Question 1

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Accepted Answer

A)   rise from 10 to 20.
B)   rise from 5 to 10.
C)   fall from 10 to 5.
D)   not change.E) B) and C)
F) A) and D)

Question 2

Consider five individuals with different occupations.  If this economy has money

Accepted Answer

A)   Allen will buy from Betty
B)   Betty will buy from Calvin
C)   Eric will buy from Allen
D)   None of the above are correct.E) None of the above
F) A) and B)

Question 3

Many societies used gold as money, because

Accepted Answer

A)   it is relatively rare.
B)   it is durable.
C)   it has a relatively low melting point.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 4

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Accepted Answer

A)   $600
B)   $528
C)   $72
D)   $12E) None of the above
F) B) and C)

Question 5

If the reserve ratio is 8 percent, then the money multiplier is

Accepted Answer

A)   12.5.
B)   11.5.
C)   13.5.
D)   8.E) A) and D)
F) A) and C)

Question 6

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)   term auctions
B)   open-market operations
C)   changes in reserve requirements
D)   changes in the discount rateE) A) and C)
F) C) and D)

Question 7

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below.
 
-Refer to Table 29-3. The bank's reserve ratio is

Accepted Answer

A)   17.5 percent.
B)   8.5 percent.
C)   91.5 percent.
D)   100 percent.E) None of the above
F) A) and D)

Question 8

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Accepted Answer

A)   $64 of new reserves.
B)   $448 of new reserves.
C)   $700 of new reserves.
D)   $800 of new reserves.E) None of the above
F) A) and B)

Question 9

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

Accepted Answer

A)   savings deposits
B)   demand deposits
C)   small time deposits
D)   money market mutual fundsE) None of the above
F) B) and D)

Question 10

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Accepted Answer

A)   reserves and the money supply increase by less than $100 million.
B)   reserves increase by $100 million and the money supply increases by $100 million.
C)   reserves increase by $100 million and the money supply increases by more than $100 million.
D)   both reserves and the money supply increase by more than $100 million.E) B) and C)
F) A) and D)

Question 11

When the Fed sells 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) A) and B)
F) A) and C)

Question 12

Consider four survivors on an island.  Which of the following pairs of survivors has a double-coincidence of wants?

Accepted Answer

A)   Ron with Alice, and Ron with Lee
B)   Alice with Lee
C)   Ron with Raymond
D)   None of the above are correct.E) A) and B)
F) A) and D)

Question 13

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Accepted Answer

As bank asset values fall, the effect on...

Question 14

In measuring the stock of money in the U.S., M1 includes

Accepted Answer

A)   traveler's checks.
B)   savings deposits.
C)   credit cards
D)   none of the above.E) A) and B)
F) None of the above

Question 15

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Accepted Answer

A)   $270 billion
B)   $5,400 billion
C)   $6,000 billion
D)   $5,100 billionE) All of the above
F) A) and B)

Question 16

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Accepted Answer

A)   increased the money multiplier and the money supply.
B)   decreased the money multiplier and increased the money supply.
C)   increased the money multiplier and decreased the money supply.
D)   decreased both the money multiplier and the money supply.E) A) and D)
F) B) and C)

Question 17

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 18

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase.
B)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease
C)   The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease.
D)   The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decreaseE) A) and B)
F) B) and D)

Question 19

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Accepted Answer

The Fed's policy decisions influence the...

Question 20

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Accepted Answer

A)   increase by $25.5 million and the money supply eventually increases by $382.5 million.
B)   increase by $25.5 million and the money supply eventually increases by $170 million.
C)   decrease by $25.5 million and the money supply eventually decreases by $382.5 million.
D)   decrease by $25.5 million and the money supply eventually decreases by $170 million.E) B) and C)
F) A) and D)

Exam 21: The Monetary System

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Correct Answer
verified

Many societies used gold as money, because

Correct Answer
verified

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Correct Answer
verified

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Correct Answer
verified

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Correct Answer
verified

Correct Answer
verified

When the Fed sells government bonds,

Correct Answer
verified

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Correct Answer
verified
As bank asset values fall, the effect on...
View Answer

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Correct Answer
verified

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Correct Answer
verified

Which tool of monetary policy does the Federal Reserve use most often?

Correct Answer
verified

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

Correct Answer
verified

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Correct Answer
verified

In measuring the stock of money in the U.S., M1 includes

Correct Answer
verified

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Correct Answer
verified

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Correct Answer
verified

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Correct Answer
verified

Consider five individuals with different occupations. If this economy has money

Correct Answer
verified

If the reserve ratio is 8 percent, then the money multiplier is

Correct Answer
verified

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Correct Answer
verified
The Fed's policy decisions influence the...
View Answer

Exam 21: The Monetary System

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

Correct AnswerverifiedShow Answer

Many societies used gold as money, because

Correct AnswerverifiedShow Answer

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

Correct AnswerverifiedShow Answer

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Correct AnswerverifiedShow Answer

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Fed sells government bonds,

Correct AnswerverifiedShow Answer

Describe the role of bank leverage in bank insolvency during times of falling asset prices.

Correct AnswerverifiedAs bank asset values fall, the effect on...View AnswerShow Answer

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Correct AnswerverifiedShow Answer

Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

Correct AnswerverifiedShow Answer

Which tool of monetary policy does the Federal Reserve use most often?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by

Correct AnswerverifiedShow Answer

In measuring the stock of money in the U.S., M1 includes

Correct AnswerverifiedShow Answer

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Correct AnswerverifiedShow Answer

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Correct AnswerverifiedShow Answer

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. If this economy has money

Correct AnswerverifiedShow Answer

If the reserve ratio is 8 percent, then the money multiplier is

Correct AnswerverifiedShow Answer

Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"

Correct AnswerverifiedThe Fed's policy decisions influence the...View AnswerShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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verified
As bank asset values fall, the effect on...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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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Correct Answer
verified
The Fed's policy decisions influence the...
View Answer