Question 1

Which of the following statements is true?

Accepted Answer

A)  In Romania under Communist Party rule in the 1980s, Kent cigarettes served as a medium of exchange. This illustrates the use of Kent cigarettes as fiat money. 
B)  Commodity money has no value apart from its use as money. 
C)  In Romania under Communist Party rule in the 1980s, Kent cigarettes served as a medium of exchange. This illustrates the use of Kent cigarettes as commodity money. 
D)  Fiat money must be backed by gold; otherwise it is worthless. 
A)  In Romania under Communist Party rule in the 1980s, Kent cigarettes served as a medium of exchange. This illustrates the use of Kent cigarettes as fiat money. 
B)  Commodity money has no value apart from its use as money. 
C)  In Romania under Communist Party rule in the 1980s, Kent cigarettes served as a medium of exchange. This illustrates the use of Kent cigarettes as commodity money. 
D)  Fiat money must be backed by gold; otherwise it is worthless.

Question 2

Which of the following is an example of a bank's reserves?

Accepted Answer

A)  demand deposits with other banks 
B)  deposits with the Federal Reserve 
C)  Treasury bonds and bills 
D)  state bonds of the state in which the bank is located but not state bonds of other states. 
A)  demand deposits with other banks 
B)  deposits with the Federal Reserve 
C)  Treasury bonds and bills 
D)  state bonds of the state in which the bank is located but not state bonds of other states.

Question 3

Which of the following is true regarding the reserve requirements?

Accepted Answer

A)  The Fed changes them frequently because they are a power monetary policy tool. 
B)  The Fed does not change them much at all because taxation is a more impactful monetary policy tool. 
C)  The Fed changes them frequently because doing so simplifies banking operations. 
D)  The Fed does not change them much at all because doing so would make banking operations difficult. 
A)  The Fed changes them frequently because they are a power monetary policy tool. 
B)  The Fed does not change them much at all because taxation is a more impactful monetary policy tool. 
C)  The Fed changes them frequently because doing so simplifies banking operations. 
D)  The Fed does not change them much at all because doing so would make banking operations difficult.

Question 4

Which of the following illustrates the store-of-value function of money?

Accepted Answer

A)  writing a check to buy a new Volkswagen 
B)  noting that the price of a $20,000 Volkswagen is 16,000 euros 
C)  agreeing to repay a bank $400 a month for the next 48 months for a loan to buy a new Volkswagen 
D)  keeping $20,000 in cash in your mattress instead of buying a new Volkswagen 
A)  writing a check to buy a new Volkswagen 
B)  noting that the price of a $20,000 Volkswagen is 16,000 euros 
C)  agreeing to repay a bank $400 a month for the next 48 months for a loan to buy a new Volkswagen 
D)  keeping $20,000 in cash in your mattress instead of buying a new Volkswagen

Question 5

When the Fed purchases government bonds it _____ reserves and ____ the money supply.

Accepted Answer

A)  decreases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  increases; increases 
A)  decreases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  increases; increases

Question 6

The seven members of the Board of Governors serve 14-year terms to

Accepted Answer

A)  provide steady employment. 
B)  reduce political influence. 
C)  prevent illegal appointments. 
D)  inhibit independent decisions. 
A)  provide steady employment. 
B)  reduce political influence. 
C)  prevent illegal appointments. 
D)  inhibit independent decisions.

Question 7

Table 9-6: Deposit Expansion Stages
   In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number.
-Refer to Table 9-6. What is the value of $H (the total loans)?

Accepted Answer

A)  $1,000 
B)  $4,000 
C)  $5,000 
D)  $6,000 
A)  $1,000 
B)  $4,000 
C)  $5,000 
D)  $6,000

Question 8

The Federal Reserve buys $10,000 of government securities from commercial banks. If the required reserve ratio is 25%, what is the maximum amount of change in the nation's money supply? Assume that no banks keep excess reserves and no individuals or firms hold cash.

Accepted Answer

A)  expand by $10,000 
B)  expand by $30,000 
C)  expand by $40,000 
D)  expand by $7,500 
A)  expand by $10,000 
B)  expand by $30,000 
C)  expand by $40,000 
D)  expand by $7,500

Question 9

The rate of interest charged for reserves in the federal funds market is the

Accepted Answer

A)  federal funds rate. 
B)  open market rate. 
C)  required reserve rate. 
D)  discount rate. 
A)  federal funds rate. 
B)  open market rate. 
C)  required reserve rate. 
D)  discount rate.

Question 10

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)
  
-Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

Accepted Answer

A)  $30 million 
B)  $70 million 
C)  $100 million 
D)  $300 million 
A)  $30 million 
B)  $70 million 
C)  $100 million 
D)  $300 million

Question 11

M1 includes

Accepted Answer

A)  currency only. 
B)  currency plus checkable deposits. 
C)  currency in circulation plus checkable deposits. 
D)  currency in circulation plus checkable deposits plus traveler's checks. 
A)  currency only. 
B)  currency plus checkable deposits. 
C)  currency in circulation plus checkable deposits. 
D)  currency in circulation plus checkable deposits plus traveler's checks.

Question 12

Table 9-1
  
-Refer to Table 9-1. The difference between M1 and M2 amounts to

Accepted Answer

A)  $325 billion. 
B)  $350 billion. 
C)  $450 billion. 
D)  $1,275 billion. 
A)  $325 billion. 
B)  $350 billion. 
C)  $450 billion. 
D)  $1,275 billion.

Question 13

Any reserves that banks hold in excess of required reserves are called

Accepted Answer

A)  excess reserves. 
B)  margin reserves. 
C)  federal reserves. 
D)  surplus reserves. 
A)  excess reserves. 
B)  margin reserves. 
C)  federal reserves. 
D)  surplus reserves.

Question 14

Which of the following is an advantage of using money as a medium of exchange?

Accepted Answer

A)  It simplifies purchases because all prices are specified in money values. 
B)  There is no interest charged on using money for purchases. 
C)  It is easy to mass produce money. 
D)  It avoids having to rely on barter, the exchange of one good or service for another. 
A)  It simplifies purchases because all prices are specified in money values. 
B)  There is no interest charged on using money for purchases. 
C)  It is easy to mass produce money. 
D)  It avoids having to rely on barter, the exchange of one good or service for another.

Question 15

Decreasing the reserve requirement ratio is

Accepted Answer

A)  a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)  a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C)  an expansionary policy because it raises the amount of excess reserves in the banking system. 
D)  an expansionary policy because it raises the amount of required reserves in the banking system. 
A)  a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)  a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C)  an expansionary policy because it raises the amount of excess reserves in the banking system. 
D)  an expansionary policy because it raises the amount of required reserves in the banking system.

Question 16

Commodity money is paper currency that may be redeemed for a specific commodity at a specified rate on the currency.

Accepted Answer

A) True 
 B)False

Question 17

The function of money illustrated by the prevailing prices of goods and services is the

Accepted Answer

A)  medium of exchange function. 
B)  unit of account function. 
C)  standard of deferred payments function. 
D)  store of value function. 
A)  medium of exchange function. 
B)  unit of account function. 
C)  standard of deferred payments function. 
D)  store of value function.

Question 18

The money supply is the total amount of checkable deposits in the economy.

Accepted Answer

A) True 
 B)False

Question 19

When you buy a ticket to the rodeo, you are using money as a

Accepted Answer

A)  source of economic activity. 
B)  store of value. 
C)  factor of production. 
D)  medium of exchange. 
A)  source of economic activity. 
B)  store of value. 
C)  factor of production. 
D)  medium of exchange.

Question 20

Table 9-6: Deposit Expansion Stages
   In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number.
-Refer to Table 9-6. What is the value of $F (the total new checkable deposits)?

Accepted Answer

A)  $1,000 
B)  $4,000 
C)  $5,000 
D)  $6,000 
A)  $1,000 
B)  $4,000 
C)  $5,000 
D)  $6,000

Which of the following statements is true?

Which of the following is an example of a bank's reserves?

Which of the following is true regarding the reserve requirements?

Which of the following illustrates the store-of-value function of money?

When the Fed purchases government bonds it _ reserves and the money supply.

The seven members of the Board of Governors serve 14-year terms to

The Federal Reserve buys $10,000 of government securities from commercial banks. If the required reserve ratio is 25%, what is the maximum amount of change in the nation's money supply? Assume that no banks keep excess reserves and no individuals or firms hold cash.

The rate of interest charged for reserves in the federal funds market is the

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

M1 includes

Table 9-1 -Refer to Table 9-1. The difference between M1 and M2 amounts to

Any reserves that banks hold in excess of required reserves are called

Which of the following is an advantage of using money as a medium of exchange?

Decreasing the reserve requirement ratio is

Commodity money is paper currency that may be redeemed for a specific commodity at a specified rate on the currency.

The function of money illustrated by the prevailing prices of goods and services is the

The money supply is the total amount of checkable deposits in the economy.

When you buy a ticket to the rodeo, you are using money as a

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Exam 9: The Nature and Creation of Money

Which of the following statements is true?

Which of the following is an example of a bank's reserves?

Which of the following is true regarding the reserve requirements?

Which of the following illustrates the store-of-value function of money?

When the Fed purchases government bonds it _____ reserves and ____ the money supply.

The seven members of the Board of Governors serve 14-year terms to

The Federal Reserve buys $10,000 of government securities from commercial banks. If the required reserve ratio is 25%, what is the maximum amount of change in the nation's money supply? Assume that no banks keep excess reserves and no individuals or firms hold cash.

The rate of interest charged for reserves in the federal funds market is the

Table 9-5 Bolton Bank: Partial Balance Sheet (All figures in $ million) -Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's required reserves?

M1 includes

Table 9-1 -Refer to Table 9-1. The difference between M1 and M2 amounts to

Any reserves that banks hold in excess of required reserves are called

Which of the following is an advantage of using money as a medium of exchange?

Decreasing the reserve requirement ratio is

Commodity money is paper currency that may be redeemed for a specific commodity at a specified rate on the currency.

The function of money illustrated by the prevailing prices of goods and services is the

The money supply is the total amount of checkable deposits in the economy.

When you buy a ticket to the rodeo, you are using money as a

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

When the Fed purchases government bonds it _ reserves and the money supply.