1. Precautionary cash balances: (Points: 5)

are invested in insurance policies by people who are highly risk-averse.

were emphasized by classical writers on monetary theory.

are intended primarily for unexpected expenditures.

grow when individuals acquire personal lines of credit.

2. Money is NOT: (Points: 5)

a medium of exchange.

a standard of value.

a store of value.

the exclusive means of holding wealth.

3. The first bankers were: (Points: 5)

goldsmiths.

printers.

storekeepers.

innkeepers.

4. One of the main results of the Depository Institutions Deregulation and Monetary Control Act of 1980 may be to: (Points: 5)

lessen the number of financial institutions in the United States.

increase the number of financial institutions in the United States.

discourage the formation of big, nationwide, all-purpose financial institutions.

make it easier for the member banks to borrow money from the Federal Reserve District Banks.

5. Commercial banks are required by law to hold reserves. These reserves are specified as percentages of a bank’s: (Points: 5)

total assets.

total liabilities.

checkable deposit liabilities.

holdings of government securities.

6. Foreigners, especially __________, consider American dollars, particularly one hundred dollar bills, as a much better medium of exchange and standard of value than there owns currencies. (Points: 5)

Germans

Brazilians

Asians

Russians

7. Barter involves: (Points: 5)

money.

specialization.

a double coincidence of wants.

demand deposits.

8. The largest United States bank in 2008 was: (Points: 5)

BankAmerica.

Citigroup.

J.P. Morgan Chase.

Security Pacific.

9. Which is NOT a job of the Federal Reserve? (Points: 5)

Check clearing

Issuing currency

Insuring bank deposits

Controlling the rate of growth of the money supply

10. The Federal reserve Board has the power to change reserve requirements within legal limits. The limits for checkable deposits are between __________ percent. (Points: 5)

8 and 14

10 and 12

15 and 20

6 and 8

11. When the Fed engages in a tight money policy, the price of government bonds tend to: (Points: 5)

fall.

rise.

remain constant.

move in the same direction as the bonds’ market interest rate return.

12. Passage of the Depository Institutions Deregulation and Monetary Control Act of 1980: (Points: 5)

created uniform reserve requirements for all financial institutions.

resulted in an increase in the number of financial institutions in the United States.

discouraged the formation of big, nationwide, all-purpose financial institutions.

meant that vault cash would no longer count toward bank reserves.

13. Lowering tax rates was the main priority of the: (Points: 5)

classicals.

Keynesians.

monetarists.

supply-siders.

14. Which of the following theories of expectations holds that individuals use all information available in forming expectations? (Points: 5)

Rational expectations theory

Certainty equivalent theory

Expected value analysis

Adaptive expectations theory

15. Which of the following would be most likely to suggest reducing the money supply as a way to end a prolonged inflation? (Points: 5)

Monetarist

Keynesian

Economic behaviorists

Classical economist

16. The only school of economics that could be construed as advocating big government are the: (Points: 5)

classicals.

Keynesians.

monetarists.

supply-siders.

17. Which is the most accurate statement? (Points: 5)

The quantity theory of money and the equation of exchange are two ways of saying exactly the same thing.

The crude quantity theory of money very accurately describes the relation between the money supply and the price level.

According to the crude quantity theory, Q and V are constants.

One of our main economic problems has been that the equation of exchange has not been balanced.

18. Proponents of the monetarist approach to economic stabilization think that the growth of the money supply should be approximately equal to the: (Points: 5)

prime rate.

long-term average growth of real output.

real interest rate.

growth of federal expenditures.

19. A conclusion of the theory of rational expectations is that the impact of discretionary fiscal policies designed to shift the aggregate demand curve will: (Points: 5)

result in no net change in aggregate demand.

be anticipated and compensated for, causing no significant change in real GDP or employment levels.

be completely opposite of the intended result.

be incorrectly evaluated by most economists.

20. According to the classical economists, if the quantity of money that people wanted to save was greater than the amount that people wanted to invest: (Points: 5)

there would be a recession.

there would be inflation.

the interest rate would fall.

the interest rate would rise.