The imposition of a binding price ceiling 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 2Which of the following is included in M2 but is not included in M1?
a. Eurodollar deposits
b. savings accounts
c. traveler's checks
d. checkable deposits
Question 3Sterilization occurs when a central bank offsets the effects of expansionary monetary policy through foreign exchange market intervention.
a. True
b. False
Indicate whether the statement is true or false
Question 4A shortage results when a
a. nonbinding price ceiling is imposed on a market.
b. nonbinding price ceiling is removed from a market.
c. binding price ceiling is imposed on a market.
d. binding price ceiling is removed from a market.
Question 5A decrease in currency in circulation combined with an equal increase in savings account deposits would:
a. increase both M1 and M2.
b. increase M1 but have no effect on M2.
c. decrease both M1 and M2.
d. decrease M1 but have no effect on M2.
Question 6The sale of U.S. currency and purchase of foreign currency by the Federal Reserve would shift the demand curve for U.S. dollars to the left.
a. True
b. False
Indicate whether the statement is true or false
Question 7To say that a price ceiling is nonbinding is to say that the price ceiling
a. results in a surplus.
b. is set above the equilibrium price.
c. causes quantity demanded to exceed quantity supplied.
d. All of the above are correct.
Question 8A gold standard is:
a. a measurement of the importance of a good; it indicates high quality.
b. the basis for monetary exchange internationally.
c. an internationally recognized means for defining currency exchange rates.
d. a system where currency (e.g., the dollar) was defined as equivalent in value to a certain amount of gold.
Question 9If a depreciation of the British pound is to be prevented, the U.S. Federal Reserve has to buy British pounds and sell U.S. dollars.
a. True
b. False
Indicate whether the statement is true or false
Question 10To say that a price ceiling is binding is to say that the price ceiling
a. results in a surplus.
b. is set above the equilibrium price.
c. causes quantity demanded to exceed quantity supplied.
d. All of the above are correct.
Question 11Which of the following observations is true of nontransaction deposits?
a. depositor can use them directly as a means of payment
b. they do not pay any interest
c. depositor cannot directly write checks against them
d. they generally pay lower interest rates than transaction deposits