ECON PRACTICE

Which category of the money supply would you be contributing to if you invest in money market mutual funds?

• M2

• M0 and M1

• M1

• M1 and M2

When the central bank decides it will sell bonds using open market operations:

• interest rates decrease.
  

• the money supply decreases.

• the money supply increases.

• money supply is unaffected.

Which of the following institutions determines the quantity of money in the economy as its most important task?

• Federal Trade Commission

• Federal Reserve Board of Governors

• U.S. Department of the Treasury

• Central Bank

A central bank that desires to reduce the quantity of money in the economy can:

• lower the discount rate.

• buy bonds in open market operations.

• raise the reserve requirement.

• engage in quantitative easing.

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

• unit of account

• store of value

• medium of exchange

• unit of exchange

In 2010, Tara used $50,000 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment?

• unit of exchange.

• medium of exchange.

• store of value.

• unit of account.

_________________________ are included in the aggregate amount of M1 money currently in circulation.

• Checkable deposits

• Foreign currency deposits 

• Savings deposits 

• Short-term bonds

Image that the people have just deposited another $10 million in the only one bank that all the people deposit their money into. The bank holds 25% of the deposits as required reserves. What is the change of the excess reserves?

• $1 million 

• $75 million

• $7.5 million

• $10 million

If a Central Bank decides it needs to decrease both the money supply and the aggregate demand, then it will:

• follow contractionary monetary policy.

• follow quantitative easing policy.

• follow expansionary monetary policy.

• follow loose monetary policy.