Chapter 16-19

Money

• has to spend moris more efficient than bartere dollars to maintain the same standard of living
• makes trades easier
• allows greater specialization
• All of the above are correct

Current U.S. currency is

• fiat money with intrinsic value
• fiat money with no intrinsic value
• commodity money with intrinsic value
• commodity money with no intrinsic value

Which of the following is not included in M1?

• currency
• demand deposits
• savings deposits
• savings deposits

M1 is

• smaller and less liquid than M2
• smaller but more liquid than M2
• larger than and less liquid than M2
• larger than but more liquid than M2

The Fed can influence unemployment in

• the short and long run
• the short run, but not the long run
• the long run, but not the short run
• neither the short nor long run

In 1991 the Federal Reserve lowered the reserve requirement ratio from 12 percent to 10 percent. Other things the same this should have

• increased both the money multiplier and the money supply
• increased both the money multiplier and the money supply
• increased the money multiplier and decreased the money supply
• decreased the money multiplier and increased the money supply

The quantity theory of money

• is a fairly recent addition to economic theory
• can explain both moderate and hyperinflation
• argues that inflation is caused by too little money in the economy
• All of the above are correct

Economists all agree that

• neither high inflation nor moderate inflation is very costly
• both high and moderate inflation are quite costly
• high inflation is costly, but disagree about the costs of moderate inflation
• moderate inflation is as costly as high inflation

A decrease in the money supply creates an excess

• supply of money that is eliminated by rising prices
• supply of money that is eliminated by falling prices
• demand for money that is eliminated by rising prices
• demand for money that is eliminated by falling prices

When the money market is drawn with the value of money on the vertical axis, if the value of money is below the equilibrium level

• the price level will rise
• the value of money will rise
• money demand will shift left
• money demand will shift right