Question 1

One surprising thing about the U.S.money stock is that

Accepted Answer

A)   banks hold so much currency relative to the public.
B)   the public holds so much currency relative to banks.
C)   there is so little currency per person.
D)   there is so much currency per person.E) All of the above
F) A) and D)

Question 2

When the Fed buys government bonds,

Accepted Answer

A)   the money supply increases and the federal funds rate increases.
B)   the money supply increases and the federal funds rate decreases.
C)   the money supply decreases and the federal funds rate increases.
D)   the money supply decreases and the federal funds rate decreases.E) C) and D)
F) A) and B)

Question 3

Table 21-2.An economy starts with $10,000 in currency.All of this currency is deposited into a single bank,and the bank then makes loans totaling $9,250.The T-account of the bank is shown below.
 
-Refer to Table 21-2.The bank's reserve ratio is

Accepted Answer

A)   7.50 percent.
B)   8.12 percent.
C)   92.50 percent.
D)   100 percent.E) A) and B)
F) A) and C)

Question 4

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) B) and D)
F) A) and B)

Question 5

If the Fed raised the reserve requirement,the demand for reserves would

Accepted Answer

A)   increase,so the federal funds rate would fall.
B)   increase,so the federal funds rate would rise.
C)   decrease,so the federal funds rate would fall.
D)   decrease,so the federal funds rate would rise.E) B) and C)
F) A) and D)

Question 6

Which of the following is included in both M1 and M2?

Accepted Answer

A)   currency
B)   demand deposits
C)   other checkable deposits
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 7

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 8

If people decide to hold more currency relative to deposits,the money supply

Accepted Answer

A)   falls.The Fed could lessen the impact of this by buying Treasury bonds.
B)   falls.The Fed could lessen the impact of this by selling Treasury bonds.
C)   rises.The Fed could lessen the impact of this by buying Treasury bonds.
D)   rises.The Fed could lessen the impact of the by selling Treasury bonds.E) C) and D)
F) A) and D)

Question 9

Which of the following is not correct?

Accepted Answer

A)   The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system.
B)   The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee.
C)   U.S.monetary policy is made by the Federal Open Market Committee.
D)   The Federal Open Market Committee meets every 12 weeks.E) B) and C)
F) A) and D)

Question 10

A double coincidence of wants

Accepted Answer

A)   is required when there is no item in an economy that is widely accepted in exchange for goods and services.
B)   is required in an economy that relies on barter.
C)   is a hindrance to the allocation of resources when it is required for trade.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 11

Which of the following is not correct?

Accepted Answer

A)   The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee.
B)   The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run.
C)   The Fed's primary monetary policy tool is open-market operations.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 12

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

Question 13

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) A) and C)
F) C) and D)

Question 14

When conducting an open-market sale,the Fed

Accepted Answer

A)   buys government bonds,and in so doing increases the money supply.
B)   buys government bonds,and in so doing decreases the money supply.
C)   sells government bonds,and in so doing increases the money supply.
D)   sells government bonds,and in so doing decreases the money supply.E) A) and B)
F) None of the above

Question 15

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 16

John and Jane decide to go on a vacation.As a result,they withdraw $2,500 from their savings account.As a result of this transfer by itself

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

Question 17

The Federal Reserve

Accepted Answer

A)   is responsible for conducting the nation's monetary policy,and it plays a role in regulating banks.
B)   is responsible for conducing the nation's monetary policy,but it plays no role in regulating banks.
C)   is not responsible for conducting the nation's monetary policy,and it plays a role in regulating banks.
D)   is not responsible for conducing the nation's monetary policy,and it plays no role in regulating banks.E) B) and D)
F) A) and C)

Question 18

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000,it could

Accepted Answer

A)   buy $300,000 worth of bonds.
B)   buy $450,000 worth of bonds.
C)   sell $300,000 worth of bonds.
D)   sell $450,000 worth of bonds.E) All of the above
F) A) and D)

Question 19

Which of the following is included in M2 but not in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   All of the above are included in both M1 and M2.E) B) and D)
F) B) and C)

Question 20

According to economists,"money" means the same thing as "wealth".

Accepted Answer

A) True 
 B)False

Exam 21: The Monetary System

John and Jane decide to go on a vacation.As a result,they withdraw $2,500 from their savings account.As a result of this transfer by itself

Correct AnswerverifiedShow Answer

Which list ranks assets from most to least liquid?

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Bottles of very fine wine are less liquid than demand deposits.

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If people decide to hold more currency relative to deposits,the money supply

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Which of the following is not correct?

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Table 21-2.An economy starts with $10,000 in currency.All of this currency is deposited into a single bank,and the bank then makes loans totaling $9,250.The T-account of the bank is shown below. -Refer to Table 21-2.The bank's reserve ratio is

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Which of the following is included in M2 but not in M1?

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The Federal Reserve

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A double coincidence of wants

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When conducting an open-market sale,the Fed

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In a fractional-reserve banking system,a bank

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If the Fed raised the reserve requirement,the demand for reserves would

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When the Fed buys government bonds,

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One surprising thing about the U.S.money stock is that

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If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000,it could

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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

Which of the following is not correct?

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Which of the following is included in both M1 and M2?

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

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According to economists,"money" means the same thing as "wealth".

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

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Correct Answer
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