Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Table 29-4.
 
-Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Accepted Answer

A)   $40.
B)   $437.50.
C)   $71.42.
D)   $428.57.E) A) and B)
F) A) and C)

Question 3

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)   demand deposits.
B)   short-term bonds.
C)   credit cards.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 4

First National Bank FNB)  has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Accepted Answer

A)   then it has required reserves of $210 and holds excess reserves of $10.
B)   then it has required reserves of $10 and holds excess reserves of $20.
C)   then it has required reserves of $110 and holds excess reserves of $190.
D)   then it has required reserves of $110 and holds excess reserves of $0.E) A) and B)
F) A) and D)

Question 5

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Accepted Answer

A)   does not change the money supply.
B)   increases the money supply.
C)   decreases the money supply.
D)   has an indeterminate effect on the money supply.E) C) and D)
F) A) and C)

Question 6

Monetary policy has an important influence on and in the short run.

Accepted Answer

inflation,...

Question 7

Which of the following is not a central bank?

Accepted Answer

A)   The Bank of England
B)   The Bank of Japan
C)   The Bank of America
D)   The Federal ReserveE) A) and C)
F) B) and C)

Question 8

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

Accepted Answer

A)   those assets are government bonds and the Fed's reason for selling them is to increase the money supply.
B)   those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.
C)   those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply.
D)   those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.E) None of the above
F) C) and D)

Question 9

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Accepted Answer

A)   increases the money multiplier and increases the money supply.
B)   decreases the money multiplier and decreases the money supply.
C)   does not change the money multiplier, but increases the money supply.
D)   does not change the money multiplier, but decreases the money supply.E) A) and C)
F) B) and C)

Question 10

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
B)   serve six-year terms.
C)   are also the presidents of the regional Federal Reserve banks.
D)   share power equally, with no governor having any more influence or power than any other governor.E) B) and C)
F) A) and D)

Question 11

Reserves decrease if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.E) A) and B)
F) A) and C)

Question 12

To increase the money supply, the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   decrease the reserve requirement.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 13

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
 
-Refer to Table 29-9. 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 14

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following does the Federal Reserve not do?

Accepted Answer

A)   conduct monetary policy
B)   act as a lender of last resort
C)   convert Federal Reserve Notes into gold
D)   serve as a bank regulatorE) None of the above
F) C) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Accepted Answer

A)   $5,500 of new money.
B)   $5,000 of new money.
C)   $4,000 of new money.
D)   None of the above is correct.E) A) and D)
F) None of the above

Question 18

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

Question 19

The legal tender requirement means that

Accepted Answer

A)   people are more likely to accept the dollar as a medium of exchange.
B)   the government must hold enough gold to redeem all currency.
C)   people may not make trades with anything else.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 20

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha...

Exam 16: The Monetary System

Table 29-4. -Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Correct AnswerverifiedShow Answer

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

Correct AnswerverifiedShow Answer

To increase the money supply, the Fed could

Correct AnswerverifiedShow Answer

First National Bank FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Correct AnswerverifiedShow Answer

When the Fed buys government bonds,

Correct AnswerverifiedShow Answer

The set of items that serve as media of exchange clearly includes

Correct AnswerverifiedShow Answer

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Correct AnswerverifiedShow Answer

Table 29-9 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

Correct AnswerverifiedShow Answer

The legal tender requirement means that

Correct AnswerverifiedShow Answer

The members of the Federal Reserve's Board of Governors

Correct AnswerverifiedShow Answer

Monetary policy has an important influence on and in the short run.

Correct Answerverifiedinflation,...View AnswerShow Answer

Which of the following is not a central bank?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

Correct AnswerverifiedShow Answer

Reserves decrease if the Federal Reserve

Correct AnswerverifiedShow Answer

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow Answer

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Correct AnswerverifiedShow Answer

Which of the following does the Federal Reserve not do?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Correct AnswerverifiedShow Answer

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inflation,...
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When the reserve requirement is less tha...
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