(1) People Use Money As a Store of Value When They

Macroeconomics Sample Quiz 2

(1) People use money as a store of value when they:

a. Hold money to transfer purchasing power into the future

b. Use money as measure of economic transactions

c. Use money to buy goods and services

d. Hold money to gain power and esteem

(2) To reduce the money supply, the Federal Reserve:

a. Buys government bonds

b. Sells government bonds

c. Creates demand deposits

d. Destroys demand deposits

(3) If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transaction velocity per year is

a. 0.2

b. 2

c. 5

d. 10

(4) The real interest rate is equal to the:

a. Amount of interest that a lender actually receives when making a loan

b. Nominal interest rate plus the inflation rate

c. Nominal interest rate minus the inflation rate

d. Nominal interest rate plus producer price index

(5) If the number of dollars per yen rises, this is called a(n):

a. Appreciation of the dollar

b. Appreciation of the yen

c. Increase in the terms of trade

d. Decrease in the terms of trade

(6) According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the:

a. Inflation rate

b. Expected inflation rate

c. Ex ante real interest rate

d. Ex post real interest rate

(7) The value of net exports is also the value of:

a. Net investment

b. Net saving

c. National saving

d. The excess of national saving over domestic investment

(8) The real exchange rate:

a. Measures how many Japanese yen one really gets for a U.S. dollar

b. Is equal to the nominal exchange rate multiplied by the domestic price level divided by the foreign price level

c. Is equal to the nominal exchange rate multiplied by the foreign price level divided by the domestic price level

d. The price of a domestic car divided by the price of a foreign car

(9) If a country has a high rate of inflation relative to the United States, the dollar will buy:

a. Less of the foreign currency over time

b. More of the foreign currency over time

c. The same amount of foreign currency over time

d. An amount of foreign currency determined by the real exchange rate

(10) According to the quantity theory of money, ultimate control over the rate of inflation in the United Sates is exercised by:

a. The Organization of Petroleum Exporting Countries (OPEC)

b. The U.S. treasury

c. The Fed

d. Private citizens

(11) In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a:

a. Trade surplus

b. Trade deficit

c. Budget surplus

d. Stagflation

(12) In a small open economy, if consumer confidence falls and consumers decide to save more, then the real exchange rate:

a. Rises

b. Falls

c. Does not change

d. First falls, then remains constant

(13) When the real exchange rate rises :

Exports will decrease but imports will be unaffected
Imports will decrease but exports will be unaffected
Exports will increase but imports will decrease

d. Imports will increase but exports will decrease

(14) If the real exchange rate is high, foreign goods:

And domestic goods are both relatively expensive
And domestic goods are both relatively cheap
Are relatively expensive and domestic goods are relatively cheap

d. Are relatively cheap and domestic goods are relatively expensive

(15) In a small open economy, policies that increase investment:

Cause higher social problem
Cause higher unemployment
Cause a trade surplus

d. Cause a trade deficit