Question 1

Suppose that the required reserve ratio is 0.25. If a customer withdraws $10 million from a bank, then the money supply could potentially:

Accepted Answer

A)  decrease by $25 million. 
B)  increase by $40 million. 
C)  increase by $2.5 million. 
D)  decrease by $40 million. 
A)  decrease by $25 million. 
B)  increase by $40 million. 
C)  increase by $2.5 million. 
D)  decrease by $40 million.

Question 2

The decisions concerning the money supply are made by:

Accepted Answer

A)  the FOMC. 
B)  the presidents of the district central banks. 
C)  the Board of Governors. 
D)  Congress. 
A)  the FOMC. 
B)  the presidents of the district central banks. 
C)  the Board of Governors. 
D)  Congress.

Question 3

Briefly discuss the structure of the Federal Reserve.

Accepted Answer

The Federal Reserve consists of 12 distr

Question 4

The reason why raw fish is not used as money is because it would perform which property of money most unsatisfactorily?

Accepted Answer

A)  unit of account 
B)  store of value 
C)  unit of bartering 
D)  medium of exchange 
A)  unit of account 
B)  store of value 
C)  unit of bartering 
D)  medium of exchange

Question 5

Fred wants to trade peanut butter for bread. Sally wants to trade bread for jelly. Fred and Sally have a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 6

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions:
-According to the application, what was the interest rate banks earned on excess reserves prior to September 2008?

Accepted Answer

A)  two percent 
B)  the discount rate 
C)  zero percent 
D)  the fed funds rate 
A)  two percent 
B)  the discount rate 
C)  zero percent 
D)  the fed funds rate

Question 7

Explain why a market structure in which money is used as a medium of exchange is more conducive to the expansion of trade and exchange than a barter system.

Accepted Answer

A barter system relies on a double coinc

Question 8

-Refer to Table 13.3. People's Bank excess reserves are $ _______ .

Accepted Answer

A)  20,000 
B)  100,000 
C)  60,000 
D)  40,000 
A)  20,000 
B)  100,000 
C)  60,000 
D)  40,000

Question 9

A checking deposit in a bank is considered _______ of that bank.

Accepted Answer

A)  an asset 
B)  owners' equity 
C)  a liability 
D)  capital 
A)  an asset 
B)  owners' equity 
C)  a liability 
D)  capital

Question 10

In a barter economy, the exchange of goods trade requires a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 11

When you keep your savings in a savings account, you are using money as a(n):

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  investment good. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  investment good.

Question 12

Which of the following provides members of the Board of Governors independence in conducting monetary policy?

Accepted Answer

A)  the fact that they have lifetime appointments 
B)  the fact that they usually are university professors and lawyers 
C)  their 14 year tenure 
D)  the fact that they register as independents and not as Democrats or Republicans 
A)  the fact that they have lifetime appointments 
B)  the fact that they usually are university professors and lawyers 
C)  their 14 year tenure 
D)  the fact that they register as independents and not as Democrats or Republicans

Question 13

Why would the money multiplier decrease if banks choose to hold excess reserves?

Accepted Answer

If banks choose to hold excess reserves,

Question 14

An account statement for a bank that shows the sources of its funds and the uses of its funds is called:

Accepted Answer

A)  a person's checking account. 
B)  a bank's balance sheet. 
C)  a bank's income statement. 
D)  a bank's profit report. 
A)  a person's checking account. 
B)  a bank's balance sheet. 
C)  a bank's income statement. 
D)  a bank's profit report.

Question 15

Which of the following is not a function of the Federal Reserve?

Accepted Answer

A)  regulate banks 
B)  conduct monetary policy 
C)  issue new Treasury bonds 
D)  provide a system of check collection and clearing 
A)  regulate banks 
B)  conduct monetary policy 
C)  issue new Treasury bonds 
D)  provide a system of check collection and clearing

Question 16

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions:
-According to the application, which of the following was not a tool used by the Fed to avert a financial crisis in 2001?

Accepted Answer

A)  the Fed increased the Federal Reserve Float 
B)  the Fed took over major US banks 
C)  the Fed purchased government securities 
D)  the Fed allowed banks to borrow more 
A)  the Fed increased the Federal Reserve Float 
B)  the Fed took over major US banks 
C)  the Fed purchased government securities 
D)  the Fed allowed banks to borrow more

Question 17

The central bank of the United States is known as the:

Accepted Answer

A)  Federal Reserve System. 
B)  Federal Deposit Insurance Corporation. 
C)  Federal Savings and Loan Insurance Corporation. 
D)  Department of the Treasury. 
A)  Federal Reserve System. 
B)  Federal Deposit Insurance Corporation. 
C)  Federal Savings and Loan Insurance Corporation. 
D)  Department of the Treasury.

Question 18

-Refer to Table 13.4. First Charter Bank could still make additional loans of $40,000 if the required reserve ratio were:

Accepted Answer

A)  5%. 
B)  2.5%. 
C)  10%. 
D)  8%. 
A)  5%. 
B)  2.5%. 
C)  10%. 
D)  8%.

Question 19

The amount of money banks can create is determined by the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 20

Explain what will happen to the size of both M1 and M2 in each of the following situations:
(a) Jane, a millionaire, withdraws $500,000 from her money market account to buy a famous painting.
(b) Paul transfers $10,000 from his checking account to his savings account.
(c) Sarah takes $5,000 out of her checking account to buy IBM stock.

Accepted Answer

(a) M1 stays the same and M2 d

Suppose that the required reserve ratio is 0.25. If a customer withdraws $10 million from a bank, then the money supply could potentially:

The decisions concerning the money supply are made by:

Briefly discuss the structure of the Federal Reserve.

The reason why raw fish is not used as money is because it would perform which property of money most unsatisfactorily?

Fred wants to trade peanut butter for bread. Sally wants to trade bread for jelly. Fred and Sally have a double coincidence of wants.

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions: -According to the application, what was the interest rate banks earned on excess reserves prior to September 2008?

Explain why a market structure in which money is used as a medium of exchange is more conducive to the expansion of trade and exchange than a barter system.

-Refer to Table 13.3. People's Bank excess reserves are $ _______ .

A checking deposit in a bank is considered _______ of that bank.

In a barter economy, the exchange of goods trade requires a double coincidence of wants.

When you keep your savings in a savings account, you are using money as a(n):

Which of the following provides members of the Board of Governors independence in conducting monetary policy?

Why would the money multiplier decrease if banks choose to hold excess reserves?

An account statement for a bank that shows the sources of its funds and the uses of its funds is called:

Which of the following is not a function of the Federal Reserve?

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions: -According to the application, which of the following was not a tool used by the Fed to avert a financial crisis in 2001?

The central bank of the United States is known as the:

-Refer to Table 13.4. First Charter Bank could still make additional loans of $40,000 if the required reserve ratio were:

The amount of money banks can create is determined by the required reserve ratio.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 13: Money and the Banking System

Suppose that the required reserve ratio is 0.25. If a customer withdraws $10 million from a bank, then the money supply could potentially:

The decisions concerning the money supply are made by:

Briefly discuss the structure of the Federal Reserve.

The reason why raw fish is not used as money is because it would perform which property of money most unsatisfactorily?

Fred wants to trade peanut butter for bread. Sally wants to trade bread for jelly. Fred and Sally have a double coincidence of wants.

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions: -According to the application, what was the interest rate banks earned on excess reserves prior to September 2008?

Explain why a market structure in which money is used as a medium of exchange is more conducive to the expansion of trade and exchange than a barter system.

-Refer to Table 13.3. People's Bank excess reserves are $ _______ .

A checking deposit in a bank is considered _______ of that bank.

In a barter economy, the exchange of goods trade requires a double coincidence of wants.

When you keep your savings in a savings account, you are using money as a(n):

Which of the following provides members of the Board of Governors independence in conducting monetary policy?

Why would the money multiplier decrease if banks choose to hold excess reserves?

An account statement for a bank that shows the sources of its funds and the uses of its funds is called:

Which of the following is not a function of the Federal Reserve?

Recall Application 3, "The Financial System Under Stress: September 11, 2001," to answer the following questions: -According to the application, which of the following was not a tool used by the Fed to avert a financial crisis in 2001?

The central bank of the United States is known as the:

-Refer to Table 13.4. First Charter Bank could still make additional loans of $40,000 if the required reserve ratio were:

The amount of money banks can create is determined by the required reserve ratio.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters