Question 1

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 sell Treasury bonds.
B)  money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
C)  money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
D)  money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.E) All of the above
F) A) and B)

Question 2

The existence of money

Accepted Answer

A)  reduces specialization.
B)  makes trade easier.
C)  allows for barter.
D)  hinders production.E) A) and B)
F) C) and D)

Question 3

Currently, U.S. currency is

Accepted Answer

A)  fiat money with intrinsic value.
B)  fiat money with no intrinsic value.
C)  commodity money with intrinsic value.
D)  commodity money with no intrinsic value.E) A) and B)
F) None of the above

Question 4

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following individuals serve a four-year term?

Accepted Answer

A)  the members of the Board of Governors
B)  the Chair of the Board of Governors
C)  the members of the FOMC
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 6

If the federal funds rate were below 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 increase the money supply.
B)  buying bonds. This buying would reduce the money supply.
C)  selling bonds. This selling would increase the money supply.
D)  selling bonds. This selling would reduce the money supply.E) B) and D)
F) C) and D)

Question 7

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Accepted Answer

A)  The U.S. operates under the gold standard.
B)  U.S. paper money is commodity money.
C)  U.S. paper money is fiat money.
D)  U.S. paper money is a convenient store of wealth.E) None of the above
F) B) and C)

Question 8

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. 
-Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

Accepted Answer

A)  9.33.
B)  1.09.
C)  10.76.
D)  11.76.E) A) and B)
F) All of the above

Question 9

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)  it increases by $100,000
B)  it increases by $150,000
C)  it decreases by $100,000
D)  it decreases by $200,000E) C) and D)
F) None of the above

Question 10

Treasury Bonds are

Accepted Answer

A)  both a store of value and a medium of exchange.
B)  a store of value, but not a medium of exchange
C)  a medium of exchange, but not a store of value.
D)  neither a store of value nor a medium of exchange.E) All of the above
F) A) and B)

Question 11

Which of the following is not a tool of monetary policy?

Accepted Answer

A)  open market operations
B)  reserve requirements
C)  changing the discount rate
D)  increasing the government budget deficitE) All of the above
F) A) and B)

Question 12

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

Question 13

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $80 in reserves and $9,920 in loans.
B)  It has $800 in reserves and $9,200 in loans.
C)  It has $1,250 in reserves and $8,750 in loans.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 14

An important function of the U.S. Federal Reserve is to

Accepted Answer

A)  set the debt ceiling.
B)  fund Congressional spending.
C)  control the supply of money.
D)  mint coins.E) A) and B)
F) A) and C)

Question 15

List two examples of commodity money.

Accepted Answer

Commodity money refers to mone...

Question 16

The tool most often used by the Fed to control the money supply is

Accepted Answer

A)  changing reserve requirements.
B)  open market operations.
C)  buying and selling of equities.
D)  altering the discount rate.E) All of the above
F) A) and B)

Question 17

If the reserve ratio is 8 percent, then the money multiplier is

Accepted Answer

A)  12.5.
B)  11.5.
C)  13.5.
D)  8.E) C) and D)
F) A) and B)

Question 18

The money multiplier is higher when bankers are more cautious and hold excess reserves.

Accepted Answer

A) True 
 B)False

Question 19

Which list ranks assets from most to least liquid?

Accepted Answer

A)  currency, fine art, stocks
B)  currency, stocks, fine art
C)  fine art, currency, stocks
D)  fine art, stocks, currencyE) A) and B)
F) A) and C)

Question 20

Which of the following entities actually executes open-market operations?

Accepted Answer

A)  the Board of Governors
B)  the New York Federal Reserve Bank
C)  the Federal Open Market Committee
D)  the Open Market Committees of the regional Federal Reserve BanksE) B) and D)
F) B) and C)

Exam 29: The Monetary System

Which of the following entities actually executes open-market operations?

Correct Answer
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Correct Answer
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A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
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Treasury Bonds are

Correct Answer
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All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Correct Answer
verified

To decrease the money supply, the Fed can

Correct Answer
verified

The money multiplier is higher when bankers are more cautious and hold excess reserves.

Correct Answer
verified

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

Correct Answer
verified

The existence of money

Correct Answer
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Which of the following individuals serve a four-year term?

Correct Answer
verified

Currently, U.S. currency is

Correct Answer
verified

The tool most often used by the Fed to control the money supply is

Correct Answer
verified

Which list ranks assets from most to least liquid?

Correct Answer
verified

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Correct Answer
verified

Which of the following is not a tool of monetary policy?

Correct Answer
verified

As banks create money, they create wealth.

Correct Answer
verified

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

Correct Answer
verified

An important function of the U.S. Federal Reserve is to

Correct Answer
verified

List two examples of commodity money.

Correct Answer
verified
Commodity money refers to mone...
View Answer

If the reserve ratio is 8 percent, then the money multiplier is

Correct Answer
verified

Exam 29: The Monetary System

Which of the following entities actually executes open-market operations?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

Treasury Bonds are

Correct AnswerverifiedShow Answer

All U.S. paper dollars read "This note is legal tender for all debts, public and private." This statement represents which characteristic of US currency?

Correct AnswerverifiedShow Answer

To decrease the money supply, the Fed can

Correct AnswerverifiedShow Answer

The money multiplier is higher when bankers are more cautious and hold excess reserves.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The existence of money

Correct AnswerverifiedShow Answer

Which of the following individuals serve a four-year term?

Correct AnswerverifiedShow Answer

Currently, U.S. currency is

Correct AnswerverifiedShow Answer

The tool most often used by the Fed to control the money supply is

Correct AnswerverifiedShow Answer

Which list ranks assets from most to least liquid?

Correct AnswerverifiedShow Answer

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

Correct AnswerverifiedShow Answer

Which of the following is not a tool of monetary policy?

Correct AnswerverifiedShow Answer

As banks create money, they create wealth.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An important function of the U.S. Federal Reserve is to

Correct AnswerverifiedShow Answer

List two examples of commodity money.

Correct AnswerverifiedCommodity money refers to mone...View AnswerShow Answer

If the reserve ratio is 8 percent, then the money multiplier is

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Commodity money refers to mone...
View Answer

Correct Answer
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