Money and Banking Exam Materials
Course Introduction
Money and Banking explores the fundamental role of money in modern economies and the workings of banking institutions. The course covers the nature and functions of money, the evolution and structure of financial systems, and the various types of financial intermediaries, particularly commercial banks and central banks. It examines how banks create money, the instruments of monetary policy, and the relationship between money supply, inflation, and interest rates. Students will also analyze financial crises, regulatory frameworks, and the global interplay among markets, currencies, and policies. Through theoretical concepts and real-world case studies, the course equips students with an understanding of the critical importance of money and banking in overall economic stability and growth.
Recommended Textbook
Macroeconomics 13th Edition by Roger A. Arnold
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24 Chapters
3454 Verified Questions
3454 Flashcards
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Page 2
Chapter 1: What Economics Is About
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Refer to Exhibit 1-4.If the student whose marginal benefits and costs of good health are noted in this table,how many units of good health should the student obtain in order to maximize her net benefits of good health?
A) 2 units
B) 3 units
C) 4 units
D) 5 units
E) 6 units
Answer: D
Q2) It usually takes less time to buy a six-pack of Pepsi,a loaf of bread,and a bag of potato chips at a small convenience store (such as 7-Eleven)than at a large,full-service grocery store.Which of the following persons is most likely to buy these items at a convenience store?
A) a person with a high opportunity cost of time
B) a person with a low opportunity cost of time
C) a person who is out of work
D) a person who works at a full-service grocery store
Answer: A
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3
Chapter 2: Production Possibilities Frontier Framework
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Sample Questions
Q1) Refer to Exhibit 2-1.The movement from point A to point B is a movement from A) a productive efficient point to a productive inefficient point.
B) a point with more guns and less butter to a point with more butter and even more guns.
C) a productive efficient point to another productive efficient point.
D) a productive inefficient point to a productive efficient point.
Answer: C
Q2) The economy can produce 15X and 15Y,10X and 20Y,5X and 25Y,or 0X and 30Y.It follows that opportunity cost of 1X is ___Y.
A) 4.0
B) 5.0
C) 2.5
D) 1.0
E) none of the above
Answer: D
Q3) The law of increasing opportunity cost helps to explain why PPF's are typically bowed-outward.
A)True
B)False
Answer: True
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Chapter 3: Supply and Demand: Theory
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Sample Questions
Q1) At a price of $9.99 per digital book,Danielle buys 3 digital books per month.When the price decreases to $7.99,Danielle buys 4 digital books per month.Jason says that Danielle's demand for digital books has increased.Is Jason correct?
A) Yes,Jason is correct.
B) No,Jason is incorrect.Danielle's demand has decreased.
C) No,Jason is incorrect.Danielle's quantity demanded has decreased,but her demand has stayed the same.
D) No,Jason is incorrect.Danielle's quantity demanded has increased,but her demand has stayed the same.
E) No,Jason is incorrect.Danielle's quantity demanded has increased and her demand has decreased.
Answer: D
Q2) One can determine the consumers' surplus if the _______________ are known.
A) tax paid
B) maximum buying price
C) price paid
D) maximum buying price and price paid
E) maximum buying price and tax paid
Answer: D
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Page 5
Chapter 4: Prices: Free,controlled,and Relative
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Sample Questions
Q1) Refer to Exhibit 4-8.If the wheat market is in competitive equilibrium the producers' surplus will equal
A) area 1 + 2 + 3
B) area 1 + 2 + 4
C) area 3 + 5
D) area 1 + 2 + 3 + 4 + 5
E) area 6
Q2) A price floor creates a situation in which one party wins and another party loses,and the gains for the winner are equal to the losses for the loser.
A)True
B)False
Q3) Refer to Exhibit 4-11.Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4.The result of the price ceiling would be a ____________ of ______ units of good ABC.
A) shortage; 20
B) surplus; 20
C) shortage; 60
D) surplus; 60
Q4) List and describe the two major jobs performed by price.
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Chapter 5: Supply,demand,and Price: Applications
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Sample Questions
Q1) The lower the price of medical care in general,the higher the ____________________________ medical care and the ______________________ specific items that make up medical care (such as x-rays).
A) quantity demanded of; higher the demand for B) demand for; higher the demand for C) quantity demanded of; lower the demand for D) demand for; higher the quantity demanded of
Q2) Suppose that a toll of $15 is charged to drive on a road,regardless of the time of day.If this toll brings about equilibrium travel flows at the busiest time of day,it will create __________ at all other times of day.
A) equilibrium
B) a shortage of toll road space
C) a surplus of toll road space
D) b or c
Q3) Since most colleges and universities do not charge students different tuition based on the time or day a student takes classes,there will likely be a shortage of seats in some classes and a surplus of seats in other classes.
A)True
B)False
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Chapter 6: Elasticity
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Sample Questions
Q1) In year 1 the CPI is 140,and in year 2 the CPI is 154.From year 1 to year 2,Marcy's salary rises from $43,000 to $48,000,and Daphne's salary rises from $65,000 to $70,000.Who is "more than keeping up with inflation"?
A) Marcy
B) Daphne
C) both Marcy and Daphne
D) neither Marcy nor Daphne
Q2) Smith's income was $50,000 in year 1 and $55,600 in year 2.The CPI was 114 in year 1 and 124 in year 2.What was the approximate percentage change in Smith's real income between the two years?
A) -2.2 percent
B) +3.4 percent
C) -1.7 percent
D) +5.6 percent
E) +2.2 percent
Q3) Describe what the unemployment rate and the employment rate measure.If we were to sum the unemployment rate and the employment rate,would that sum be equal to one hundred percent? Explain why or why not.
Q4) Describe what the term "full employment" means to an economist.
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Chapter 7: Consumer Choice: Maximizing Utility and Behavioral Economics
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Sample Questions
Q1) Gross Domestic Product is computed by using A) base-year prices.
B) wholesale prices.
C) previous-year prices.
D) current-year prices.
Q2) Refer to Exhibit 7-5.What was Country Z's economic growth rate between year 2 and year 3?
A) -3.0%
B) 2.6%
C) 14.0%
D) -2.2%
Q3) Refer to Exhibit 7-1.Which of the following summations represents GDP using the expenditure approach?
A) $4,150 + $751 + $850 + $300
B) $4,150 + $751 + $850 - $331 + $300
C) $4,150 + $751 + $850 + $331 + $300
D) $4,150 + $751 + $850 + $331 + $300 - $320
E) $4,150 + $751 + $850 + $331 + $300 - $320 + $111
Q4) Explain why GDP figures do not necessarily measure happiness or well-being.
Q5) List and explain the two different approaches used to measure GDP.
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Chapter 8: Production and Costs
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Sample Questions
Q1) Assume that the economy is currently in short-run equilibrium,then the U.S.dollar appreciates in the foreign exchange market.Describe the correct sequence of events that happens as the economy adjusts to a new short-run equilibrium.
Q2) If businesses are optimistic about future sales,the short-run aggregate supply curve will shift leftward.
A)True
B)False
Q3) The level of Real GDP that the economy produces in long-run equilibrium is Natural Real GDP.
A)True
B)False
Q4) An increase in the price level
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) causes an upward movement along the existing AD curve.
D) causes a downward movement along the existing AD curve.
E) a and c
Q5) List and describe the three effects that help to explain why the aggregate demand (AD)curve slopes downward.
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Chapter 9: Perfect Competition
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Sample Questions
Q1) When there is a recessionary gap,(actual)Real GDP is __________ Natural Real GDP,and the (actual)unemployment rate is __________ the natural unemployment rate.
A) greater than; less than B) greater than; greater than C) greater than; equal to D) less than; greater than E) less than; less than
Q2) Which of the following statements is false?
A) If the economy is self-regulating,wages are flexible.
B) The frictional unemployment rate equals the natural unemployment rate minus the structural unemployment rate.
C) If the economy is producing Natural Real GDP,it is operating at the natural unemployment rate.
D) The economy is operating at full employment if it is producing more than Natural Real GDP.
Q3) For saving to increase,consumption must decrease,ceteris paribus.
A)True
B)False
Q4) Explain the policy implications of the classical economists' beliefs.
Page 11
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Chapter 10: Monopoly
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200 Flashcards
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Sample Questions
Q1) When total production is greater than total expenditures,
A) the economy is in disequilibrium.
B) there are increases in inventory.
C) total output will decrease.
D) all of the above
Q2) According to Keynes,the economy is inherently unstable and may get stuck in a recessionary gap.
A)True
B)False
Q3) Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC)that would correctly fill in blank (G)and the value of the multiplier that would correctly fill in blank (H)?
A) 0.80; 20
B) 0.80; 5
C) 0.20; 0.80
D) 0.50; 0.50
E) There is not enough information given to answer this question.
Q4) The economy can be in equilibrium and in a recessionary gap simultaneously. A)True
B)False
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Chapter 11: Monopolistic Competition, oligopoly, and Game Theory
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167 Flashcards
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Sample Questions
Q1) Explain the difference between a progressive income tax,a proportional income tax and a regressive income tax.Under which type of system is the federal income tax?
Q2) Which of the following statements is true?
A) A budget deficit occurs when government expenditures exceed tax receipts during any single year.
B) The public debt is the total amount the federal government owes its creditors.
C) The public debt is greater than the net public debt.
D) b and c
E) a,b,and c
Q3) The economy is in a recessionary gap,there is incomplete crowding out,and government implements expansionary fiscal policy.It follows that
A) Real GDP will fall.
B) the AD curve will shift to the right.
C) the price level will fall.
D) the recessionary gap will necessarily be completely eliminated.
E) b and d
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Chapter 12: Government and Product Markets: Antitrust and Regulation
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150 Flashcards
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Sample Questions
Q1) According to the textbook,The Wonderful Wizard of Oz is alleged to be a story about
A) the California gold strikes of 1849.
B) the end of the gold standard in 1934.
C) the presidential election of 1896.
D) the financial panic of 1907.
Q2) The two types of asymmetric information problems are moral hazard and insolvency.
A)True
B)False
Q3) The existence and use of the Internet has lowered the transaction costs of making some exchanges.
A)True
B)False
Q4) List and describe the three functions of money.
Q5) Exchanges take less time in a barter economy than in a money economy because a double coincidence of wants is necessary for a money economy.
A)True
B)False
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Chapter 13: Factor Markets: With Emphasis on the Labor Market
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Sample Questions
Q1) Controlling the nation's money supply is the most important duty of the Federal Reserve.
A)True
B)False
Q2) Which of the following Fed actions will decrease the money supply?
A) an open market purchase of Treasury bills
B) an increase in the required reserve ratio
C) a decrease in the discount rate relative to the federal funds rate
D) all of the above
E) none of the above
Q3) The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.
A) New York; Board of Governors of the Federal Reserve System
B) Washington D.C.; FOMC
C) San Francisco; FOMC
D) New York; FOMC
E) Washington D.C.; Board of Governors of the Federal Reserve System
Q4) A discount loan is a loan the Federal Reserve makes to a commercial bank.
A)True B)False
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Chapter 14: Wages,union,and Labor
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Sample Questions
Q1) Refer to Exhibit 14-2.The economy moves from point 1 to 2 to 3 to 4 to 5 to 6 to 7.Is this consistent with one-shot declines originating on the supply-side of the economy combined with continued increases in aggregate demand?
A) No,continued supply-induced inflation would be more likely to move the economy from point 1 to 2 and then in a northwesterly direction from point 2.
B) No,continued supply-induced inflation would be more likely to move the economy from point 1 to 3 to 5.
C) No,continued supply-induced inflation would be more likely to move the economy from 1 to 2 and then in a southwesterly direction from point 2.
D) Yes.
Q2) The equation of exchange is
A) an identity.
B) a theory.
C) an abstraction
D) a hypothesis.
E) a,b,and c
Q3) Describe the expectations (or Fisher)effect.
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Page 16
Chapter 15: The Distribution of Income and Poverty
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Sample Questions
Q1) Monetarists believe that changes in the supply of money
A) do not affect aggregate demand.
B) affect aggregate demand through the loanable funds market only.
C) affect only the investment component of aggregate demand.
D) affect aggregate demand directly.
Q2) If the interest rate falls,the opportunity cost of holding money __________ and the quantity demanded of money __________.
A) rises,rises
B) rises,falls
C) falls,rises
D) falls,falls
Q3) A person who opposes the deliberate use of fiscal and monetary policies is called a(n)
A) Keynesian.
B) fiscalist.
C) nonactivist.
D) activist.
Q4) The money supply curve is usually horizontal.
A)True
B)False
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Chapter 16: Interest,rent,and Profit
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Sample Questions
Q1) Refer to Exhibit 16-1.According to new classical macroeconomists,if increases in aggregate demand are correctly anticipated,then the economy will move from point A to
A) point B.
B) point C.
C) some point on SRPC<sub>2</sub>,above C.
D) some point on SRPC<sub>1</sub>,below A.
Q2) The economy is in long-run equilibrium when there is a correctly anticipated increase in aggregate demand.In new Keynesian theory,the price level will rise __________ in the short run than it is predicted to rise in new classical theory. A) by more
B) by less
C) by the same amount
D) faster
E) slower
Q3) Describe the sequence of events that real business cycle theorists would use to explain how an adverse supply shock would impact the economy.Use your answer to explain why it is easy to confuse cause and effect between changes originating on the supply side and those that begin on the demand side.
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Page 18
Chapter 17: Market Failure: Externalities, public Goods, and
Asymmetric
Information
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Sample Questions
Q1) Refer to Exhibit 17-5.Based on the equation given in this exhibit,if your motivation to learn rises from 7 to 9,by how much will the amount of learning acquired rise as a result?
A) 2
B) 0.8
C) 1.6
D) 8
Q2) Suppose the population of country XYZ falls from 10 million to 9 million.If the country's Real GDP falls from $325 billion to $297 billion during this same period,the result is _________________ economic growth.
A) both absolute economic growth and per-capita real
B) absolute economic growth,but not per-capita real
C) per-capita real economic growth,but not absolute
D) neither absolute economic growth nor per-capita real
Q3) If Real GDP is $6 billion and the population is 300,000,per-capita Real GDP is
A) $30,000.
B) $20,000.
C) $33,333.
D) $39,434.
Q4) List and describe four factors that can contribute to economic growth.
Page 19
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Chapter 18: Public Choice and Special-Interest-Group
Politics
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Sample Questions
Q1) The Taylor Rule is an example of
A) discretionary monetary policy.
B) rule-based monetary policy.
C) a monetary policy measure that always sets the money supply growth rate at 3 percent.
D) contractionary monetary policy.
E) none of the above
Q2) Economists who view the AS curve as vertical believe that government ________________ to raise Real GDP (in the short run)from the demand side of the economy.Economists who view the AS curve as upward-sloping believe that changes in Real GDP (in the short run)_________ result from changes on the demand side.
A) can do many things; cannot
B) cannot do anything; may
C) can do many things; may
D) cannot do anything; cannot
Q3) All economists agree that some types of government spending are better for the economy than other types of spending.
A)True
B)False
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Chapter 19: Building Theories to Explain Everyday Life: From
Observations to Questions to Theories to Predictions
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Q1) Logrolling
A) is vote trading among elected officials.
B) eliminates the influence of special interest groups.
C) puts downward pressure on federal spending.
D) b and c
E) all of the above
Q2) Competition for votes between two political parties will cause those parties to
A) produce quite different policy proposals.
B) have very similar policy proposals.
C) find ways to clearly distinguish themselves in order to give voters a clear choice.
D) a and c
E) none of the above
Q3) One implication of the median voter model is that a candidate is likely to label himself __________ and his or her opponent as __________.
A) moderate; too far right or too far left (whichever makes more sense)
B) a member of one of the political wings; moderate or mainstream
C) as a member of the political right; moderate
D) as a member of the political left; moderate
E) none of the above
Page 21
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Chapter 20: International Trade
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Sample Questions
Q1) A theory predicts that the more a student studies,the higher his or her grades will be.This theory is
A) not falsifiable.
B) falsifiable.
C) too difficult a theory to test.
D) inconsistent with the fact that some students study less than other students,yet receive higher grades.
E) b and d
Q2) Which of the following can a homebuyer pay for indirectly when purchasing a home?
A) good weather
B) a good school district
C) a nice view
D) all of the above
Q3) Scientists are interested in finding out when their theories are wrong,as well as when their theories are right.
A)True
B)False
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Chapter 21: International Finance
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Sample Questions
Q1) Refer to Exhibit 34-8.Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports).The government collects tariff revenues on sugar imports in the amount of __________ million.
A) $500
B) $1,000
C) $1,500
D) $2,000
E) none of the above
Q2) In contrast to a tariff,a quota does not
A) reduce consumers' surplus.
B) increase producers' surplus.
C) generate revenues for government.
D) raise price.
E) c and d
Q3) The national defense argument has been used in the past to justify trade restrictions by firms in the peanut industry and the pottery industry.
A)True
B)False
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23
Chapter 22: The Economic Case for and Against
Government: Five Topics Considered
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Q1) The U.S.dollar has depreciated relative to the Japanese yen if it takes
A) fewer yen to buy a dollar.
B) more yen to buy a dollar.
C) more dollars to buy a yen.
D) fewer dollars to buy a yen.
E) a and c
Q2) In a foreign exchange market diagram with dollars per peso on the vertical axis,the quantity of __________ would be on the horizontal axis,and the U.S.demand for Mexican goods would help to determine the __________ curve.
A) dollars; demand
B) dollars; supply
C) pesos; demand
D) pesos; supply
Q3) The market in which the currencies of different countries are exchanged is called the A) money market.
B) capital market.
C) foreign exchange market.
D) loanable funds market.
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Chapter 23: Stocks,bonds,futures,and Options
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Q1) List and describe the three different types of transfers discussed in this chapter.Give a hypothetical example of each to help support your answer.
Q2) When a positive externality exists,_______________________ and thus _______________ intervention may be needed to achieve efficiency.
A) external costs are necessarily greater than private costs; government B) social costs equal private costs; no government
C) social costs are less than private costs; government
D) social costs are greater than private costs; government
E) none of the above
Q3) The federal government and many state governments gave tax credits to first-time home buyers in 2009 and 2010.An effect of these tax credits was to
A) make the price of houses higher than they would have been without the tax credit.
B) lower house prices.
C) shift the demand curve for houses leftward.
D) b and c
E) none of the above
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Chapter 24: Stocks,bonds,futures,and Options
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Q1) When you purchase a share of stock,you are
A) borrowing funds from the corporation.
B) lending funds to the corporation.
C) selling an ownership right in the corporation.
D) acquiring an ownership right in the corporation.
E) b and d
Q2) Refer to Exhibit 38-4.If the closing price of Greenco's stock on the previous day was $48.10,what value goes in blank (B)?
A) $47.35
B) $48.85
C) $45.85
D) $47.85
E) There is not enough information given to answer this question.
Q3) The federal government began issuing inflation-indexed Treasury bonds in A) 1913.
B) 1989.
C) 1997.
D) 2001.
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