1. Money functions as:
A.a store of value.
B.a unit of account.
C.a medium of exchange.
D.all of the above.


2. The major component of the money supply (M1) is:
A.gold certificates.
B.checkable deposits.
C.paper money in circulation.
D.coins.


3. Which of the following is correct?
A.The asset demand for money is downsloping because the opportunity cost of holding money declines as the interest rate rises.
B.The asset demand for money is downsloping because the opportunity cost of holding money increases as the interest rate rises.
C.The transactions demand for money is downsloping because the opportunity cost of holding money varies inversely with the interest rate.
D.The asset demand for money is downsloping because bond prices and the interest rate are directly related.


4.
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Refer to the above diagram of the money market. The downward slope of the money demand curve D*B m can best be explained in terms of the:
A.transactions demand for money.
B.direct or positive relationship between bond prices and interest rates.
C.asset demand for money.
D.wealth or real-balances effect.



5.
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Refer to the above diagram of the money market. The vertical money supply curve S*B m reflects the fact that:
A.bond prices and interest rates are inversely related.
B.the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes.
C.the Depository Institutions Deregulation and Monetary Control Act of 1980 has removed interest rate ceilings imposed on banks and thrifts.
D.lower interest rates result in lower opportunity costs of supplying money.



6.
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Refer to the above diagram of the money market. The equilibrium interest rate is:
A.i*B 1.
B.i*B 2.
C.i*B 3.
D.not determinable without further information.



7.
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Refer to the above diagram of the money market. Other things equal, the money demand curve in the diagram would shift leftward if:
A.the asset demand for money increased.
B.the transactions demand for money increased.
C.nominal GDP decreased.
D.the overall price level rose.



8. In the U.S. economy the money supply is controlled by the:
A.President.
B.U.S. Treasury.
C.Federal Reserve System.
D.Senate Committee on Banking and Finance.
E.Congress.


9. The group that sets the Federal Reserve Systems policy on buying and selling government securities (bills, notes, and bonds) is the:
A.Federal Advisory Council.
B.Consumer Advisory Council.
C.Council of Economic Advisers.
D.Federal Open Market Committee (FOMC).


10. The seven members of the Board of Governors of the Federal Reserve System are:
A.appointed by the President with the confirmation of the Senate.
B.elected by Congress from a slate of nominees provided by the President.
C.appointed by the Senate Finance Committee.
D.appointed by the presidents of the twelve Federal Reserve Banks.



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