Question 1

When a bank loans out $1,000, the money supply

Accepted Answer

A)   does not change.
B)   decreases.
C)   increases.
D)   may do any of the above.E) C) and D)
F) B) and D)

Question 2

The Fed's primary tool to change the money supply is

Accepted Answer

A)   changing the interest rate on reserves.
B)   changing the reserve requirement.
C)   conducting open market operations.
D)   redeeming Federal Reserve notes.E) B) and C)
F) A) and B)

Question 3

The ease with which an asset can be

Accepted Answer

A)   traded for another asset determines whether or not that asset is a unit of account.
B)   transported from one place to another determines whether or not that asset could serve as fiat money.
C)   converted into a store of value determines the liquidity of that asset.
D)   converted into the economy's medium of exchange determines the liquidity of that asset.E) A) and B)
F) A) and C)

Question 4

Consider the following traders who meet.  Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)   Bill with Mike
B)   Time with Amy
C)   Bill with Mike, and Tim with Amy
D)   Bill with Tim, and Mike with AmyE) C) and D)
F) A) and B)

Question 5

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Accepted Answer

A)   store of value
B)   medium of exchange
C)   unit of account
D)   None of the above is correct.E) None of the above
F) All of the above

Question 6

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 7

When conducting an open-market purchase, the Fed

Accepted Answer

A)   buys government bonds, and in so doing increases the money supply.
B)   buys government bonds, and in so doing decreases the money supply.
C)   sells government bonds, and in so doing increases the money supply.
D)   sells government bonds, and in so doing decreases the money supply.E) C) and D)
F) B) and D)

Question 8

First National Bank FNB)  has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Accepted Answer

A)   then it has required reserves of $210 and holds excess reserves of $10.
B)   then it has required reserves of $10 and holds excess reserves of $20.
C)   then it has required reserves of $110 and holds excess reserves of $190.
D)   then it has required reserves of $110 and holds excess reserves of $0.E) A) and B)
F) A) and C)

Question 9

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Accepted Answer

1. The president appoints the Board of G...

Question 10

Monetary policy affects employment

Accepted Answer

A)   only in the long run.
B)   only in the short run.
C)   in both the long run and the short run.
D)   in neither the long run nor the short run.E) A) and B)
F) B) and C)

Question 11

Table 29-8
 
-Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

Accepted Answer

A)   This banks reserve ratio is 12 percent. Its excess reserves are $0.
B)   This banks reserve ratio is 13.3 percent. Its excess reserves are $120.
C)   This banks reserve ratio is 15 percent. Its excess reserves are $240.
D)   This banks reserve ratio is 10 percent. Its excess reserves are $300.E) All of the above
F) B) and C)

Question 12

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 13

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)   deposits of its customers and loans to its customers
B)   deposits of its customers but not loans to its customers
C)   loans to its customers but not the deposits of its customers
D)   neither the deposits of its customers nor the loans to its customersE) None of the above
F) A) and C)

Question 15

When the Fed makes open-market sales bank

Accepted Answer

A)   withdrawals and lending increase.
B)   withdrawals increase and lending decreases.
C)   deposits and lending increase.
D)   deposits increase and lending decreases.E) All of the above
F) A) and B)

Question 16

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 which...

Question 17

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha...

Question 18

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 19

Table 29-5.
 
-Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

Accepted Answer

A)   has $10,000 of excess reserves.
B)   needs $10,000 more reserves to meet its reserve requirements.
C)   needs $20,000 more reserves to meet its reserve requirements.
D)   just meets its reserve requirement.E) B) and C)
F) A) and C)

Question 20

If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

Accepted Answer

A)   it must increase its required reserves by more than $150.
B)   its total reserves initially increase by $120.
C)   it will be able to make new loans up to a maximum of $880.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Exam 21: The Monetary System

When the Fed makes open-market sales bank

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Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

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Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 20 percent, then it

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

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When a bank loans out $1,000, the money supply

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Which of the following is an asset of a bank and a liability for its customers?

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When conducting an open-market purchase, the Fed

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One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

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Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

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If the reserve requirement is 12 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $1,000,

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The Fed's primary tool to change the money supply is

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First National Bank FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

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?

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Bottles of very fine wine are less liquid than demand deposits.

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Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Correct Answerverified1. The president appoints the Board of G...View AnswerShow Answer

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

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The ease with which an asset can be

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Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

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Monetary policy affects employment

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Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow Answer

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1. The president appoints the Board of G...
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When the reserve requirement is less tha...
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