Question 1

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re...

Question 2

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o...

Question 4

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 5

​In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Accepted Answer

A) True 
 B)False

Question 6

Joshua and Ryzard buy the same pair of flip flops, but each in the wrong size. Joshua proposes a size swap with Ryzard. This is an example of

Accepted Answer

A)  barter, since the flip flops in the correct size represent a medium of exchange.
B)  barter, since the flip flops in the correct size have intrinsic value to both Joshua and Ryzard.
C)  money, since the flip flops in the correct size do not have any intrinsic value.
D)  money, since the flip flops in the correct size represent a medium of exchange.E) A) and B)
F) A) and C)

Question 7

Why is the president of the New York Fed always a voting member of the FOMC?

Accepted Answer

New York is the financial capitol of the...

Question 8

Which of the following both decrease the money supply?

Accepted Answer

A)  A decrease in the discount rate and a decrease 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)  An increase in the discount rate and an increase in the interest rate on reservesE) All of the above
F) A) and B)

Question 9

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 10

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 13

The existence of money leads to

Accepted Answer

A)  greater specialization in production, but not to a higher standard of living.
B)  a higher standard of living, but not to greater specialization.
C)  greater specialization and to a higher standard of living.
D)  neither greater specialization nor to a higher standard of living.E) B) and C)
F) A) and B)

Question 14

The banking system currently has $10 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 raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)  It falls by $12 billion.
B)  It falls by $19 billion.
C)  It falls by $21 billion.
D)  It rises by $19 billion.E) A) and D)
F) All of the above

Question 15

In the special case of the 100-percent-reserve banking, the money multiplier is

Accepted Answer

A)  1 and banks create money.
B)  1 and banks do not create money.
C)  2 and banks create money
D)  2 and banks do not create money.E) A) and B)
F) A) and D)

Question 16

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Accepted Answer

The answer of What is the change in the money...

Question 17

When the Fed decreases the discount rate, banks will

Accepted Answer

A)  borrow more from the Fed and lend more to the public.The money supply increases.
B)  borrow more from the Fed and lend less to the public.The money supply decreases.
C)  borrow less from the Fed and lend more to the public.The money supply increases.
D)  borrow less from the Fed and lend less to the public.The money supply decreases.E) A) and C)
F) A) and B)

Question 18

Which of the following is included in M2?

Accepted Answer

A)  Credit cards
B)  Money market mutual funds
C)  Corporate bonds
D)  Large time depositsE) B) and C)
F) A) and D)

Question 19

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 20

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

Which of the following is included in M2?

Correct Answer
verified

Correct Answer
verified

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

Correct Answer
verified

Why is the president of the New York Fed always a voting member of the FOMC?

Correct Answer
verified
New York is the financial capitol of the...
View Answer

What makes the New York Federal Reserve regional bank so important?

Correct Answer
verified
The president of the New York Federal Re...
View Answer

When the Fed decreases the discount rate, banks will

Correct Answer
verified

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct Answer
verified

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct Answer
verified

In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Correct Answer
verified

In the special case of the 100-percent-reserve banking, the money multiplier is

Correct Answer
verified

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Correct Answer
verified

Joshua and Ryzard buy the same pair of flip flops, but each in the wrong size. Joshua proposes a size swap with Ryzard. This is an example of

Correct Answer
verified

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Correct Answer
verified

M1 includes savings deposits.

Correct Answer
verified

The existence of money leads to

Correct Answer
verified

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

Correct Answer
verified

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct Answer
verified
The money multiplier is the reciprocal o...
View Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct Answer
verified

Which of the following both decrease the money supply?

Correct Answer
verified

As banks create money, they create wealth.

Correct Answer
verified

Exam 29: The Monetary System

Which of the following is included in M2?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

Correct AnswerverifiedShow Answer

Why is the president of the New York Fed always a voting member of the FOMC?

Correct AnswerverifiedNew York is the financial capitol of the...View AnswerShow Answer

What makes the New York Federal Reserve regional bank so important?

Correct AnswerverifiedThe president of the New York Federal Re...View AnswerShow Answer

When the Fed decreases the discount rate, banks will

Correct AnswerverifiedShow Answer

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Correct AnswerverifiedShow Answer

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Correct AnswerverifiedShow Answer

​In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Correct AnswerverifiedShow Answer

In the special case of the 100-percent-reserve banking, the money multiplier is

Correct AnswerverifiedShow Answer

What is the change in the money supply when the Fed purchases $700 worth of bonds and the required reserve ratio is 14 percent assuming banks hold no excess reserves?

Correct AnswerverifiedShow Answer

Joshua and Ryzard buy the same pair of flip flops, but each in the wrong size. Joshua proposes a size swap with Ryzard. This is an example of

Correct AnswerverifiedShow Answer

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Correct AnswerverifiedShow Answer

M1 includes savings deposits.

Correct AnswerverifiedShow Answer

The existence of money leads to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct AnswerverifiedThe money multiplier is the reciprocal o...View AnswerShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Correct AnswerverifiedShow Answer

Which of the following both decrease the money supply?

Correct AnswerverifiedShow Answer

As banks create money, they create wealth.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
New York is the financial capitol of the...
View Answer

Correct Answer
verified
The president of the New York Federal Re...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In a system of 100-percent-reserve banking, changes in the money supply depend on the decisions of the Fed as well as the behavior of depositors and bankers.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
The money multiplier is the reciprocal o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified