Money & Banking

It has a strong reputation for controlling inflation on its own.

It lacks ample foreign exchange reserves.

It is well-integrated with the country its currency is fixed.

Its own macroeconomic characteristics are inversely correlated with the macroeconomic characteristics of the country which its currency is fixed.

If more countries would have been on the gold standard the Great Depression would have been averted.

The gold standards didn’t play a major role in the Great Depression.

The gold standard shoulders a lot of the blame for the Great Depression.

Countries that held on to the gold standard recovered from the Great Depression the quickest.

The currency of a country with a strong reputation for low inflation.

The currency of a larger country.

The currency of a country with similar inflation performance.

The currency of a country that is still on the gold standard.

Slower integration into world markets.

Adopting the monetary policy of the country whose currency is being used.

The central bank no longer has the ability to be the lender of last resort.

The lost of revenue from printing currency.

A lower risk premium since inflationary finance is no longer a possibility.

Greater and faster integration into world markets increasing trade and investment.

No risk of an exchange rate crisis.

Increased revenue from seigniorage.

Country A’s inflation rate will have to match country B’s.

Country A’s monetary policy must be conducted so the inflation rate in country A matches the inflation rate in country B.

Country A’s monetary policy will not be able to be used to address domestic issues.

All of the above

None of the above.

They increase the number of dollars.

Downward pressure is put on domestic interest rates.

The domestic money supply increases.

Only: b and c

A sterilized foreign exchange intervention will alter the composition of a central bank’s assets and alter commercial bank reserves.

A sterilized foreign exchange intervention will not alter the composition of a central bank’s assets.

An unsterilized foreign exchange intervention will alter the commercial bank reserves.

A sterilized foreign exchange intervention will leave the central bank’s holdings of foreign reserves unchanged.

The issuer of gold.

The clearinghouse for international transactions.

The lender of last resort.

The arbiter of trade disputes.

Contributes to the rigidity of exchange rates.

Contributes to the equalization of expected returns across countries.

Eliminates arbitrage opportunities.

Makes interest rates equal across countries.

.+0.5%

-0.5%

+ 16.7%

+6.5%

The country exports more than it imports.

It must have ample gold reserves.

It cannot have a domestic monetary policy.

It must be running large trade deficits.

High rates of inflation in the U.S.

Greater mobility of capital across international borders.

The desire on the part of participating countries to have an independent monetary policy.

All of the above.

Financial market participants believe the government will have to devalue its currency.

Financial market participants believe the government will have to sell off some of their international reserves.

Financial market participants believe the currency is undervalued.

The country is running out of gold reserves.

The currency of country B should depreciate relative to the currency of country A.

The inflation rate in country B will rise to match the inflation rate in country A.

The currency of country A will depreciate relative to the currency of country B.

The inflation rate in country A will fall to match the inflation rate in country B.

A controlled domestic interest rate, a closed capital market and a flexible exchange rate.

A controlled domestic interest rate, an open capital market and a flexible exchange rate.

No control over the domestic interest rate, an open capital market and a flexible exchange rate.

A controlled domestic interest rate, an open capital market and a fixed exchange rate.

Required each participating country to peg their currency to the U.S. dollar.

Required each participating country to abolish all trade barriers.

Required each participating country to stay on the gold standard.

Standardized tariffs across all participating countries.

Monetary policy.

Purchasing power parity.

The domestic inflation rate.

Supply and demand.

Trade deficits would result in gold reserves in the U.S. decreasing.

Trade deficits would result in lower domestic interest rates.

Trade deficits would quickly disappear.

Trade deficits would result in high inflation.

Doesn’t exist, it was phased out in 1971 with the collapse of the Bretton Woods System.

Serves only in the role of financing current account deficits.

Serves only in an advisory capacity, it does not have any lending powers.

Provides loans to countries facing a capital crisis and serves in an advisory capacity.

Trade deficits would result in gold reserves in the U.S. increasing.

Trade deficits would result in higher domestic interest rates.

Currency boards and dollarization.

Dollarization and the gold standard.

Flexible exchange rates and currency board.

The gold standard and currency boards.

Mexico limiting the number of U.S. dollars an American can bring into the country.

Mexico limiting the number of U.S. dollars its citizens can purchase before leaving on their vacation to the U.S.

Mexico limiting the number of pesos its citizens can take out of the country.

A country uses the U.S. dollar as well as their currency for all transactions.

A country adopts a foreign currency for all transactions basically eliminating their own monetary policy.

A country eliminates their own currency for international transactions and requires all international transactions be conducted in U.S. dollars.

The central bank of a country agrees to exchange their own currency for U.S. dollars at a fixed exchange rate.

Alter the asset side of a central bank’s balance sheet but leave the domestic monetary base unchanged.

Alter the liability side of the central bank’s balance sheet but leave the asset side unchanged.

Leave the central bank’s balance sheet unchanged.

Not alter the central bank’s holdings of international reserves.

The money supply is fixed.

The velocity of money is constant.

The percentage change in the price level equals the percentage change in real GDP.

The change in nominal GDP is zero.

The supply of money is not stable.

The money market is always in disequilibrium.

Money demand is stable.

Money demand is not stable.

Remain relatively stable.

Increase slightly.

Increase dramatically.

Decrease.

Nominal money demand should remain the same.

Nominal money demand should decrease.

Nominal money demand should increase.

Real money demand should decrease.

Directly with the liquidity of other financial assets.

Inversely with the liquidity of other financial assets.

Not all with the liquidity of other assets since money is liquid.

Inversely with wealth.

$2000.

$66.67.

$1000.

$800.00.

The opportunity cost of money decreases, the velocity of money decreases, and the quantity of money people want to hold decreases.

The opportunity cost of money increases, the velocity of money decreases, and the quantity of money people want to hold decreases.

The opportunity cost of money decreases, the velocity of money increases, and the quantity of money people want to hold decreases.

The opportunity cost of money increases, the velocity of money increases, and the quantity of money people want to hold decreases.

(Y·M)/P

(P·M)/Y

(P·Y)/M

(P·Y) +M.

One-fourth.

Four.

The money supply divided by 4

Nominal GDP divided by four.

Keeping funds in your checking account to pay your rent.

Keeping funds in your savings account because the interest rate looks relatively attractive.

Selling common stocks you own and increasing the money in your savings account because you think stock prices will fall soon.

a and c

.

The portfolio demand for money.

The precautionary demand for money.

The transaction demand for money.

None of the above since credit cards aren’t money.

The money we hold for our everyday transactions.

The portion of wealth people desire to hold in the form of money.

The money we hold to purchase stocks and bonds and other financial securities.

A growing real economy.

A constant velocity of money.

An increasing velocity of money.

A decreasing velocity of money.

The quantity theory of money

The assumption of constant nominal GDP growth.

The assumption that the price level grows at the same rate as real GDP.

The assumption that the central bank increases the money supply by a constant rate every year.

Not impact the demand for money since money doesn’t earn any interest.

Also decrease the demand for money.

Increase the demand for money.

Increase the velocity of money.

Ms = (1/V)Y

Ms = Md

Ms = (1/V)PY

a and b

b and c

Increase dollar for dollar with wealth.

Increase but at a rate less than dollar for dollar.

Money demand does not vary with wealth, only with income.

Countries with low rates of money growth have high rates of inflation.

Money growth and inflation are not related.

Countries with high rates of money growth have high rates of inflation.

Money growth rates equal inflation rates.

The CPI does not measure inflation at the household level.

Most economists maintain the CPI overstates inflation by 2 to 4 percent annually.

Most economists maintain the CPI overstates inflation by 1 percent annually.

Studies suggest that money growth is not related to the CPI.

Increased the transaction demand for money.

Decreased the transaction demand for money.

This doesn’t impact the transaction demand for money.

Increased the cost of converting non-money assets to a means of payment.

High inflation increases the velocity of money.

High rates of inflation increase the opportunity cost of holding money.

Money loses value quickly with inflation.

All of the above.

Sell her bonds and hold more money.

Buy more bonds now and hold less money.

Not alter her bond portfolio until interest rates actually rise.

Not change her money holdings at all.

Md = VY.

Md = PY.

Md = (1/V) PY.

Md = V(Y/P).

The return on money increases.

The return on financial assets increases.

There is no risk with holding money.

The risk of holding money relative to other financial assets decreases.

The nominal interest rate.

The real interest rate.

The nominal interest rate less the cost of converting a bond to cash.

The rate of inflation.