Money and Banking Practise Questions

Topics: Inflation, Money, Monetary policy Pages: 70 (28008 words) Published: June 23, 2013
Practice Questions for Money and Banking

Why Study Money, Banking, and Financial Markets: Chapter 1 Money appears to have a major influence on a. inflation. b. the business cycle. c. interest rates. d. each of the above. In the United States, monetary policy is implemented by the a. U.S. Congress b. U.S. Treasury c. Office of Thrift Supervision d. Federal Reserve The financial system provides all of the following financial services except: a. risk sharing b. provision of liquidity c. reduction of information costs d. the elimination of public debt The central bank of the United States is the a U.S. Treasury b. Federal Deposit Insurance Corporation c. Federal Reserve d. Comptroller of the Currency A higher interest rate might induce households to _____ but businesses to _____. a. save more, borrow less b. save less, borrow more c. save more, borrow more d. save less, borrow less Budget deficits are important to study in a money and banking class because a. budget deficits cause banks to fail. b. without budget deficits banks would not exist. c. budget deficits may influence the conduct of monetary policy. d. of each of the above. An increase in the growth rate of the money supply is most likely to be followed by a. a recession.

b. a decline in economic activity. c. inflation. d. all of the above. A sharp decrease in the growth rate of the money supply is most likely to be followed by a. a decline in economic activity. b an upswing in the business cycle. c. inflation. d. all of the above. Suppose that due to a fear that the United States is about to enter a long period of stagnant growth, stock prices fall by 50% on average. Predict what would happen to spending by consumers. a. spending would probably increase. b. spending would probably fall. c. spending would probably be unaffected. d. the change in spending would be ambiguous. Budget deficits can be a concern because they might a. ultimately lead to lower inflation. b. lead to lower interest rates. c. lead to a higher rate of money growth which causes inflation. d. cause all of the above to occur. Which of the following is most likely to result from a stronger euro? a. U.S. goods exported aboard will cost less in Germany, and so Germans will buy more of them. b. U.S. goods exported aboard will cost more in Germany, and so Germans will buy more of them. c. U. S. goods exported abroad will cost more in Germany, and so Germans will buy fewer of them. d. Americans will purchase more foreign goods. Which of the following are true statements? a. Inflation is defined as a continual increase in the money supply. b. Inflation is a condition of a continually rising price level. c. The inflation rate is measured as the rate of change in the aggregate price level. e. Only (b) and (c) of the above are true statements. When the dollar depreciates in value, it benefits_______ and harms________. a. American exporters; American consumers b. American exporters; foreign consumers c. foreign exporters; American exporters d. foreign exporters; American tourists The Federal Reserve System is:

a. b. c. d.

a large commercial bank another name for the U.S. Treasury the central bank in the United States the organization that insures bank deposits in the U.S.

When a nation's money supply persistently increases at a faster rate than the nation can increase its output of goods and services, which of the following happens? a. budget deficits increase b. inflation occurs c. real output accelerates d. living standards rise A chief concern about large budget deficits is that they may lead to: a. lower living standards in the future b. lower interest rates in the present c. deflation in the future d. all of the above When you purchase shares of corporate stock, then: a. you have loaned money to the corporation b. you own part of the corporation c. you have made new funds available to the corporation d. all of the above A graph depicting money growth rates and inflation rates for a...
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