Test Your Knowledge!

According to our text, which of the following is correct?

The function of money that allows people to accumulate wealth more easily and save is called:

The money supply measure that contains only those forms of money that people readily use to purchase goods and services in grocery stores and department stores, is called:

If a United States business person takes money out of her United States checking account, and deposits this as Eurodollars in a foreign account, then M1 will _______, M2 will ________, and M3 will _________.

Which of the following statements is correct?

Which of the following can the Fed use to increase the nation’s money supply?

If a bank receives a deposit from a customer in the amount of $2,000, and the reserve requirement for this customer’s account is 15%, then how much of this customer’s deposit can this bank maximally loan out?

Which of the following equations properly illustrates how much a nation’s money supply changes?

If a customer deposits $2,000 in new money (for example, he sold $2,000 of his government bonds to the Fed), and if the nation’s reserve requirement is 20%, then how much will this deposit maximally be able to change the entire nation’s money supply?

If a country’s nominal GDP (average price level * quantity produced) is $6,000, and its money supply is $1,000, then, according to the quantity theory of money, how much is this country’s velocity?