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Test your basic knowledge |
CLEP Macroeconomics: Money And Banking
Start Test
Study First
Subjects
:
clep
,
economics
Instructions:
Answer 42 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Who determines quantity of money supplied?
change in interest rate
M3
money multiplier
Federal Reserve
2. Informal discussions that occur between the commercial banks and the Fed about monetary and other policies
moral suasion
inversely
M1 - M2 - M2+ - M3
interest rate
3. (1) medium of exchange; (2) store of value; (3) unit of account
three functions of money
M3
increases
interest rate
4. Stems from the fact that money is a store of value and people hold their financial assets in many forms
asset demand for money
interest rate
money multiplier
inflation
5. Movement along money demand curve
Federal Reserve
interest rate
M2+
change in interest rate
6. M1 + personal savings deposits + non-personal notice deposits (from chartered banks)
change in interest rate
M3
M2
monetary policy
7. Equilibrium force in quantity of money demanded and quantity of money supplied
interest rate
tight money policy
bank rate
false
8. The purchase or sale of government securities
M2
open market operations
M3
expansionary monetary policy
9. Increases money supply
moral suasion
expansionary monetary policy
interest rate
M1
10. The amount that a bank must keep in its reserve in order to meet cash demands
discount rate
reserve requirement
excess cash reserve
money multiplier equation
11. Households using money to pay bills - purchase materials - etc.
M2+
switching of deposits
change in interest rate
transactions demand for money
12. Contractionary monetary policy is used during a period of _________
difference between money groups
Federal Reserve
tight money policy
inflation
13. If the Federal reserve lowers the reserve requirement - the interest rate will ________
open market operations
switching of deposits
decrease
contractionary monetary policy
14. Each group is less liquid than the one before
asset demand for money
bank rate
interest rates
difference between money groups
15. The money that a bank has in reserve which exceeds the reserve requirement
transmission mechanism
inflation
excess cash reserve
interest rate
16. Entity responsible for managing the money supply in accordance with the needs of the economy
reserve requirement
money multiplier
easy money policy
Federal Reserve
17. Quantity of money demanded and interest rate are ________ related
inversely
asset demand for money
Federal Reserve
M3
18. M2 + deposits held by other financial institutions (trust companies - credit unions)
Federal Reserve
M2+
change in interest rate
easy money policy
19. When the Fed purchases securities it ________ the banks' reserves
change in interest rate
contractionary monetary policy
increases
M1 - M2 - M2+ - M3
20. Decrease interest rates to increase the money supply
inflation
reserve requirement
easy money policy
M1 - M2 - M2+ - M3
21. Four categories of money
M1 - M2 - M2+ - M3
contractionary monetary policy
discount rate
three functions of money
22. The rate the Federal Reserve charges banks to borrow money
tight money policy
M2+
discount rate
inflation
23. Shows how interest rates affect investment expenditure - and ultimately real GDP - prices and unemployment
transmission mechanism
false
M1 - M2 - M2+ - M3
difference between money groups
24. Shift of money demanded curve
M2
expansionary monetary policy
change in real GDP
means and goal of monetary policy
25. Expansionary monetary policy is used during a period of _________
M1 - M2 - M2+ - M3
three functions of money
money multiplier
recession
26. M2+ + non-personal term deposits + foreign currency deposits
discount rate
M1 - M2 - M2+ - M3
M3
money multiplier equation
27. The ratio of a bank's cash assets to its deposit liabilities
cash reserve
interest rate
asset demand for money
interest rate
28. How banks create money
loans
increases
Federal Reserve
excess cash reserve
29. The amount received by a lender and paid by a borrower expressed as a percentage of the amount of a loan
interest rate
open market operations
decrease
money multiplier
30. Changing the money supply to assist the economy to achieve a full employment - noninflationary level of output
M2
means and goal of monetary policy
reserve requirement
Federal Reserve
31. 1/reserve requirement
transactions demand for money
reserve requirement
money multiplier equation
change in real GDP
32. What determines how much cash people will want to hold?
money multiplier equation
interest rate
inflation
decrease
33. The multiple by which the banking system can expand the money supply for each dollar of excess reserves
three functions of money
M1
money multiplier
inversely
34. Occurs when the Fed switches the deposits between its own accounts and the accounts of the commercial banks
discount rate
three functions of money
switching of deposits
contractionary monetary policy
35. Lender of last resort - supervisor of member banks - provider of check-clearing services - and controller of money supply
M1
monetary policy
easy money policy
Federal Reserve
36. Increase interest rates to decrease the money supply
money multiplier
contractionary monetary policy
interest rate
tight money policy
37. Open market operations effect the money supply and _______ _____
interest rates
decrease
Federal Reserve
transactions demand for money
38. The Federal Reserve policies that are aimed at changing the size of the money supply and interest rates to affect the national economy
change in interest rate
monetary policy
switching of deposits
Federal Reserve
39. Currency + demand deposits
asset demand for money
difference between money groups
tight money policy
M1
40. The rate at which the Fed will loan money to commercial banks
bank rate
three functions of money
switching of deposits
interest rate
41. Decreases money supply
increases
change in interest rate
contractionary monetary policy
interest rate
42. T/F. The transactions demand for money is dependent on the interest rate.
decrease
M2+
reserve requirement
false