Macro meeting 5th

Fiat money is

• a type of money with intrinsic value

• a type of money set by government decree

• any asset used as the medium of exchange

• any asset used as the unit of account

If the Fed wants to increase the money supply, it can

• raise income tax rates

• reduce income tax rates

• buy bonds in open-market operations

• sell bonds in open-market operations

If the reserve ratio is 1 4 and the central bank increases the quantity of reserves in the banking system by $120, the money supply increases by

• $90

• $150

• $160

• $480

In a system of fractional-reserve banking, even without any action by the central bank, the money supply declines if households choose to hold _________ currency or if banks choose to hold _________ excess reserves.

• more; more

• more; less

• less; more

• less; less

Which of the following actions by the Fed would tend to increase the money supply?

• an open-market sale of government bonds

• a decrease in reserve requirements

• an increase in the interest rate paid on reserves

• an increase in the discount rate on Fed lending

Because most loans are written in _________ terms, an unexpected increase in inflation hurts _________.

• real; creditors

• real; debtors

• nominal; creditors

• nominal; debtors

Ongoing inflation does not automatically reduce most people’s incomes because

• the tax code is fully indexed for inflation.

• people respond to inflation by holding less money.

• wage inflation goes together with price inflation.

• higher inflation lowers real interest rates.

According to the quantity theory of money and the Fisher effect, if the central bank increases the rate of money growth, then

• inflation and the nominal interest rate both increase

• inflation and the real interest rate both increase.

• the nominal interest rate and the real interest rate both increase.

• inflation, the real interest rate, and the nominal interest rate all increase.

According to the quantity theory of money, which variable in the quantity equation is most stable over long periods of time?

• money

• velocity

• price level

• output

If nominal GDP is $400, real GDP is $200, and the money supply is $100, then

• the price level is ½, and velocity is 2.

• the price level is ½, and velocity is 4.

• the price level is 2, and velocity is 2.

• the price level is 2, and velocity is 4.