a fraction of deposits.C) C ash reserves earn the highest rate of return of any asset for a bank.D) S ince the advent of the Federal Reserve, banks do not need to maintain cash reserves.Answer: BTopic: B anks' ReservesSkill: C onceptual15) E xamples of thrift institutions includeA) s avings deposits and checking deposits.B) c ommercial banks, savings and loan associations, and insurance companies.C) s avings and loan associations, savings banks, and credit unions.D) m oney market mutual funds, commercial banks, and credit unions.Answer: CTopic: T hrift InstitutionsSkill: R ecognition*16) A credit union isA) a combination of credit card corporations.B) a n depository institution owned by depositors who are members of a particular group.C) a thrift institution that issues credit cards.D) a commercial bank owned by its depositors.Answer: BTopic: C redit UnionSkill: R ecognition*17) M oney market mutual funds invest inA) r esidential mortgages.B) c ommercial real estate.C) l ong-term government securities.D) h ighly liquid assets.Answer: DTopic: M oney Market Mutual FundsSkill: R ecognition18) A money market mutual fund isA) e ssentially the same as a demand deposit account.B) a time deposit of $100,000 or less.C) a time deposit of more than $100,000.D) a depository institution that sells shares and buys securities such as U.S. Treasury bills.Answer: DTopic: M oney Market Mutual FundsSkill: C onceptual19) W hich of the following is NOT a service of depository institutions?A) m inimizing the cost of obtaining fundsB) a ccepting reserve account depositsC) p ooling riskD) c reating liquidityAnswer: BTopic: E conomic Functions of Depository institutionsSkill: C onceptual20) D epository institutions do all of the following EXCEPTA) s et required reserve ratioB) c reate liquidityC) p ool risksD) m inimize the cost of obtaining fundsAnswer: ATopic: E conomic Functions of Depository institutionsSkill: C onceptual*21) L iquidity canA) n ot be created.B) b e created by borrowing short and lending long.C) o nly be created by the government.D) b e created by borrowing long and lending short.Answer: BTopic: T he Economic Functions of Depository institutionsSkill: R ecognition*22) T he practice of borrowing short and lending longA) p ools risk.B) m inimizes the cost of monitoring borrowers.C) c reates liquidity.D) A ll of the above answers are correct.Answer: CTopic: T he Economic Functions of Depository institutionsSkill: R ecognition23) W hich of the following is NOT an economic benefit of depository institutions?A) T hey borrow long and lend shortB) T hey create liquidityC) T hey pool riskD) T hey reduce the cost of monitoring borrowersAnswer: ATopic: T he Economic Functions of Depository institutionsSkill: R ecognition24) L iquidity isA) t he property of an asset being instantly convertible into a means of payment with littleloss in value.B) t he degree of movement in an asset's interest rate.C) t he same thing as a checking deposit.D) t he net flow of gold into the U.S. Treasury.Answer: ATopic: T he Economic Functions of Depository institutionsSkill: R ecognition25) D epository institution create liquidity when theyA) b uy assets that are liquid.B) b orrow short and lend long.C) h ave liabilities that are illiquid.D) b orrow long and lend short.Answer: BTopic: E conomic Functions of Depository institutionsSkill: C onceptual26) W hich of the following allow banks to minimize the cost to a business of borrowing?I. Borrowing long and lending short.II. Raising funds from a large number of depositors.III. Creating money by lending all their reserves.A) I onlyB) I I onlyC) I and IIID) I I and IIIAnswer: BTopic: E conomic Functions of Depository institutionsSkill: C onceptual27) W hen banks use specialized resources to monitor borrowers, they areA) p ooling risk.B) l owering the cost of creating liquidity.C) m inimizing the cost of assessing borrowers' creditworthiness.D) l ending to only high-risk borrowers.Answer: CTopic: E conomic Functions of Depository institutionsSkill: C onceptual28) T he risk of making a loan isA) e arning profits that are too high and cause higher taxes.B) t he risk that lender does not pay.C) t he risk that the borrower does not pay.D) c alled "default risk" when taxes are not paid.Answer: CTopic: E conomic Functions of Depository institutionsSkill: R ecognition*29) P ooling of risk occurs when depository institutionsA) m ake assets more liquid.B) s pecialize in loaning only to good borrowers.C) b ring lenders together.D) l end to a variety of different borrowers.Answer: DTopic: E conomic Functions of Depository institutionsSkill: R ecognition30) W hen a depository institution pools risk, itA) b uys short and lends long.B) b orrows reserves from the Federal Reserve.C) s preads loan losses across many depositors so that no one depositor faces a high degreeof risk.D) m akes loans to just one firm.Answer: CTopic: E conomic Functions of Depository institutionsSkill: R ecognition31) B y borrowing money from many depositors and lending money to a variety of borrowers,depository institutionsA) s pread risk efficiently.B) c an expose themselves to a great deal of risk.C) d ecrease the quantity of money.D) m ove money from M1 to M2.Answer: ATopic: E conomic Functions of Depository institutionsSkill: C onceptual32) F inancial innovation isA) t he process of turning assets into a more liquid form.B) t he development of new financial products and services.C) r esponsible for credit cards being included as part of money.D) c ausing a decrease in bank profits.Answer: BTopic: F inancial InnovationSkill: R ecognition33) T he development of new financial products has been spurred by all of the following EXCEPTA) h igh inflation and high interest rates.B) n ew technology in long-distance communication.C) a ttempts to circumvent bank regulations such as Regulation Q.D) d ecreasing competition from nonbank depository institutions.Answer: DTopic: F inancial InnovationSkill: C onceptual34) A s a result of financial innovation, which of the following is TRUE?I. Variable interest rate mortgages were created.II. The use of credit cards increased.III. Many money market mutual funds collapsed.A) I and IIB) I I and IIIC) I and IIID) I, II, and IIIAnswer: ATopic: F inancial InnovationSkill: C onceptual35) D epository institutions do all the following EXCEPTA) m inimize the cost of obtaining funds.B) c reate liquidity.C) p ool risks.D) c reate required reserve ratios.Answer: DTopic: S tudy Guide Question, Depository institutionsSkill: R ecognition36) A savings bank is a depository institution that ________.A) s ells shares which it uses to purchase shares in U.S. Treasury billsB) m akes mostly mortgage loansC) i s owned by a social or economic groupD) m akes mostly consumer loansAnswer: BTopic: S avings BanksSkill: R ecognition37) A depository institution is a firm that takes deposits from ________ and makes loans to________.A) h ouseholds and firms; other households and firmsB) f irms; householdsC) h ouseholds; firmsD) f irms; other firmsAnswer: ATopic: D epository InstitutionsSkill: R ecognition38) R eserves are ________.A) g old in a bank's vault plus its gold at Federal Reserve banksB) c ash in a bank's vault plus its deposits at Federal Reserve banksC) c ash in a bank's vault plus its gold at Federal Reserve banksD) c ash in a bank's vault plus the cash carried by its customersAnswer: BTopic: R eservesSkill: R ecognition39) D epository institutions undertake all the following activities except they do not ________.A) p rint moneyB) m inimize the cost of monitoring borrowersC) p ool riskD) c reate liquidityAnswer: ATopic: E conomic Functions of Depository institutionsSkill: R ecognition40) S arah buys shares from a financial institution that uses her funds together with other funds topurchase U.S. treasury bills. Sarah has deposited her money into a ________.A) s avings bankB) c redit unionC) m oney market mutual fundD) s avings and loan associationAnswer: CTopic: M oney Market Mutual FundsSkill: R ecognition41) T he main influences on financial innovation include all of the following except ________.A) e conomic environmentB) a decrease in the inflation rateC) t echnologyD) r egulationAnswer: BTopic: F inancial InnovationSkill: R ecognition9.3 The Federal Reserve System1) T he "Fed" is the abbreviation forA) C ongress, the President, and the Supreme Court.B) t he U.S. Treasury.C) t he Federal Council on Economic Activity.D) t he Federal Reserve System.Answer: DTopic: T he Federal Reserve SystemSkill: R ecognition2) T he U.S. central bank is formally called theA) F ederal Central Bank.B) F ederal Reserve System.C) O pen Market Committee.D) U.S. Treasury.Answer: BTopic: T he Federal Reserve SystemSkill: R ecognition3) W hich of the following is the central bank of the United States?A) C omptroller of the CurrencyB) T reasury DepartmentC) F ederal Reserve SystemD) O ffice of the BudgetAnswer: CTopic: T he Federal Reserve SystemSkill: R ecognition4) T he Federal Reserve SystemA) r egulates the nation's financial institutions.B) c onducts the nation's monetary policy.C) B oth answers A and B are correct.D) N either answer A nor B is correct.Answer: CTopic: T he Federal Reserve SystemSkill: R ecognition5) T he Bank of Japan is Japan's central bank. As part of its duties, the Bank of Japan wouldA) p rovide banking services to Japan's citizens and firms.B) p rovide banking services to foreigners.C) c ontrol the quantity of money in circulation in Japan.D) c hange tax rates.Answer: CTopic: T he Federal Reserve SystemSkill: R ecognition。