Question 1

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 2

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Accepted Answer

A)  M1 increases by $2,500 and M2 decreases by $2,500.
B)  M1 increases by $2,500 and M2 stays the same.
C)  M1 and M2 stay the same.
D)  M1 decreases by $2,500 and M2 increases by $2,500.E) A) and B)
F) All of the above

Question 3

​The Fed wants to increase the quantity of funds available through the Term Auction Facility. The Fed sets the

Accepted Answer

A)  ​price of the loan, and money supply increases.
B)  ​quantity of borrowing, and money supply increases.
C)  ​price of the loan, and money supply decreases.
D)  ​quantity of borrowing, and money supply decreases.E) A) and B)
F) A) and C)

Question 4

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to...

Question 5

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Accepted Answer

A)  2.5 percent.
B)  5 percent.
C)  9.5 percent.
D)  25 percent.E) A) and C)
F) None of the above

Question 6

The legal tender requirement means that

Accepted Answer

A)  people are more likely to accept the dollar as a medium of exchange.
B)  the government must hold enough gold to redeem all currency.
C)  people may not make trades with anything else.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 7

Suppose banks decide to hold fewer 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) A) and B)
F) B) and C)

Question 8

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Accepted Answer

A)  medium of exchange
B)  unit of account
C)  store of value
D)  liquidityE) B) and C)
F) B) and D)

Question 9

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 10

The banking system currently has $100 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It rises by $200 billion.
B)  It rises by $800 billion.
C)  It rises by $1,200 billion.
D)  None of the above is correct.E) A) and D)
F) None of the above

Question 11

The money supply increases when the Fed

Accepted Answer

A)  lowers the discount rate. The increase will be larger the smaller the reserve ratio is.
B)  lowers the discount rate. The increase will be larger the larger the reserve ratio is.
C)  raises the discount rate. The increase will be larger the smaller the reserve ratio is.
D)  raises the discount rate. The increase will be larger the larger the reserve ratio is.E) B) and C)
F) A) and C)

Question 12

During the Great Depression in the early 1930s,

Accepted Answer

A)  bank runs closed many banks.
B)  the money supply rose sharply.
C)  the Fed decreased reserve requirements.
D)  both a and b are correct.E) B) and C)
F) B) and D)

Question 13

M1 includes

Accepted Answer

A)  small time deposits.
B)  savings deposits.
C)  other checkable deposits.
D)  money market mutual funds.E) All of the above
F) B) and D)

Question 14

If the reserve ratio is 12 percent, then the money multiplier is

Accepted Answer

A)  9.3.
B)  8.3.
C)  7.3.
D)  12.E) B) and C)
F) A) and B)

Question 15

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A)  sell bonds to increase reserves
B)  sell bonds to decrease reserves
C)  buy bonds to increase reserves
D)  buy bonds to decrease reservesE) All of the above
F) A) and B)

Question 16

Credit cards

Accepted Answer

A)  ​are a method of deferring payment, and people who have credit cards hold less money on average.
B)  are a method of deferring payment, and people who have credit cards hold more money on average.
C)  ​are a medium of exchange, and people who have credit cards hold less money on average.
D)  are a medium of exchange, and people who have credit cards hold more money on average.E) B) and D)
F) B) and C)

Question 17

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A)  It has $25 in reserves and $4,975 in loans.
B)  It has $250 in reserves and $4,750 in loans.
C)  It has $1,000 in reserves and $4,000 in loans.
D)  None of the above is correct.E) A) and B)
F) B) and C)

Question 18

The ease with which an asset can be converted into the economy's medium of exchange is known as _____.

Accepted Answer

The answer of The ease with which an asset can...

Question 19

Fiat money

Accepted Answer

A)  is worthless.
B)  has no intrinsic value.
C)  may be used as a medium of exchange, but is not legal tender.
D)  refers to highly liquid assets that do not serve as a medium of exchange.E) B) and D)
F) None of the above

Question 20

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

Accepted Answer

A)  $8.
B)  $80.
C)  $92.
D)  $920.E) B) and C)
F) A) and C)

Exam 29: The Monetary System

During the Great Depression in the early 1930s,

Correct Answer
verified

The money supply increases when the Fed

Correct Answer
verified

M1 includes

Correct Answer
verified

The ease with which an asset can be converted into the economy's medium of exchange is known as _____.

Correct Answer
verified

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct Answer
verified
A "lender of last resort" is a lender to...
View Answer

Credit cards

Correct Answer
verified

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct Answer
verified

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

Correct Answer
verified

If the reserve ratio is 12 percent, then the money multiplier is

Correct Answer
verified

Fiat money

Correct Answer
verified

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Correct Answer
verified

The Fed wants to increase the quantity of funds available through the Term Auction Facility. The Fed sets the

Correct Answer
verified

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Correct Answer
verified

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Correct Answer
verified

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct Answer
verified

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct Answer
verified

The legal tender requirement means that

Correct Answer
verified

Exam 29: The Monetary System

During the Great Depression in the early 1930s,

Correct AnswerverifiedShow Answer

The money supply increases when the Fed

Correct AnswerverifiedShow Answer

M1 includes

Correct AnswerverifiedShow Answer

The ease with which an asset can be converted into the economy's medium of exchange is known as _____.

Correct AnswerverifiedShow Answer

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Correct AnswerverifiedA "lender of last resort" is a lender to...View AnswerShow Answer

Credit cards

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Correct AnswerverifiedShow Answer

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

Correct AnswerverifiedShow Answer

If the reserve ratio is 12 percent, then the money multiplier is

Correct AnswerverifiedShow Answer

Fiat money

Correct AnswerverifiedShow Answer

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Correct AnswerverifiedShow Answer

​The Fed wants to increase the quantity of funds available through the Term Auction Facility. The Fed sets the

Correct AnswerverifiedShow Answer

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Correct AnswerverifiedShow Answer

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Correct AnswerverifiedShow Answer

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

Correct AnswerverifiedShow Answer

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

Correct AnswerverifiedShow Answer

The legal tender requirement means that

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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A "lender of last resort" is a lender to...
View 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
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Correct Answer
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Correct Answer
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Correct Answer
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The Fed wants to increase the quantity of funds available through the Term Auction Facility. The Fed sets the

Correct Answer
verified

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
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