Question 1

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds in an attempt to increase the federal funds rate.
B)   purchased bonds in an attempt to reduce the federal funds rate.
C)   sold bonds in an attempt to increase the federal funds rate.
D)   sold bonds in an attempt to reduce the federal funds rate.E) None of the above
F) B) and C)

Question 2

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A)   Ben Bernanke
B)   Christina Romer
C)   Timothy Geithner
D)   Bernie MadoffE) C) and D)
F) A) and D)

Question 3

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Accepted Answer

A) True 
 B)False

Question 4

The federal funds rate is the interest rate that

Accepted Answer

A)   banks charge one another for loans.
B)   banks charge the Fed for loans.
C)   the Fed charges banks for loans.
D)   the Fed charges Congress for loans.E) None of the above
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi...

Question 7

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) C) and D)

Question 8

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A)   the Fed increased the reserve ratio from 5 percent to 8 percent.
B)   the Fed increased the fed funds rate from 5 percent to 8 percent..
C)   the Fed decreased the reserve ratio from 8 percent to 5 percent.
D)   the Fed decreased the fed funds rate from 8 percent to 5 percent.E) None of the above
F) All of the above

Question 9

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A)   $50
B)   $100
C)   $150
D)   $200E) B) and D)
F) A) and B)

Question 10

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Accepted Answer

The amount of currency per person is nea...

Question 11

If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves

Accepted Answer

A)   increase by $20 million and the money supply eventually increases by $250 million.
B)   decrease by $20 million and the money supply eventually increases by $250 million.
C)   increase by $20 million and the money supply eventually decreases by $250 million.
D)   decrease by $20 million and the money supply eventually decreases by $250 million.E) A) and D)
F) A) and C)

Question 12

The discount rate is

Accepted Answer

A)   the interest rate the Fed charges banks.
B)   one divided by the difference between one and the reserve ratio.
C)   the interest rate banks receive on reserve deposits with the Fed.
D)   the interest rate that banks charge on overnight loans to other banks.E) None of the above
F) A) and C)

Question 13

The federal funds rate is a long-term interest rate banks charge one another for loans.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that in a country the total holdings of banks were as follows:
required reserves = $45 million
excess reserves = $15 million
deposits = $750 million
loans = $600 million
Treasury bonds = $90 million
Show that the balance sheet balances if these are the only assets and liabilities.
Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks don't change their holdings of Treasury bonds? How much does the money supply change by?

Accepted Answer

The only liability is deposits which equ...

Question 15

When we measure and record economic value, we use money as the

Accepted Answer

A)   liquid asset.
B)   medium of exchange.
C)   unit of account.
D)   store of value.E) B) and D)
F) A) and D)

Question 16

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 17

Table 11-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Balance Sheet of Metropolis National Bank. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Accepted Answer

A)   12 percent
B)   10 percent
C)   8 percent
D)   6 percentE) B) and D)
F) None of the above

Question 18

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)   $7,000 of new money.
B)   $8,000 of new money.
C)   $11,500 of new money.
D)   $12,500 of new money.E) B) and C)
F) A) and C)

Question 19

In a system of 100-percent-reserve banking, the purpose of a bank is to

Accepted Answer

A)   make loans to households.
B)   influence the money supply.
C)   give depositors a safe place to keep their money.
D)   buy and sell gold.E) B) and D)
F) B) and C)

Question 20

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

Accepted Answer

A)   falls. The larger the reserve ratio is, the more the money supply falls.
B)   falls. The larger the reserve ratio is, the less the money supply falls.
C)   rises. The larger the reserve ratio is, the more the money supply rises.
D)   rises. The larger the reserve ratio is, the less the money supply rises.E) A) and D)
F) A) and C)

Exam 11: The Monetary System

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct Answer
verified
Bank failures cause people to lose confi...
View Answer

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Correct Answer
verified

If the money multiplier decreased from 20 to 12.5, then

Correct Answer
verified

The discount rate is

Correct Answer
verified

An increase in the money supply might indicate that the Fed had

Correct Answer
verified

If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves

Correct Answer
verified

The federal funds rate is a long-term interest rate banks charge one another for loans.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

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

Correct Answer
verified

In a system of 100-percent-reserve banking, the purpose of a bank is to

Correct Answer
verified

Table 11-7 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Balance Sheet of Metropolis National Bank. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Correct Answer
verified

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

Correct Answer
verified

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Correct Answer
verified

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

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

When we measure and record economic value, we use money as the

Correct Answer
verified

The federal funds rate is the interest rate that

Correct Answer
verified

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply?

Correct Answer
verified

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Correct Answer
verified
The amount of currency per person is nea...
View Answer

Exam 11: The Monetary System

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Correct AnswerverifiedBank failures cause people to lose confi...View AnswerShow Answer

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

If the money multiplier decreased from 20 to 12.5, then

Correct AnswerverifiedShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves

Correct AnswerverifiedShow Answer

The federal funds rate is a long-term interest rate banks charge one another for loans.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe only liability is deposits which equ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In a system of 100-percent-reserve banking, the purpose of a bank is to

Correct AnswerverifiedShow Answer

Table 11-7 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Balance Sheet of Metropolis National Bank. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If banks hold any amount of their deposits in reserve, then they do not have the ability to influence the money supply.

Correct AnswerverifiedShow Answer

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

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

When we measure and record economic value, we use money as the

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that

Correct AnswerverifiedShow Answer

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply?

Correct AnswerverifiedShow Answer

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Correct AnswerverifiedThe amount of currency per person is nea...View AnswerShow Answer

Correct Answer
verified
Bank failures cause people to lose confi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The only liability is deposits which equ...
View Answer

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
The amount of currency per person is nea...
View Answer