Question 1

At any given time, the voting members of the Federal Open Market Committee include

Accepted Answer

A)  five of the presidents of the regional Federal Reserve banks.
B)  the president of the Federal Reserve Bank of New York.
C)  the seven members of the Board of Governors.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 2

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) None of the above
F) A) and B)

Question 3

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 4

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) B) and D)
F) B) and C)

Question 5

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Accepted Answer

A)  $6,400.
B)  $8,000.
C)  $12,500.
D)  $10,000.E) A) and B)
F) B) and C)

Question 6

Which of the following both increase the money supply?

Accepted Answer

A)  an increase in the discount rate and an increase in the interest rate on reserves
B)  an increase in the discount rate and a decrease in the interest rate on reserves
C)  a decrease in the discount rate and an increase in the interest rate on reserves
D)  a decrease in the discount rate and a decrease in the interest rate on reservesE) A) and D)
F) C) and D)

Question 7

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) A) and B)
F) None of the above

Question 8

The federal funds rate is the

Accepted Answer

A)  percentage of face value that the Federal Reserve is willing to pay for Treasury Securities.
B)  percentage of deposits that banks must hold as reserves.
C)  interest rate at which the Federal Reserve makes short-term loans to banks.
D)  interest rate at which banks lend reserves to each other overnight.E) C) and D)
F) All of the above

Question 9

Table 29-4.
The First Bank of Fairfield 
-Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Accepted Answer

A)  $40.
B)  $437.50.
C)  $71.42.
D)  $428.57.E) A) and B)
F) A) and C)

Question 10

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Accepted Answer

A)  $5,000 billion
B)  $4,937.5 billion
C)  $5,062.5 billion
D)  $4,995 billionE) C) and D)
F) None of the above

Question 11

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)  balances that lie behind debit cards.
B)  demand deposits.
C)  other checkable deposits.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 12

Paper money

Accepted Answer

A)  has a high intrinsic value.
B)  is the primary medium of exchange in a barter economy.
C)  is valuable because it is generally accepted in trade.
D)  is valuable only because of the legal tender requirement.E) B) and C)
F) A) and C)

Question 13

Which of the following best illustrates the unit of account function of money?

Accepted Answer

A)  You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.
B)  You pay for your theater tickets with dollars.
C)  You hold currency even though you don't intend to spend it right away.
D)  None of the above is correct.E) B) and C)
F) C) and D)

Question 14

​Bank runs are only a concern under a fractional-reserve banking system.

Accepted Answer

A) True 
 B)False

Question 15

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o...

Question 16

The Federal Open Market Committee meets approximately

Accepted Answer

A)  every three weeks
B)  every six weeks
C)  every 3 months
D)  every 6 months.E) B) and C)
F) A) and D)

Question 17

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A)  money supply to fall. To reduce the impact of this the Fed could lower the discount rate.
B)  money supply to fall. To reduce the impact of this the Fed could raise the discount rate.
C)  money supply to rise. To reduce the impact of this the Fed could lower the discount rate.
D)  money supply to rise. To reduce the impact of this the Fed could raise the discount rate.E) B) and C)
F) A) and D)

Question 18

When the Fed purchases government bonds the money supply _____ and the federal funds rate _____.

Accepted Answer

increases,...

Question 19

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Accepted Answer

A)  $8,000 of new money.
B)  $16,000 of new money.
C)  $32,000 of new money.
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 20

The money multiplier is _____ when the reserve ratio is 12.5 percent.

Accepted Answer

The answer of The money multiplier is _____ when the...

Exam 29: The Monetary System

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct Answer
verified

The Federal Open Market Committee meets approximately

Correct Answer
verified

When the Fed purchases government bonds the money supply _ and the federal funds rate _.

Correct Answer
verified
increases,...
View Answer

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

Correct Answer
verified

Paper money

Correct Answer
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Bank runs are only a concern under a fractional-reserve banking system.

Correct Answer
verified

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Correct Answer
verified

The money multiplier is _____ when the reserve ratio is 12.5 percent.

Correct Answer
verified

The set of items that serve as media of exchange clearly includes

Correct Answer
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Federal Reserve governors are given long terms to insulate them from politics.

Correct Answer
verified

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Correct Answer
verified

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

Correct Answer
verified

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Correct Answer
verified

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

The federal funds rate is the

Correct Answer
verified

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Correct Answer
verified

Which of the following best illustrates the unit of account function of money?

Correct Answer
verified

Which of the following both increase the money supply?

Correct Answer
verified

At any given time, the voting members of the Federal Open Market Committee include

Correct Answer
verified

Exam 29: The Monetary System

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Correct AnswerverifiedShow Answer

The Federal Open Market Committee meets approximately

Correct AnswerverifiedShow Answer

When the Fed purchases government bonds the money supply _____ and the federal funds rate _____.

Correct Answerverifiedincreases,...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Paper money

Correct AnswerverifiedShow Answer

​Bank runs are only a concern under a fractional-reserve banking system.

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

The money multiplier is _____ when the reserve ratio is 12.5 percent.

Correct AnswerverifiedShow Answer

The set of items that serve as media of exchange clearly includes

Correct AnswerverifiedShow Answer

Federal Reserve governors are given long terms to insulate them from politics.

Correct AnswerverifiedShow Answer

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Correct AnswerverifiedCommodity money has "intrinsic value," o...View AnswerShow Answer

Correct AnswerverifiedShow 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

The federal funds rate is the

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Correct AnswerverifiedShow Answer

Which of the following best illustrates the unit of account function of money?

Correct AnswerverifiedShow Answer

Which of the following both increase the money supply?

Correct AnswerverifiedShow Answer

At any given time, the voting members of the Federal Open Market Committee include

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

When the Fed purchases government bonds the money supply _ and the federal funds rate _.

Correct Answer
verified
increases,...
View Answer

Correct Answer
verified

Correct Answer
verified

Bank runs are only a concern under a fractional-reserve banking system.

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Commodity money has "intrinsic value," o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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