Question 1

In an economy that relies on barter,trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 2

In a fractional-reserve banking system,a bank

Accepted Answer

A)   does not make loans.
B)   does not accept deposits.
C)   keeps only a fraction of its deposits in reserve.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 3

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)   the prime rate.
B)   the federal funds rate.
C)   the discount rate.
D)   the LIBOR.E) None of the above
F) B) and C)

Question 4

At one time,people in a certain country had no access to banks;they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Accepted Answer

A)   increased.The central bank could have reduced the size of this increase by buying bonds.
B)   increased.The central bank could have reduced the size of this increase by selling bonds.
C)   decreased.The central bank could have reduced the size of this decrease by buying bonds.
D)   decreased.The central bank could have reduced the size of this decrease by selling bonds.E) C) and D)
F) All of the above

Question 5

If the public decides to hold more currency and fewer deposits in banks,bank reserves

Accepted Answer

A)   decrease and the money supply eventually decreases.
B)   decrease but the money supply does not change.
C)   increase and the money supply eventually increases.
D)   increase but the money supply does not change.E) None of the above
F) A) and B)

Question 6

Describe the role of Federal Deposit Insurance Corporation (FDIC).

Accepted Answer

The FDIC is the primary mechanism by whi...

Question 7

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 8

The existence of money makes trade easier.How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy...

Question 9

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Accepted Answer

A)   FOMC
B)   the Board of Governors
C)   the New York Fed
D)   the regional Federal Reserve BanksE) All of the above
F) B) and C)

Question 10

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 11

In a fractional-reserve banking system,a decrease in reserve requirements

Accepted Answer

A)   increases both the money multiplier and the money supply.
B)   decreases both the money multiplier and the money supply.
C)   increases the money multiplier,but decreases the money supply.
D)   decreases the money multiplier,but increases the money supply.E) A) and B)
F) B) and D)

Question 12

If the discount rate is lowered,banks borrow

Accepted Answer

A)   less from the Fed so reserves increase.
B)   less from the Fed so reserves decrease.
C)   more from the Fed so reserves increase.
D)   more from the Fed so reserves decrease.E) All of the above
F) None of the above

Question 13

Table 16-6.
 
-Refer to Table 16-6.Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent.From then on,no bank holds any excess reserves.Assume also that people hold only deposits and no currency.Then by what amount does the economy's money supply increase?

Accepted Answer

A)   $50,200
B)   $60,000
C)   $72,000
D)   $106,000E) B) and C)
F) All of the above

Question 14

To decrease the money supply,the Fed can

Accepted Answer

A)   buy government bonds or increase the discount rate.
B)   buy government bonds or decrease the discount rate.
C)   sell government bonds or increase the discount rate.
D)   sell government bonds or decrease the discount rate.E) All of the above
F) A) and C)

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) B) and D)

Question 16

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are...

Question 17

If the federal funds rate were above the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds.This buying would reduce reserves.
B)   buying bonds.This buying would increase reserves.
C)   selling bonds.This selling would reduce reserves.
D)   selling bonds.This selling would increase reserves.E) None of the above
F) A) and D)

Question 18

All Fed purchases and sales of

Accepted Answer

A)   corporate stocks and bonds are conducted at the New York Fed's trading desk.
B)   government bonds are conducted at the New York Fed's trading desk.
C)   real estate and other real assets are conducted by the Federal Open Market Committee.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 19

The federal funds rate is the interest rate

Accepted Answer

A)   the Federal Reserves charges for loans it makes to the federal government.
B)   the Federal Reserve charges banks for short-term loans.
C)   banks charge each other for short-term loans of reserves.
D)   on newly issued one-year Treasury bonds.E) A) and B)
F) B) and C)

Question 20

Reserves decrease if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.E) A) and B)
F) B) and C)

Exam 29: The Monetary System

In a fractional-reserve banking system,a decrease in reserve requirements

Correct Answer
verified

If the public decides to hold more currency and fewer deposits in banks,bank reserves

Correct Answer
verified

The interest rate the Fed charges on loans it makes to banks is called

Correct Answer
verified

To decrease the money supply,the Fed can

Correct Answer
verified

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

Correct Answer
verified

The existence of money makes trade easier.How is it that money can also increase the standard of living?

Correct Answer
verified
The existence of money means the economy...
View Answer

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Correct Answer
verified

At one time,people in a certain country had no access to banks;they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Correct Answer
verified

In an economy that relies on barter,trade requires a double-coincidence of wants.

Correct Answer
verified

If the discount rate is lowered,banks borrow

Correct Answer
verified

Correct Answer
verified

All Fed purchases and sales of

Correct Answer
verified

The federal funds rate is the interest rate

Correct Answer
verified

Describe the role of Federal Deposit Insurance Corporation (FDIC).

Correct Answer
verified
The FDIC is the primary mechanism by whi...
View Answer

If the federal funds rate were above the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Correct Answer
verified

Reserves decrease if the Federal Reserve

Correct Answer
verified

In a fractional-reserve banking system,a bank

Correct Answer
verified

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Correct Answer
verified

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct Answer
verified
Neither credit cards nor debit cards are...
View Answer

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Correct Answer
verified

Exam 29: The Monetary System

In a fractional-reserve banking system,a decrease in reserve requirements

Correct AnswerverifiedShow Answer

If the public decides to hold more currency and fewer deposits in banks,bank reserves

Correct AnswerverifiedShow Answer

The interest rate the Fed charges on loans it makes to banks is called

Correct AnswerverifiedShow Answer

To decrease the money supply,the Fed can

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The existence of money makes trade easier.How is it that money can also increase the standard of living?

Correct AnswerverifiedThe existence of money means the economy...View AnswerShow Answer

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Correct AnswerverifiedShow Answer

At one time,people in a certain country had no access to banks;they relied exclusively on currency.Then,a fractional-reserve banking system was created.As a result,the money supply

Correct AnswerverifiedShow Answer

In an economy that relies on barter,trade requires a double-coincidence of wants.

Correct AnswerverifiedShow Answer

If the discount rate is lowered,banks borrow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All Fed purchases and sales of

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate

Correct AnswerverifiedShow Answer

Describe the role of Federal Deposit Insurance Corporation (FDIC).

Correct AnswerverifiedThe FDIC is the primary mechanism by whi...View AnswerShow Answer

If the federal funds rate were above the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Reserves decrease if the Federal Reserve

Correct AnswerverifiedShow Answer

In a fractional-reserve banking system,a bank

Correct AnswerverifiedShow Answer

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Correct AnswerverifiedShow Answer

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Correct AnswerverifiedNeither credit cards nor debit cards are...View AnswerShow Answer

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The existence of money means the economy...
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
The FDIC is the primary mechanism by whi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Neither credit cards nor debit cards are...
View Answer

Correct Answer
verified