Question 1

As a lender of last resort, the Fed avoids most financial crisis by providing liquidity to the financial system.

Accepted Answer

A) True 
 B)False

Question 2

The governors of the Board of Governors of the Federal Reserve have terms of what length?

Accepted Answer

A)  14 years 
B)  16 years 
C)  4 years 
D)  10 years 
A)  14 years 
B)  16 years 
C)  4 years 
D)  10 years

Question 3

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions:
-According to the application, what was the reason why banks started to hold more excess reserves after September 2008?

Accepted Answer

A)  The Fed allowed banks with little excess reserves to be taken over by banks with a large amount of excess reserves. 
B)  The Fed lent lots of money to banks, which in turn did not lend any of it. 
C)  The Fed started paying interest on bank reserves. 
D)  The Fed required that banks hold excess reserves. 
A)  The Fed allowed banks with little excess reserves to be taken over by banks with a large amount of excess reserves. 
B)  The Fed lent lots of money to banks, which in turn did not lend any of it. 
C)  The Fed started paying interest on bank reserves. 
D)  The Fed required that banks hold excess reserves.

Question 4

Money is anything that is regularly used in exchange.

Accepted Answer

A) True 
 B)False

Question 5

If the money multiplier is 4, the required reserve ratio is:

Accepted Answer

A)  25%. 
B)  50%. 
C)  20%. 
D)  2%. 
A)  25%. 
B)  50%. 
C)  20%. 
D)  2%.

Question 6

Prior to the 1980s, which of the following assets did not pay interest?

Accepted Answer

A)  savings accounts 
B)  time deposits 
C)  checking accounts 
D)  All of the above paid interest prior to the 1980s. 
A)  savings accounts 
B)  time deposits 
C)  checking accounts 
D)  All of the above paid interest prior to the 1980s.

Question 7

Recall Application 4, "Coping with the Financial Chaos Caused by the Mortgage Crisis," to answer the following questions:
-According to Application 4, the solution that the Fed came up with to prevent the collapse of Bear Stearns was to:

Accepted Answer

A)  buy an 80 percent stake in the company. 
B)  sell Bear Sterns to JP Morgan Chase and Co. 
C)  take over the company. 
D)  buy commercial paper issued by Bear Sterns. 
A)  buy an 80 percent stake in the company. 
B)  sell Bear Sterns to JP Morgan Chase and Co. 
C)  take over the company. 
D)  buy commercial paper issued by Bear Sterns.

Question 8

What is included in M1?

Accepted Answer

M1 consists of money that can be directl

Question 9

Saving account balances are included in:

Accepted Answer

A)  M2 only. 
B)  M1 only. 
C)  neither M1 nor M2. 
D)  both M1 and M2. 
A)  M2 only. 
B)  M1 only. 
C)  neither M1 nor M2. 
D)  both M1 and M2.

Question 10

Which of the following assets is the largest component of M2?

Accepted Answer

A)  small time deposits 
B)  currency 
C)  checking deposits 
D)  savings deposits 
A)  small time deposits 
B)  currency 
C)  checking deposits 
D)  savings deposits

Question 11

If $10,000 of new reserves are deposited in the banking system, what is the maximum amount of money that can be generated by the banking system if the reserve ratio is: (a) 100%
(b) 50%
(c) 25%
(d) 20%
(e) 10%

Accepted Answer

(a) $10,000 (b) $20,

Question 12

Suppose that Bob had $500 in travelers checks unused from his trip to Italy and he decides to deposit the checks to his checking account. This transaction will:

Accepted Answer

A)  increase M1 and M2. 
B)  keep M1 unchanged and increase M2. 
C)  keep M1 and M2 unchanged. 
D)  decrease M1 and M2. 
A)  increase M1 and M2. 
B)  keep M1 unchanged and increase M2. 
C)  keep M1 and M2 unchanged. 
D)  decrease M1 and M2.

Question 13

Why is a savings account included in M2 only while a checking account is included in M1 and M2?

Accepted Answer

Savings accounts are investment type ass

Question 14

Traveler's checks are:

Accepted Answer

A)  included only in M1. 
B)  not included in M1. 
C)  not included in M2. 
D)  included in M2. 
A)  included only in M1. 
B)  not included in M1. 
C)  not included in M2. 
D)  included in M2.

Question 15

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions:
-According to the application, which of the following entities issued their own scrip (money issued for emergency use) during the Great Depression?

Accepted Answer

A)  school boards only 
B)  cities only 
C)  cities, school boards and corporations 
D)  corporations only 
A)  school boards only 
B)  cities only 
C)  cities, school boards and corporations 
D)  corporations only

Question 16

If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:

Accepted Answer

A)  the money supply can decrease by as much as $1000, if banks hold some excess reserves. 
B)  the money supply can increase by as much as $1000, if banks hold no excess reserves. 
C)  the money supply can decrease by as much as $100, if banks hold some excess reserves. 
D)  the money supply can decrease by as much as $1000, if banks hold no excess reserves. 
A)  the money supply can decrease by as much as $1000, if banks hold some excess reserves. 
B)  the money supply can increase by as much as $1000, if banks hold no excess reserves. 
C)  the money supply can decrease by as much as $100, if banks hold some excess reserves. 
D)  the money supply can decrease by as much as $1000, if banks hold no excess reserves.

Question 17

-Refer to Table 13.4. If the required reserve ratio is 5%, First Charter Bank:

Accepted Answer

A)  is meeting its required reserve ratio and has no excess reserves. 
B)  has excess reserves of $100,000. 
C)  has too few reserves on hand. 
D)  has no excess reserves. 
A)  is meeting its required reserve ratio and has no excess reserves. 
B)  has excess reserves of $100,000. 
C)  has too few reserves on hand. 
D)  has no excess reserves.

Question 18

The two sides of a banks balance sheet are labeled:

Accepted Answer

A)  assets and liabilities. 
B)  assets and net worth.. 
C)  deposits and loans. 
D)  liabilities and net worth. 
A)  assets and liabilities. 
B)  assets and net worth.. 
C)  deposits and loans. 
D)  liabilities and net worth.

Question 19

Which of the following would not be counted as part of M1?

Accepted Answer

A)  demand deposits 
B)  traveler's check 
C)  currency 
D)  money market accounts 
A)  demand deposits 
B)  traveler's check 
C)  currency 
D)  money market accounts

Question 20

A bank has reserves of $40, loans of $110, deposits of $90, and owners' equity of $60. Which of the following represents the bank's total assets?

Accepted Answer

A)  $130 
B)  $150 
C)  $180 
D)  $110 
A)  $130 
B)  $150 
C)  $180 
D)  $110

As a lender of last resort, the Fed avoids most financial crisis by providing liquidity to the financial system.

The governors of the Board of Governors of the Federal Reserve have terms of what length?

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions: -According to the application, what was the reason why banks started to hold more excess reserves after September 2008?

Money is anything that is regularly used in exchange.

If the money multiplier is 4, the required reserve ratio is:

Prior to the 1980s, which of the following assets did not pay interest?

Recall Application 4, "Coping with the Financial Chaos Caused by the Mortgage Crisis," to answer the following questions: -According to Application 4, the solution that the Fed came up with to prevent the collapse of Bear Stearns was to:

What is included in M1?

Saving account balances are included in:

Which of the following assets is the largest component of M2?

If $10,000 of new reserves are deposited in the banking system, what is the maximum amount of money that can be generated by the banking system if the reserve ratio is: (a) 100% (b) 50% (c) 25% (d) 20% (e) 10%

Suppose that Bob had $500 in travelers checks unused from his trip to Italy and he decides to deposit the checks to his checking account. This transaction will:

Why is a savings account included in M2 only while a checking account is included in M1 and M2?

Traveler's checks are:

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, which of the following entities issued their own scrip (money issued for emergency use) during the Great Depression?

If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:

-Refer to Table 13.4. If the required reserve ratio is 5%, First Charter Bank:

The two sides of a banks balance sheet are labeled:

Which of the following would not be counted as part of M1?

A bank has reserves of $40, loans of $110, deposits of $90, and owners' equity of $60. Which of the following represents the bank's total assets?

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

As a lender of last resort, the Fed avoids most financial crisis by providing liquidity to the financial system.

The governors of the Board of Governors of the Federal Reserve have terms of what length?

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions: -According to the application, what was the reason why banks started to hold more excess reserves after September 2008?

Money is anything that is regularly used in exchange.

If the money multiplier is 4, the required reserve ratio is:

Prior to the 1980s, which of the following assets did not pay interest?

Recall Application 4, "Coping with the Financial Chaos Caused by the Mortgage Crisis," to answer the following questions: -According to Application 4, the solution that the Fed came up with to prevent the collapse of Bear Stearns was to:

What is included in M1?

Saving account balances are included in:

Which of the following assets is the largest component of M2?

If $10,000 of new reserves are deposited in the banking system, what is the maximum amount of money that can be generated by the banking system if the reserve ratio is: (a) 100% (b) 50% (c) 25% (d) 20% (e) 10%

Suppose that Bob had $500 in travelers checks unused from his trip to Italy and he decides to deposit the checks to his checking account. This transaction will:

Why is a savings account included in M2 only while a checking account is included in M1 and M2?

Traveler's checks are:

Recall Application 1, "City-Issued Money in the Great Depression," to answer the following questions: -According to the application, which of the following entities issued their own scrip (money issued for emergency use) during the Great Depression?

If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:

-Refer to Table 13.4. If the required reserve ratio is 5%, First Charter Bank:

The two sides of a banks balance sheet are labeled:

Which of the following would not be counted as part of M1?

A bank has reserves of $40, loans of $110, deposits of $90, and owners' equity of $60. Which of the following represents the bank's total assets?

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