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