Question 1

Which of the following is not included in either M1 or M2?

Accepted Answer

A)   money market deposit accounts
B)   large time deposit
C)   demand deposits
D)   money market mutual fundsE) C) and D)
F) A) and D) B

Question 2

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Accepted Answer

A)   $6,400.
B)   $8,000.
C)   $12,500.
D)   $10,000.E) A) and B)
F) B) and C)

Question 3

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Accepted Answer

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

Question 4

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

Question 5

Which of the following is a function of money?

Accepted Answer

A)   a unit of account
B)   a store of value
C)   medium of exchange
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 6

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A)   cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by.
B)   American dollars in exchange for goods and services, because rubles were extremely hard to come by.
C)   goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money.
D)   All of the above are correct.E) None of the above
F) All of the above

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

Question 8

Which of the following can banks use to borrow from the Federal Reserve?

Accepted Answer

A)   the discount window or the term auction facility
B)   the discount window but not the term auction facility
C)   the term auction facility but not the discount window
D)   Banks cannot borrow from the Federal Reserve, only the government can.E) A) and B)
F) A) and C) A

Question 9

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Accepted Answer

A) True 
 B)False

Question 10

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Fed does not control the amou...

Question 11

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

Accepted Answer

A)   demand deposits
B)   corporate bonds
C)   large time deposits
D)   money market mutual fundsE) A) and C)
F) B) and C)

Question 12

Table 29-7.
 
-Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Accepted Answer

A)   1.1
B)   12.3
C)   8.1
D)   9.1E) C) and D)
F) B) and C)

Question 13

The money supply decreases if

Accepted Answer

A)   households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans.
B)   households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans.
C)   households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans.
D)   households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.E) B) and C)
F) A) and B) A

Question 14

Which of the following is included in M1 and M2?

Accepted Answer

A)   traveler's checks
B)   savings deposits
C)   money market mutual funds
D)   small time depositsE) All of the above
F) B) and C)

Question 15

The Fed can increase the money supply by conducting open-market

Accepted Answer

A)   sales or by raising the discount rate.
B)   sales or by lowering the discount rate.
C)   purchases or by raising the discount rate.
D)   purchases or by lowering the discount rate.E) A) and C)
F) A) and B)

Question 16

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) A) and B)
F) B) and C)

Question 17

Other things the same, if reserve requirements are increased, the reserve ratio

Accepted Answer

A)   increases, the money multiplier increases, and the money supply increases.
B)   increases, the money multiplier decreases, and the money supply decreases.
C)   decreases, the money multiplier increases, and the money supply increases.
D)   decreases, the money multiplier decreases, and the money supply increases.E) A) and B)
F) C) and D)

Question 18

Describe how the use of leverage affects the impact of bank investments.

Accepted Answer

Leverage amplifies the impact from chang...

Question 19

Money market mutual funds are included in

Accepted Answer

A)   M1 but not M2.
B)   M1 and M2.
C)   M2 but not M1.
D)   neither M1 nor M2.E) A) and B)
F) None of the above

Question 20

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks?

Accepted Answer

A)   625 million dias
B)   875 million dias
C)   1,125 million dias
D)   None of the above is correct.E) A) and D)
F) All of the above

Exam 21: The Monetary System

Which of the following is not included in either M1 or M2?

Correct Answer
verified
B

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Correct Answer
verified

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a function of money?

Correct Answer
verified

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Correct Answer
verified

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

Which of the following can banks use to borrow from the Federal Reserve?

Correct Answer
verified
A

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Correct Answer
verified

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct Answer
verified
First, the Fed does not control the amou...
View Answer

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

Correct Answer
verified

Table 29-7. -Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Correct Answer
verified

The money supply decreases if

Correct Answer
verified
A

Which of the following is included in M1 and M2?

Correct Answer
verified

The Fed can increase the money supply by conducting open-market

Correct Answer
verified

The money supply increases when the Fed

Correct Answer
verified

Other things the same, if reserve requirements are increased, the reserve ratio

Correct Answer
verified

Describe how the use of leverage affects the impact of bank investments.

Correct Answer
verified
Leverage amplifies the impact from chang...
View Answer

Money market mutual funds are included in

Correct Answer
verified

Correct Answer
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Exam 21: The Monetary System

Which of the following is not included in either M1 or M2?

Correct AnswerverifiedB

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Correct AnswerverifiedShow Answer

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a function of money?

Correct AnswerverifiedShow Answer

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

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

Which of the following can banks use to borrow from the Federal Reserve?

Correct AnswerverifiedA

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Correct AnswerverifiedShow Answer

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Correct AnswerverifiedFirst, the Fed does not control the amou...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Table 29-7. -Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Correct AnswerverifiedShow Answer

The money supply decreases if

Correct AnswerverifiedA

Which of the following is included in M1 and M2?

Correct AnswerverifiedShow Answer

The Fed can increase the money supply by conducting open-market

Correct AnswerverifiedShow Answer

The money supply increases when the Fed

Correct AnswerverifiedShow Answer

Other things the same, if reserve requirements are increased, the reserve ratio

Correct AnswerverifiedShow Answer

Describe how the use of leverage affects the impact of bank investments.

Correct AnswerverifiedLeverage amplifies the impact from chang...View AnswerShow Answer

Money market mutual funds are included in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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B

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Correct Answer
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Correct Answer
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A

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Correct Answer
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First, the Fed does not control the amou...
View Answer

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Correct Answer
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Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Leverage amplifies the impact from chang...
View Answer

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Correct Answer
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