Money lowers the transaction cost when:

Money lowers the transaction cost when:
 a. the economy is experiencing rapid inflation.
  b. its value is stable.
 c. the rate of inflation is uncertain.
 d. there is widespread deflation

Question 2

If the aggregate supply curve is positively sloped, an increase in the money supply will result in an increase in both equilibrium national income and the equilibrium price level.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 3

The imposition of a binding price floor on a market causes quantity demanded to be
 a. greater than quantity supplied.
  b. less than quantity supplied.
 c. equal to quantity supplied.
 d. Both (a) and (b) are possible.

Question 4

A bank's capital is:
 a. the value of all its assets, including loans.
 b. the value of all its assets, excluding loans.
 c. the value of its physical plant, including buildings, computers, and automatic teller machines.
  d. the difference between its assets and liabilities.

Question 5

An outward shift of the money demand function indicates an increase in the market rate of interest and hence a decrease in the level of investment in the economy.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 6

To say that a price floor is binding is to say that the price floor
 a. results in a shortage.
 b. is set below the equilibrium price.
 c. causes quantity supplied to exceed quantity demanded.
  d. All of the above are correct.

Question 7

The process of money creation can be reversed:
 a. when a person pays a loan back to a bank.
 b. when the government passes a law against it.
 c. when customers begin to deposit money into banks.
  d. when loans are extended to customers.

Question 8

If you buy for 100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 9

A price floor is binding when it is set
 a. above the equilibrium price, causing a shortage.
  b. above the equilibrium price, causing a surplus.
  c. below the equilibrium price, causing a shortage.
  d. below the equilibrium price, causing a surplus.

Question 10

A single bank is severely limited in its ability to create money because:
 a. the FDIC will not permit it to create money unless the Resolution Trust Corporation guarantees the loans.
  b. loan recipients usually take the proceeds of the loan in cash.
 c. the funds loaned probably will be deposited in another bank.
 d. recent federal legislation prohibits banks from creating money except to finance international trade.

Question 11

The money supply function reflects a positive relationship between the interest rate and the quantity of money supplied.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 12

When a binding price floor is imposed on a market to benefit sellers,
 a. no sellers actually benefit.
 b. some sellers benefit, but no sellers are harmed.
 c. some sellers benefit, and some sellers are harmed.
  d. all sellers benefit.