AP Macroeconomics Practice Test: Money, Banking, and Monetary Policy

Test Information

Question 6 questions

Time 7 minutes

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1. Which function of money best defines $1.25 as the price of a 20-ounce bottle of pop?

2. If a bank has $500 in checking deposits and the bank is required to reserve $50, what is the reserve ratio? How much does the bank have in excess reserves?

3. Which is not a way that the Fed can affect the money supply?

4. If the money supply increases, what happens in the money market (assuming money demand is downward sloping)?

5. To move the economy closer to full employment, the central bank decides that the federal funds rate must be increased. The appropriate open market operation is to ______, which ______ the money supply, ______ aggregate demand, and fights ______.

OMO     MONEY SUPPLY     AD     TO FIGHT

6. Which of the following is a predictable advantage of expansionary monetary policy in a recession?