Question 1

Which list ranks assets from most to least liquid?

Accepted Answer

A)  currency, demand deposits, money market mutual funds
B)  currency, money market mutual funds, demand deposits
C)  money market mutual funds, demand deposits, currency
D)  demand deposits, money market mutual funds, currencyE) A) and B)
F) C) and D)

Question 2

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Accepted Answer

A)  being a unit of account.
B)  being a medium of exchange.
C)  serving as a store of value.
D)  having intrinsic value.E) All of the above
F) A) and B)

Question 3

The Federal Reserve Board of Governors

Accepted Answer

A)  rotate each four years.
B)  are appointed by the President and confirmed by the Senate.
C)  are elected by popular vote.
D)  hold lifetime appointments.E) All of the above
F) A) and B)

Question 4

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 5

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A)  falls. The Fed could lessen the impact of this by buying Treasury bonds.
B)  falls. The Fed could lessen the impact of this by selling Treasury bonds.
C)  rises. The Fed could lessen the impact of this by buying Treasury bonds.
D)  rises. The Fed could lessen the impact of the by selling Treasury bonds.E) None of the above
F) C) and D)

Question 6

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Accepted Answer

A)  $600 increase in excess reserves and no increase in required reserves.
B)  $600 increase in required reserves and no increase in excess reserves.
C)  $510 increase in excess reserves and a $90 increase in required reserves.
D)  $90 increase in excess reserves and a $510 increase in required reserves.E) A) and B)
F) B) and C)

Question 7

Monetary policy is made by the ______.

Accepted Answer

Federal Op...

Question 8

Which of the following does the Federal Reserve not do?

Accepted Answer

A)  conduct monetary policy
B)  act as a lender of last resort
C)  convert Federal Reserve Notes into gold
D)  serve as a bank regulatorE) A) and B)
F) All of the above

Question 9

The Federal Reserve

Accepted Answer

A)  was created in 1913.
B)  is the U.S.'s central bank.
C)  has other duties in addition to controlling the money supply.
D)  All of the above are correct.E) None of the above
F) B) and C)

Question 10

Table 29-1. The information in the table pertains to an imaginary economy. 
-Refer to Table 29-1. What is the value of M1 in billions of dollars?

Accepted Answer

A)  $1,915 billion
B)  $1,900 billion
C)  $2,665 billion
D)  $2,825 billionE) B) and C)
F) A) and C)

Question 11

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves. 
-Refer to Table 29-9. Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

Accepted Answer

A)  $190,000
B)  $200,000
C)  $240,000
D)  None of the above are correct.E) B) and C)
F) All of the above

Question 12

Commodity money is

Accepted Answer

A)  backed by gold.
B)  the principal type of money in use today.
C)  money with intrinsic value.
D)  receipts created in international trade that are used as a medium of exchange.E) A) and C)
F) All of the above

Question 13

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A)  $27,000
B)  $27,190
C)  $26,190
D)  $9,000E) A) and B)
F) All of the above

Question 14

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

Accepted Answer

The answer of When banks decide to increase their reserves,...

Question 15

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)  U.S. citizens are holding a lot of foreign currency.
B)  Currency may be a preferable store of wealth for criminals.
C)  People use credit and debit cards more frequently.
D)  All of the above help explain the abundance of currency.E) A) and B)
F) C) and D)

Question 16

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Fed does not control the amou...

Question 17

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.

Accepted Answer

The answer of If you withdraw $500 from your savings...

Question 18

Which of the following is correct concerning the FOMC?

Accepted Answer

A)  the members of the Board of Governors have the majority of the votes
B)  the New York Federal Reserve Bank District President is always a voting member
C)  all Federal Reserve Bank presidents attend the meetings
D)  All of the above are correct.E) A) and B)
F) B) and D)

Question 19

When the Fed buys government bonds,

Accepted Answer

A)  the money supply increases and the federal funds rate increases.
B)  the money supply increases and the federal funds rate decreases.
C)  the money supply decreases and the federal funds rate increases.
D)  the money supply decreases and the federal funds rate decreases.E) All of the above
F) A) and C)

Question 20

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A)  $140 of new money.
B)  $14,000 of new money.
C)  $140,000 of new money.
D)  None of the above is correct.E) A) and D)
F) B) and C)

Exam 29: The Monetary System

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct Answer
verified
First, the Fed does not control the amou...
View Answer

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _ and M2 will change by _.

Correct Answer
verified

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Correct Answer
verified

Monetary policy is made by the ______.

Correct Answer
verified
Federal Op...
View Answer

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

Correct Answer
verified

Which list ranks assets from most to least liquid?

Correct Answer
verified

Commodity money is

Correct Answer
verified

If people decide to hold more currency relative to deposits, the money supply

Correct Answer
verified

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Correct Answer
verified

Which of the following is correct concerning the FOMC?

Correct Answer
verified

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Correct Answer
verified

Which of the following might explain why the United States has so much currency per person?

Correct Answer
verified

Correct Answer
verified

When the Fed buys government bonds,

Correct Answer
verified

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Correct Answer
verified

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Correct Answer
verified

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct Answer
verified

The Federal Reserve

Correct Answer
verified

The Federal Reserve Board of Governors

Correct Answer
verified

Which of the following does the Federal Reserve not do?

Correct Answer
verified

Exam 29: The Monetary System

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct AnswerverifiedFirst, the Fed does not control the amou...View AnswerShow Answer

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.

Correct AnswerverifiedShow Answer

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Correct AnswerverifiedShow Answer

Monetary policy is made by the ______.

Correct AnswerverifiedFederal Op...View AnswerShow Answer

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

Correct AnswerverifiedShow Answer

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

Commodity money is

Correct AnswerverifiedShow Answer

If people decide to hold more currency relative to deposits, the money supply

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the FOMC?

Correct AnswerverifiedShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Correct AnswerverifiedShow Answer

Which of the following might explain why the United States has so much currency per person?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Fed buys government bonds,

Correct AnswerverifiedShow Answer

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Correct AnswerverifiedShow Answer

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Correct AnswerverifiedShow Answer

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Correct AnswerverifiedShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

The Federal Reserve Board of Governors

Correct AnswerverifiedShow Answer

Which of the following does the Federal Reserve not do?

Correct AnswerverifiedShow Answer

Correct Answer
verified
First, the Fed does not control the amou...
View Answer

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _ and M2 will change by _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Federal Op...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified