Question 1

The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 million dollars in loans. The Fed then raises the reserve requirement from 5 percent to 10 percent. Assuming everything else stays the same, how much is the bank holding in excess reserves after the increase in the reserve requirement?

Accepted Answer

A)  $0
B)  $20 million
C)  $40 million
D)  $60 millionE) None of the above
F) B) and D)

Question 2

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Accepted Answer

A)  members of the Board of Governors and regional Federal Reserve Bank Presidents.
B)  members of the Board of Governors but not the regional Federal Reserve Bank Presidents.
C)  the regional Federal Reserve Bank Presidents, but not members of the Board of Governors.
D)  neither members of the Board of Governors nor regional Federal Reserve Bank Presidents.E) A) and B)
F) A) and C)

Question 4

Money

Accepted Answer

A)  is more efficient than barter.
B)  makes trades easier.
C)  allows greater specialization.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 5

Savings deposits are included in

Accepted Answer

A)  M1 but not M2.
B)  M2 but not M1.
C)  M1 and M2.
D)  neither M1 nor M2.E) A) and B)
F) A) and C)

Question 6

If the Fed raised the reserve requirement, the demand for reserves would

Accepted Answer

A)  increase, so the federal funds rate would fall.
B)  increase, so the federal funds rate would rise.
C)  decrease, so the federal funds rate would fall.
D)  decrease, so the federal funds rate would rise.E) B) and D)
F) A) and B)

Question 7

Table 29-4.
The First Bank of Fairfield 
-Refer to Table 29-4. The reserve ratio for this bank is

Accepted Answer

A)  8 percent.
B)  12.5 percent.
C)  87.5 percent.
D)  25 percent.E) None of the above
F) All of the above

Question 8

Dollar bills, rare paintings, and emerald necklaces are all

Accepted Answer

A)  media of exchange.
B)  units of account.
C)  stores of value.
D)  All of the above are correct.E) A) and B)
F) A) and D)

Question 9

When the Fed conducts open-market purchases,

Accepted Answer

A)  it buys Treasury securities, which increases the money supply.
B)  it buys Treasury securities, which decreases the money supply.
C)  it borrows money from member banks, which increases the money supply.
D)  it lends money to member banks, which decreases the money supply.E) None of the above
F) All of the above

Question 10

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A)  $114.
B)  $2,166.
C)  $2,400.
D)  $45,600.E) A) and B)
F) A) and C)

Question 11

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 12

If a bank has a reserve ratio of 8 percent, then

Accepted Answer

A)  government regulation requires the bank to use at least 8 percent of its deposits to make loans.
B)  the bank's ratio of loans to deposits is 8 percent.
C)  the bank keeps 8 percent of its deposits as reserves and loans out the rest.
D)  the bank keeps 8 percent of its assets as reserves and loans out the rest.E) C) and D)
F) A) and B)

Question 13

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds to increase banks reserves.
B)  purchased bonds to decrease banks reserves.
C)  sold bonds to increase banks reserves.
D)  sold bonds to decrease banks reserves.E) B) and C)
F) All of the above

Question 14

The _____ is the interest rate at which banks make overnight loans to other banks.

Accepted Answer

The answer of The _____ is the interest rate at...

Question 15

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi...

Question 16

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds.
B)  would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.
C)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds.
D)  would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.E) A) and B)
F) A) and C)

Question 17

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Accepted Answer

A)  $50.
B)  $500.
C)  $4,500.
D)  $4,950.E) A) and C)
F) A) and B)

Question 18

Given the following information, what are the values of M1 and M2?

Accepted Answer

A)  M1 = $4,310 billion, M2 = $6,285 billion.
B)  M1 = $2,050 billion, M2 = $9,985 billion.
C)  M1 = $2,110 billion, M2 = $8,485 billion.
D)  M1 = $3,610 billion, M2 = $9,985 billion.E) C) and D)
F) B) and D)

Question 19

The existence of money leads to

Accepted Answer

A)  greater specialization in production, but not to a higher standard of living.
B)  a higher standard of living, but not to greater specialization.
C)  greater specialization and to a higher standard of living.
D)  neither greater specialization nor to a higher standard of living.E) A) and B)
F) A) and C)

Question 20

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A)  requires a double coincidence of wants.
B)  leads to less specialization.
C)  makes trades less costly.
D)  None of the above is correct.E) A) and B)
F) All of the above

Exam 29: The Monetary System

Correct Answer
verified

Table 29-4. The First Bank of Fairfield -Refer to Table 29-4. The reserve ratio for this bank is

Correct Answer
verified

Given the following information, what are the values of M1 and M2?

Correct Answer
verified

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct Answer
verified

If a bank has a reserve ratio of 8 percent, then

Correct Answer
verified

When the Fed conducts open-market purchases,

Correct Answer
verified

If the Fed raised the reserve requirement, the demand for reserves would

Correct Answer
verified

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct Answer
verified

Money

Correct Answer
verified

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct Answer
verified

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Correct Answer
verified

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Correct Answer
verified

As opposed to a payments system based on barter, a payments system based on money

Correct Answer
verified

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct Answer
verified
Bank failures cause people to lose confi...
View Answer

A decrease in the money supply might indicate that the Fed had

Correct Answer
verified

Correct Answer
verified

Dollar bills, rare paintings, and emerald necklaces are all

Correct Answer
verified

The existence of money leads to

Correct Answer
verified

Savings deposits are included in

Correct Answer
verified

The _____ is the interest rate at which banks make overnight loans to other banks.

Correct Answer
verified

Exam 29: The Monetary System

Correct AnswerverifiedShow Answer

Table 29-4. The First Bank of Fairfield -Refer to Table 29-4. The reserve ratio for this bank is

Correct AnswerverifiedShow Answer

Given the following information, what are the values of M1 and M2?

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Correct AnswerverifiedShow Answer

If a bank has a reserve ratio of 8 percent, then

Correct AnswerverifiedShow Answer

When the Fed conducts open-market purchases,

Correct AnswerverifiedShow Answer

If the Fed raised the reserve requirement, the demand for reserves would

Correct AnswerverifiedShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

Money

Correct AnswerverifiedShow Answer

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct AnswerverifiedShow Answer

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Correct AnswerverifiedShow Answer

As opposed to a payments system based on barter, a payments system based on money

Correct AnswerverifiedShow Answer

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct AnswerverifiedBank failures cause people to lose confi...View AnswerShow Answer

A decrease in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Dollar bills, rare paintings, and emerald necklaces are all

Correct AnswerverifiedShow Answer

The existence of money leads to

Correct AnswerverifiedShow Answer

Savings deposits are included in

Correct AnswerverifiedShow Answer

The _____ is the interest rate at which banks make overnight loans to other banks.

Correct AnswerverifiedShow 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
Bank failures cause people to lose confi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified