26) In Country Z, the government simultaneously decreases its expenditures by $20 billion and decreases taxes by $20 billion. If the MPS is equal to 0.2, the government's action_ real GDP by A) Decreases; $100 billion B) Decreases; $20 billion C) Decreases; S80 billion D) Has no effect on; SO 27) Money functions as an) A) Store of value. B) Unit of account. C) Medium of exchange. D) all of the above. 28) For barter to occur there must be A) Hyperinflation. B) A double coincidence of wants for each good to be exchanged. C) One person who pays cash. D) Two people willing to pay with credit. 29) Money serves as a standard of value, which is another way of saying that money functions as A) A medium of exchange. B) A unit of accounting C) A store of value. D) Standard of deferred payment. 30) The reason we are willing to accept money with no intrinsic value is that A) Paper currency may be exchanged for full-bodied money. B) The money supply is backed by an equal amount of gold and silver. C) We have a fiduciary monetary system in which currency has both acceptability and predictability of value. D) The value of the money varies directly with changes in the price level. 31) In a fiduciary monetary system, the value of the money issued by a government is based on A) The gold held in that government's vaults. B) Public confidence in that currency's acceptability and predictability of value. C) The ability to convert it to some asset of value, like silver. D) Its being made out of some material with a market value equal to a bill's face value. 32) All transaction deposits are included in A) MI only. B) M2 only. C) Both MI and M2. D) Savings balances only.
33) According to the above table, the value of Ml is A) $1.888 billion, B) S1,629 billion. C) $1,213 billion. D) $1,205 billion, 34) According to the above table, the value of M2 is A) $5,303 billion. B) S5,782 billion. C) S5,325 billion. D) $9,000 billion. 35) Russia borrowed funds from the International Monetary Fund in 1989 in exchange for agreeing to undertake certain changes. However, after receiving the funds, Russia spent the funds on other things, making the loan repayment more unlikely to occur. This situation is referred to as A) Adverse selection. B) Moral hazard. C) Asymmetric information. D) Deceptive knowledge. 36) The central bank for the United States is A) Chase Manhattan Bank. B) The Congressional Bank. C) The Federal Reserve System. D) First National Bank of New York. 37) A bank with $100 million in deposits has $15 million of cash in the bank, $10 million in deposits with the Fed, and $15 million in government securities in its vault. Its total reserves equal A) $10 million. B) S15 million. C) $25 million. D) $40 million. 38) If a check was written on Bank A for $100 and Bank B presented the check to Bank A for payment, what will happen to the required reserves for each respective bank after payment is made? A) Bank A's required reserves increase; Bank B's decrease. B) Bank B's required reserves increase: Bank A's decrease. C) Both banks will see an increase in their required reserves. D) Both banks will see a decrease in their required reserves. 39) The formula que verwer is the A) Federal funds rate. B) Discount rate. C) Potential money multiplier. D) Actual change in the money supply.
40) When banks reduce the reserve ratio, the potential money multiplier A) Increases. B) Decreases C) Remains unchanged. D) Sometimes increases, and sometimes decreases depending on the rate of inflation. 41) The money demand function implies that money demand is A) Positively related to interest rates. B) Negatively related to bond prices. C) Negatively related to interest rates. D) Negatively related to transactions in the economy. 42) The downward slope of the demand for money curve reflects the fact that A) People hold more of their wealth in the form of money as the price level rises. B) People hold more of their wealth in the form of money as the price level falls. C) People hold more of their wealth in the form of money as the interest rate rises. D) People hold more of their wealth in the form of money as the interest rate falls. Level Real GDP per Year is in Trons) 43) In the above figure, if the economy is in equilibrium at El, then A) The economy is producing below its potential long-run equilibrium at full employment. B) The economy is producing above its potential long-run equilibrium at full employment. C) There is an inflationary gap in the economy. D) The economy is in a period of high inflation. 44) In the above figure, if the economy is at equilibrium at El, the Fed would most likely A) Adopt a contractionary monetary policy. B) Adopt an expansionary monetary policy. C) Attempt to lower the aggregate demand in the economy. D) Attempt to lower the price level below 120.