Please circle the most correct or appropriate answer. Please only choose one answer per

question. Multiple selections will lead to a zero grade.

1. If money is used as a mechanism to hold purchasing power for a period of time, it is

functioning as a:

a. medium of exchange.

b. store of value.

c. unit of account.

d. standard of value.

2. Which of the following is a bank asset?

a. certificates of deposit held by the public

b. demand deposits

c. savings account deposits

d. loans made to customers

3. Given the following information about AAA bank:

Bank Deposits $100,000

Loans $50,000

Required Reserves $20,000

Excess Reserves $30,000

What is the reserve ratio set by the Federal Reserve Bank?

a. 10 percent.

b. 30 percent.

c. 20 percent.

d. 50 percent.

4. Both increases in the price level and increases in real GDP will increase the demand

for money.

a. True

b. False

5. Which set of actions could the Fed use to increase the money supply?

I. reduction in the required reserve ratio

II. an open market sale

III. a tax cut

IV. an open market purchase

a. I and II

b. I and III

c. I and IV

d. II and III

e. II and IV

Bonus Questions:

1. Actions by the Federal Reserve to influence the level of GDP are known as:

a. cyclical policy.

b. monetary policy.

c. fiscal policy.

d. procyclical policy.

2. If the current level of GDP exceeds full employment, the government can reduce the

level of GDP by:

a. increasing spending.

b. lowering interest rates.

c. reducing taxes.

d. reducing the money supply.