Question 1

Which of the following is a correct expression for the monetary base?

Accepted Answer

A) B = C + D 
B) B = C + R 
C) B = R + D 
D) B = R + M 
A) B = C + D 
B) B = C + R 
C) B = R + D 
D) B = R + M B

Question 2

If the Treasury buys $2 million in gold, the monetary base will

Accepted Answer

A) fall by $2 million. 
B) rise by $2 million. 
C) rise by $2 million times the money multiplier. 
D) be unchanged. 
A) fall by $2 million. 
B) rise by $2 million. 
C) rise by $2 million times the money multiplier. 
D) be unchanged. B

Question 3

When a bank presents a check to the Fed for clearing, the Fed promises to credit the bank for the amount

Accepted Answer

A) as soon as the Fed is able to present the check to the payor bank. 
B) immediately. 
C) within two business days. 
D) within six months. 
A) as soon as the Fed is able to present the check to the payor bank. 
B) immediately. 
C) within two business days. 
D) within six months. C

Question 4

The currency outstanding account on the Fed's balance sheet

Accepted Answer

A) represents coins minted and issued by the Treasury and held by the Fed. 
B) is an asset. 
C) represents Federal Reserve Notes. 
D) represents coins minted and issued by the U.S. Treasury and held by the commercial banking system. 
A) represents coins minted and issued by the Treasury and held by the Fed. 
B) is an asset. 
C) represents Federal Reserve Notes. 
D) represents coins minted and issued by the U.S. Treasury and held by the commercial banking system.

Question 5

The Maastricht Treaty has made the European Central Bank

Accepted Answer

A) dependent on the preferences of the leaders of the member nations. 
B) dependent on the actions of the Fed. 
C) dependent on the decisions approved by the European Parliament. 
D) independent. 
A) dependent on the preferences of the leaders of the member nations. 
B) dependent on the actions of the Fed. 
C) dependent on the decisions approved by the European Parliament. 
D) independent.

Question 6

Why aren't Treasury deposits with the Fed part of the monetary base?

Accepted Answer

A) Because they are currency and currency is not included in the monetary base 
B) Because no deposits at the Fed are included in the monetary base 
C) Because they aren't assets of either the nonbank public or banks 
D) Because the Fed is unable to exercise effective control over their size 
A) Because they are currency and currency is not included in the monetary base 
B) Because no deposits at the Fed are included in the monetary base 
C) Because they aren't assets of either the nonbank public or banks 
D) Because the Fed is unable to exercise effective control over their size

Question 7

The "Member Bank Reserve Changes" data published weekly in The Wall Street Journal is most useful for

Accepted Answer

A) information on sources of change in the monetary base. 
B) gauging whether a particular bank is likely to fail. 
C) gauging the extent to which a particular bank is indebted to the Fed. 
D) forecasting interest rates. 
A) information on sources of change in the monetary base. 
B) gauging whether a particular bank is likely to fail. 
C) gauging the extent to which a particular bank is indebted to the Fed. 
D) forecasting interest rates.

Question 8

The currency outstanding account on the Fed's balance sheet

Accepted Answer

A) is a liability. 
B) is an asset. 
C) represents chiefly the coins minted and issued by the U.S. Treasury. 
D) includes only that currency held by commercial banks. 
A) is a liability. 
B) is an asset. 
C) represents chiefly the coins minted and issued by the U.S. Treasury. 
D) includes only that currency held by commercial banks.

Question 9

What does the Treasury do with the tax funds withheld from workers' paychecks? How does the Treasury make use of these funds when making purchases for the federal government? How do these activities affect the monetary base?

Accepted Answer

The Treasury deposits funds withheld fro

Question 10

Which of the following is true of Federal Reserve float?

Accepted Answer

A) It is typically zero. 
B) The amount of cash items in the process of collection typically exceeds the amount of deferred availability cash items. 
C) The amount of deferred availability cash items typically exceeds the amount of cash items in the process of collection. 
D) Over long periods of time, float is a significant source of change in the monetary base. 
A) It is typically zero. 
B) The amount of cash items in the process of collection typically exceeds the amount of deferred availability cash items. 
C) The amount of deferred availability cash items typically exceeds the amount of cash items in the process of collection. 
D) Over long periods of time, float is a significant source of change in the monetary base.

Question 11

On the Fed's balance sheet, the Fed's holdings of foreign exchange reserves

Accepted Answer

A) is an asset. 
B) is a liability. 
C) represents promises by the Fed to make loans to foreign governments. 
D) consists of gold bars. 
A) is an asset. 
B) is a liability. 
C) represents promises by the Fed to make loans to foreign governments. 
D) consists of gold bars.

Question 12

The terms on the right-hand side of the Fed's balance sheet

Accepted Answer

A) represent the Fed's assets. 
B) represent the net worth of the Fed. 
C) represent uses of the monetary base. 
D) equal the difference between the value of the Fed's assets and the value of its liabilities. 
A) represent the Fed's assets. 
B) represent the net worth of the Fed. 
C) represent uses of the monetary base. 
D) equal the difference between the value of the Fed's assets and the value of its liabilities.

Question 13

Deposits by depository institutions with the Fed

Accepted Answer

A) are an asset to the Fed but a liability to the depository institutions. 
B) are a liability to the Fed but an asset to the depository institutions. 
C) represent all of the depository institutions reserves. 
D) receive interest at market rates. 
A) are an asset to the Fed but a liability to the depository institutions. 
B) are a liability to the Fed but an asset to the depository institutions. 
C) represent all of the depository institutions reserves. 
D) receive interest at market rates.

Question 14

The bulk of the Fed's holdings of U.S. Treasury currency consists of

Accepted Answer

A) Treasury paper currency. 
B) coins. 
C) Federal Reserve Notes. 
D) Treasury bills. 
A) Treasury paper currency. 
B) coins. 
C) Federal Reserve Notes. 
D) Treasury bills.

Question 15

If the Treasury mints more coins and sends them to the Fed,

Accepted Answer

A) the monetary base will rise. 
B) the monetary base will fall. 
C) the monetary base will be unaffected. 
D) the monetary base may rise or fall depending upon whether the public's demand for coins has risen or fallen. 
A) the monetary base will rise. 
B) the monetary base will fall. 
C) the monetary base will be unaffected. 
D) the monetary base may rise or fall depending upon whether the public's demand for coins has risen or fallen.

Question 16

In what year did the Treasury-Federal Reserve Accord take place?

Accepted Answer

A) 1913 
B) 1951 
C) 1975 
D) 1998 
A) 1913 
B) 1951 
C) 1975 
D) 1998

Question 17

How would the Fed go about "pegging" the interest rate on Treasury securities, as it did during World War II? What would be the consequences of pegging the monetary base?

Accepted Answer

To peg the interest rate on Treasury sec

Question 18

What percentage of the nation's currency is made up of Federal Reserve Notes?

Accepted Answer

A) 1% 
B) 10% 
C) 90% 
D) 100% 
A) 1% 
B) 10% 
C) 90% 
D) 100%

Question 19

An economist argues: "The only effective guarantee of low inflation is an independent central bank." Do you agree?

Accepted Answer

A central bank that lacks independence i

Question 20

According to the Maastricht Treaty, what is the goal of the European Central Bank?

Accepted Answer

A) High employment 
B) To be self financing 
C) To finance the budget deficits of member nations 
D) Price stability 
A) High employment 
B) To be self financing 
C) To finance the budget deficits of member nations 
D) Price stability

Exam 18: Changes in the Monetary Base

Which of the following is a correct expression for the monetary base?

If the Treasury buys $2 million in gold, the monetary base will

When a bank presents a check to the Fed for clearing, the Fed promises to credit the bank for the amount

The currency outstanding account on the Fed's balance sheet

The Maastricht Treaty has made the European Central Bank

Why aren't Treasury deposits with the Fed part of the monetary base?

The "Member Bank Reserve Changes" data published weekly in The Wall Street Journal is most useful for

The currency outstanding account on the Fed's balance sheet

What does the Treasury do with the tax funds withheld from workers' paychecks? How does the Treasury make use of these funds when making purchases for the federal government? How do these activities affect the monetary base?

Which of the following is true of Federal Reserve float?

On the Fed's balance sheet, the Fed's holdings of foreign exchange reserves

The terms on the right-hand side of the Fed's balance sheet

Deposits by depository institutions with the Fed

The bulk of the Fed's holdings of U.S. Treasury currency consists of

If the Treasury mints more coins and sends them to the Fed,

In what year did the Treasury-Federal Reserve Accord take place?

How would the Fed go about "pegging" the interest rate on Treasury securities, as it did during World War II? What would be the consequences of pegging the monetary base?

What percentage of the nation's currency is made up of Federal Reserve Notes?

An economist argues: "The only effective guarantee of low inflation is an independent central bank." Do you agree?

According to the Maastricht Treaty, what is the goal of the European Central Bank?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters