Question 1

Which of the following is an asset of the Federal Reserve?

Accepted Answer

A)  loans to depository institutions 
B)  the monetary base 
C)  Federal Reserve notes 
D)  commercial bank deposits 
A)  loans to depository institutions 
B)  the monetary base 
C)  Federal Reserve notes 
D)  commercial bank deposits

Question 2

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired ratio is 20 percent.
a) How much does the bank have in excess reserves?
b) What can the bank do with its excess reserves? Name two options.

Accepted Answer

a) The excess reserves are $30, equal to

Question 3

What is the relationship between money growth and inflation across countries? Does your answer support the quantity theory of money?

Accepted Answer

The international evidence sho

Question 4

The Federal Open Market Committee of the Federal Reserve System is responsible for

Accepted Answer

A)  determining monetary policy actions. 
B)  establishing the official price of gold. 
C)  maintaining competition among the nation's commercial banks. 
D)  defining the foreign exchange value of the dollar. 
A)  determining monetary policy actions. 
B)  establishing the official price of gold. 
C)  maintaining competition among the nation's commercial banks. 
D)  defining the foreign exchange value of the dollar.

Question 5

By borrowing money from many depositors and lending money to a variety of borrowers, depository institutions

Accepted Answer

A)  can expose themselves to a great deal of risk. 
B)  spread risk efficiently. 
C)  decrease the quantity of money. 
D)  move money from M1 to M2. 
A)  can expose themselves to a great deal of risk. 
B)  spread risk efficiently. 
C)  decrease the quantity of money. 
D)  move money from M1 to M2.

Question 6

Which of the following is the central bank of the United States?

Accepted Answer

A)  Comptroller of the Currency 
B)  Treasury Department 
C)  Office of the Budget 
D)  Federal Reserve System 
A)  Comptroller of the Currency 
B)  Treasury Department 
C)  Office of the Budget 
D)  Federal Reserve System

Question 7

The opportunity cost of holding money balances increases when

Accepted Answer

A)  consumers' incomes increase. 
B)  the interest rate rises. 
C)  the purchasing power of money rises. 
D)  the price of goods and services falls. 
A)  consumers' incomes increase. 
B)  the interest rate rises. 
C)  the purchasing power of money rises. 
D)  the price of goods and services falls.

Question 8

When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the

Accepted Answer

A)  loan rate. 
B)  discount rate. 
C)  federal funds rate. 
D)  prime rate. 
A)  loan rate. 
B)  discount rate. 
C)  federal funds rate. 
D)  prime rate.

Question 9

You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as desired reserves. As a direct result of your deposit, your bank will create

Accepted Answer

A)  $3,200 of new money. 
B)  $200 of new money. 
C)  $1,600 of new money. 
D)  $800 of new money. 
A)  $3,200 of new money. 
B)  $200 of new money. 
C)  $1,600 of new money. 
D)  $800 of new money.

Question 10

The smaller the currency drain, the

Accepted Answer

A)  the smaller the effect of a change in the discount rate. 
B)  more likely it is that the banking system will hold a larger proportion of excess reserves. 
C)  larger the increase in the quantity of money from an increase in reserves. 
D)  smaller the increase in the quantity of money from an increase in reserves. 
A)  the smaller the effect of a change in the discount rate. 
B)  more likely it is that the banking system will hold a larger proportion of excess reserves. 
C)  larger the increase in the quantity of money from an increase in reserves. 
D)  smaller the increase in the quantity of money from an increase in reserves.

Question 11

Excess reserves are

Accepted Answer

A)  actual reserves minus desired reserves. 
B)  liquidity funds minus actual reserves. 
C)  required reserves minus actual reserves. 
D)  desired reserves minus actual reserves. 
A)  actual reserves minus desired reserves. 
B)  liquidity funds minus actual reserves. 
C)  required reserves minus actual reserves. 
D)  desired reserves minus actual reserves.

Question 12

The practice of borrowing short and lending long

Accepted Answer

A)  minimizes the cost of monitoring borrowers. 
B)  pools risk. 
C)  creates liquidity. 
D)  All of the above answers are correct. 
A)  minimizes the cost of monitoring borrowers. 
B)  pools risk. 
C)  creates liquidity. 
D)  All of the above answers are correct.

Question 13

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Accepted Answer

A)  discount rate. 
B)  money multiplier. 
C)  minimum rate. 
D)  required reserve ratio. 
A)  discount rate. 
B)  money multiplier. 
C)  minimum rate. 
D)  required reserve ratio.

Question 14

Checks are NOT money because they

Accepted Answer

A)  are merely instructions to transfer money. 
B)  have value in exchange but little intrinsic value. 
C)  are issued by banks, not by the government. 
D)  are not backed by either gold or silver. 
A)  are merely instructions to transfer money. 
B)  have value in exchange but little intrinsic value. 
C)  are issued by banks, not by the government. 
D)  are not backed by either gold or silver.

Question 15

The required reserve ratio helps determine to what degree banks can create money.

Accepted Answer

A) True 
 B)False

Question 16

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of
$100 can make additional loans of

Accepted Answer

A)  $0. 
B)  $400. 
C)  $20. 
D)  $80. 
A)  $0. 
B)  $400. 
C)  $20. 
D)  $80.

Question 17

Bank reserves include
I. the cash in the bank's vault
II. the bank's deposits at the Federal Reserve

Accepted Answer

A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II 
A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II

Question 18

A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Accepted Answer

A)  $60,000. 
B)  $10,000. 
C)  $4,000. 
D)  $50,000. 
A)  $60,000. 
B)  $10,000. 
C)  $4,000. 
D)  $50,000.

Question 19

Which of the following is an asset of the Fed?

Accepted Answer

A)  Federal Reserve notes 
B)  banks' deposits 
C)  loans to depository institutions 
D)  Both answers B and C are correct. 
A)  Federal Reserve notes 
B)  banks' deposits 
C)  loans to depository institutions 
D)  Both answers B and C are correct.

Question 20

The Federal Reserve System is the

Accepted Answer

A)  law enforcement agency that tracks counterfeit money. 
B)  federal government agency that undertakes deregulation for depository institutions. 
C)  insurance agency the insures deposits. 
D)  central bank of the United States. 
A)  law enforcement agency that tracks counterfeit money. 
B)  federal government agency that undertakes deregulation for depository institutions. 
C)  insurance agency the insures deposits. 
D)  central bank of the United States.

Which of the following is an asset of the Federal Reserve?

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired ratio is 20 percent. a) How much does the bank have in excess reserves? b) What can the bank do with its excess reserves? Name two options.

What is the relationship between money growth and inflation across countries? Does your answer support the quantity theory of money?

The Federal Open Market Committee of the Federal Reserve System is responsible for

By borrowing money from many depositors and lending money to a variety of borrowers, depository institutions

Which of the following is the central bank of the United States?

The opportunity cost of holding money balances increases when

When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the

You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as desired reserves. As a direct result of your deposit, your bank will create

The smaller the currency drain, the

Excess reserves are

The practice of borrowing short and lending long

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Checks are NOT money because they

The required reserve ratio helps determine to what degree banks can create money.

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Bank reserves include I. the cash in the bank's vault II. the bank's deposits at the Federal Reserve

A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Which of the following is an asset of the Fed?

The Federal Reserve System is the

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

Which of the following is an asset of the Federal Reserve?

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired ratio is 20 percent. a) How much does the bank have in excess reserves? b) What can the bank do with its excess reserves? Name two options.

What is the relationship between money growth and inflation across countries? Does your answer support the quantity theory of money?

The Federal Open Market Committee of the Federal Reserve System is responsible for

By borrowing money from many depositors and lending money to a variety of borrowers, depository institutions

Which of the following is the central bank of the United States?

The opportunity cost of holding money balances increases when

When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the

You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as desired reserves. As a direct result of your deposit, your bank will create

The smaller the currency drain, the

Excess reserves are

The practice of borrowing short and lending long

The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the

Checks are NOT money because they

The required reserve ratio helps determine to what degree banks can create money.

Given a desired reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of

Bank reserves include I. the cash in the bank's vault II. the bank's deposits at the Federal Reserve

A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Which of the following is an asset of the Fed?

The Federal Reserve System is the

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters