Question 1

The Federal Reserve

Accepted Answer

A)   was created in 1836.
B)   serves as a lender of last resort.
C)   was created to facilitate the federal government's collection of taxes as well as its expenditures.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 2

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people...

Question 3

The Fed's control of the money supply is not precise because

Accepted Answer

A)   Congress can also make changes to the money supply.
B)   there are not always government bonds available for purchase when the Fed wants to perform open-market operations.
C)   the Fed does not know where all U.S. currency is located.
D)   the amount of money in the economy depends in part on the behavior of depositors and bankers.E) B) and C)
F) A) and C)

Question 4

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Accepted Answer

A)   2.5 percent.
B)   33.3 percent.
C)   25 percent.
D)   75 percent.E) A) and D)
F) A) and C)

Question 5

The Fed can directly protect a bank during a bank run by

Accepted Answer

A)   increasing reserve requirements.
B)   selling government bonds to the bank.
C)   lending reserves to the bank.
D)   doing any of the above.E) A) and B)
F) A) and C)

Question 6

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Accepted Answer

This would...

Question 7

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

Accepted Answer

The answer of If you withdraw $500 from your savings...

Question 8

If the public decides to hold less currency and more deposits in banks, bank reserves

Accepted Answer

A)   decrease and the money supply eventually decreases.
B)   decrease but the money supply does not change.
C)   increase and the money supply eventually increases.
D)   increase but the money supply does not change.E) A) and B)
F) All of the above

Question 9

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)   the prime rate.
B)   the federal funds rate.
C)   the discount rate.
D)   the LIBOR.E) B) and C)
F) All of the above

Question 10

An open-market purchase

Accepted Answer

A)   increases the number of dollars and the number of bonds in the hands of the public.
B)   increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)   decreases the number of dollars and the number of bonds in the hands of the public.
D)   decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.E) B) and D)
F) None of the above

Question 11

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Accepted Answer

A)   increased. The central bank could have reduced the size of this increase by buying bonds.
B)   increased. The central bank could have reduced the size of this increase by selling bonds.
C)   decreased. The central bank could have reduced the size of this decrease by buying bonds.
D)   decreased. The central bank could have reduced the size of this decrease by selling bonds.E) B) and C)
F) None of the above

Question 12

Prisoners sometimes determine a single good to be used as money. This good becomes

Accepted Answer

A)   a medium of exchange and a unit of account.
B)   a medium of exchange, but not a unit of account.
C)   a unit of account, but not a medium of exchange.
D)   neither a unit of account nor a medium of exchange.E) All of the above
F) A) and B)

Question 13

M2 is both larger and less liquid than M1.

Accepted Answer

A) True 
 B)False

Question 14

A bank's assets equal its liabilities under

Accepted Answer

A)   both 100-percent-reserve banking and fractional-reserve banking.
B)   100-percent-reserve banking but not under fractional-reserve banking.
C)   fractional-reserve banking but not under 100-percent-reserve banking.
D)   neither 100-percent-reserve banking nor fractional-reserve banking.E) A) and C)
F) B) and C)

Question 15

Which type of money has intrinsic value?

Accepted Answer

A)   commodity money
B)   fiat money
C)   both commodity money and fiat money
D)   neither commodity money nor fiat moneyE) None of the above
F) All of the above

Exam 29: The Monetary System

Economists argue that the move from barter to money increased trade and production. How is this possible?

Correct Answer
verified
The use of money allows people...
View Answer

An open-market purchase

Correct Answer
verified

The interest rate the Fed charges on loans it makes to banks is called

Correct Answer
verified

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

Correct Answer
verified

M2 is both larger and less liquid than M1.

Correct Answer
verified

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Correct Answer
verified

A bank's assets equal its liabilities under

Correct Answer
verified

The Fed's control of the money supply is not precise because

Correct Answer
verified

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Correct Answer
verified

If the public decides to hold less currency and more deposits in banks, bank reserves

Correct Answer
verified

Which type of money has intrinsic value?

Correct Answer
verified

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct Answer
verified

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Correct Answer
verified
This would...
View Answer

The Federal Reserve

Correct Answer
verified

The Fed can directly protect a bank during a bank run by

Correct Answer
verified

Exam 29: The Monetary System

Economists argue that the move from barter to money increased trade and production. How is this possible?

Correct AnswerverifiedThe use of money allows people...View AnswerShow Answer

An open-market purchase

Correct AnswerverifiedShow Answer

The interest rate the Fed charges on loans it makes to banks is called

Correct AnswerverifiedShow Answer

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by and M2 will change by .

Correct AnswerverifiedShow Answer

M2 is both larger and less liquid than M1.

Correct AnswerverifiedShow Answer

At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply

Correct AnswerverifiedShow Answer

A bank's assets equal its liabilities under

Correct AnswerverifiedShow Answer

The Fed's control of the money supply is not precise because

Correct AnswerverifiedShow Answer

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Correct AnswerverifiedShow Answer

If the public decides to hold less currency and more deposits in banks, bank reserves

Correct AnswerverifiedShow Answer

Which type of money has intrinsic value?

Correct AnswerverifiedShow Answer

Prisoners sometimes determine a single good to be used as money. This good becomes

Correct AnswerverifiedShow Answer

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Correct AnswerverifiedThis would...View AnswerShow Answer

The Federal Reserve

Correct AnswerverifiedShow Answer

The Fed can directly protect a bank during a bank run by

Correct AnswerverifiedShow Answer

Correct Answer
verified
The use of money allows people...
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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
This would...
View Answer

Correct Answer
verified

Correct Answer
verified