Question 1

Economists who stress the store of value function of money generally

Accepted Answer

A) argue that M1 is the best measure of the money supply. 
B) prefer the M2 measure of the money supply to the M1 measure. 
C) argue that M1 is too broad a definition of the money supply. 
D) prefer the M1 measure of the money supply to the M2 measure. 
A) argue that M1 is the best measure of the money supply. 
B) prefer the M2 measure of the money supply to the M1 measure. 
C) argue that M1 is too broad a definition of the money supply. 
D) prefer the M1 measure of the money supply to the M2 measure.

Question 2

If the Federal Reserve wants to increase the availability of money and credit, it can

Accepted Answer

A) lower the discount rate. 
B) raise the reserve requirements. 
C) sell government bonds to the public. 
D) encourage banks to increase their prime lending rate. 
A) lower the discount rate. 
B) raise the reserve requirements. 
C) sell government bonds to the public. 
D) encourage banks to increase their prime lending rate.

Question 3

If the Fed wanted to use all four of its major monetary control tools to decrease the money supply, it would

Accepted Answer

A) buy bonds, reduce the discount rate, reduce reserve requirements, and reduce the interest rate paid on excess reserves. 
B) sell bonds, reduce the discount rate, reduce reserve requirements, and reduce the interest rate paid on excess reserves. 
C) sell bonds, increase the discount rate, increase reserve requirements, and increase the interest rate paid on excess reserves. 
D) buy bonds, increase the discount rate, increase reserve requirements, and increase the interest rate paid on excess reserves. 
A) buy bonds, reduce the discount rate, reduce reserve requirements, and reduce the interest rate paid on excess reserves. 
B) sell bonds, reduce the discount rate, reduce reserve requirements, and reduce the interest rate paid on excess reserves. 
C) sell bonds, increase the discount rate, increase reserve requirements, and increase the interest rate paid on excess reserves. 
D) buy bonds, increase the discount rate, increase reserve requirements, and increase the interest rate paid on excess reserves.

Question 4

The primary benefit of a monetary system of exchange compared to a barter system is the increased

Accepted Answer

A) ability to record transactions. 
B) time necessary to find trading partners. 
C) time devoted to shopping. 
D) efficiency in arranging transactions. 
A) ability to record transactions. 
B) time necessary to find trading partners. 
C) time devoted to shopping. 
D) efficiency in arranging transactions.

Question 5

Which of the following is primarily responsible for controlling the money supply in the United States?

Accepted Answer

A) the U.S.Congress 
B) the Board of Governors of the Federal Reserve System 
C) the U.S.Treasury 
D) the Council of Economic Advisors 
A) the U.S.Congress 
B) the Board of Governors of the Federal Reserve System 
C) the U.S.Treasury 
D) the Council of Economic Advisors

Question 6

During the three years following the financial crisis of 2008,

Accepted Answer

A) the monetary base more than doubled and the M1 money supply increased even more rapidly. 
B) the monetary base more than doubled, but the M1 money supply increased much less rapidly. 
C) the monetary base fell by almost 50 percent, but the M1 money supply continued to grow at a steady rate. 
D) the monetary base fell by almost 50 percent, causing a sharp reduction in the M1 money supply. 
A) the monetary base more than doubled and the M1 money supply increased even more rapidly. 
B) the monetary base more than doubled, but the M1 money supply increased much less rapidly. 
C) the monetary base fell by almost 50 percent, but the M1 money supply continued to grow at a steady rate. 
D) the monetary base fell by almost 50 percent, causing a sharp reduction in the M1 money supply.

Question 7

A bank receives a demand deposit of $1,000. The bank loans out $600 of this deposit and increases its excess reserves by $300. What is the legal reserve requirement?

Accepted Answer

A) 10 percent 
B) 20 percent 
C) 30 percent 
D) 60 percent 
A) 10 percent 
B) 20 percent 
C) 30 percent 
D) 60 percent

Question 8

Are "smart cards" or E-cash cards part of the money supply?

Accepted Answer

A) Yes, because they can be given away to make a payment. 
B) Yes, because they will soon completely replace cash. 
C) No, because they are not issued by banks. 
D) No, because they are merely means to transfer checking deposits. 
A) Yes, because they can be given away to make a payment. 
B) Yes, because they will soon completely replace cash. 
C) No, because they are not issued by banks. 
D) No, because they are merely means to transfer checking deposits.

Question 9

The demand for money varies

Accepted Answer

A) directly with both the price level and the level of real GDP. 
B) inversely with both the price level and the level of real GDP. 
C) inversely with the price level and directly with the level of real GDP. 
D) directly with the price level and inversely with the level of real GDP. 
E) inversely with the level of nominal GDP. 
A) directly with both the price level and the level of real GDP. 
B) inversely with both the price level and the level of real GDP. 
C) inversely with the price level and directly with the level of real GDP. 
D) directly with the price level and inversely with the level of real GDP. 
E) inversely with the level of nominal GDP.

Question 10

Which of the following assets can a commercial bank count as reserves?

Accepted Answer

A) its holdings of U.S.Treasury bills 
B) its vault cash and deposits with the Fed 
C) its outstanding loans 
D) the savings accounts of its depositors 
A) its holdings of U.S.Treasury bills 
B) its vault cash and deposits with the Fed 
C) its outstanding loans 
D) the savings accounts of its depositors

Question 11

The M1 money supply

Accepted Answer

A) is composed of assets that reflect the medium of exchange function of money. 
B) is larger than the M2 money supply. 
C) includes credit card balances since they are used to purchase things. 
D) is composed of only currency. 
A) is composed of assets that reflect the medium of exchange function of money. 
B) is larger than the M2 money supply. 
C) includes credit card balances since they are used to purchase things. 
D) is composed of only currency.

Question 12

Excess reserves are

Accepted Answer

A) checking deposits that are included in the M1 money supply but not the M2. 
B) savings deposits that are included in the M2 money supply but not the M1. 
C) actual reserves held by banks that exceed the legal requirement. 
D) the portion of deposits that banks are required by the Fed to hold as reserves against their deposits. 
A) checking deposits that are included in the M1 money supply but not the M2. 
B) savings deposits that are included in the M2 money supply but not the M1. 
C) actual reserves held by banks that exceed the legal requirement. 
D) the portion of deposits that banks are required by the Fed to hold as reserves against their deposits.

Question 13

Table 13-2
  
-Refer to Table 13-2. If the Hometown Bank is holding $10,000 in excess reserves, then the reserve requirement is

Accepted Answer

A) 2 percent. 
B) 5 percent. 
C) 7 percent. 
D) 10 percent. 
A) 2 percent. 
B) 5 percent. 
C) 7 percent. 
D) 10 percent.

Question 14

During 2008-2013, the Fed initiated several rounds of "quantitative easing." Under this policy, the Fed

Accepted Answer

A) increased its purchases of financial assets and thereby injected additional reserves into the banking system. 
B) increased its purchases of financial assets, which reduced the reserves available to the banking system. 
C) reduced its purchases of financial assets and thereby injected additional reserves into the banking system. 
D) reduced its purchases of financial assets and thereby reduced the quantity of reserves available to the banking system. 
A) increased its purchases of financial assets and thereby injected additional reserves into the banking system. 
B) increased its purchases of financial assets, which reduced the reserves available to the banking system. 
C) reduced its purchases of financial assets and thereby injected additional reserves into the banking system. 
D) reduced its purchases of financial assets and thereby reduced the quantity of reserves available to the banking system.

Question 15

The money multiplier will be

Accepted Answer

A) larger if banks hold on to excess reserves but smaller if private citizens hold on to cash. 
B) smaller if banks hold on to excess reserves but larger if private citizens hold on to cash. 
C) smaller if either banks hold on to excess reserves or private citizens hold on to cash. 
D) larger if either banks hold on to excess reserves or private citizens hold on to cash. 
E) constant whether or not banks and citizens try to alter their holdings of excess reserves and cash. 
A) larger if banks hold on to excess reserves but smaller if private citizens hold on to cash. 
B) smaller if banks hold on to excess reserves but larger if private citizens hold on to cash. 
C) smaller if either banks hold on to excess reserves or private citizens hold on to cash. 
D) larger if either banks hold on to excess reserves or private citizens hold on to cash. 
E) constant whether or not banks and citizens try to alter their holdings of excess reserves and cash.

Question 16

The funds that banks are required by law to hold in the form of either vault cash or deposits with the Fed are called

Accepted Answer

A) excess reserves. 
B) fractional reserves. 
C) required reserves. 
D) certificates of deposit. 
A) excess reserves. 
B) fractional reserves. 
C) required reserves. 
D) certificates of deposit.

Question 17

Which of the following lists two things that both increase the money supply?

Accepted Answer

A) raise the discount rate and make open market purchases 
B) raise the discount rate and make open market sales 
C) lower the discount rate and make open market purchases 
D) lower the discount rate and make open market sales 
A) raise the discount rate and make open market purchases 
B) raise the discount rate and make open market sales 
C) lower the discount rate and make open market purchases 
D) lower the discount rate and make open market sales

Question 18

If banks move a substantial portion of depositors' money from interest-earning checking accounts into money-market deposit accounts, how will the money supply measures be affected?

Accepted Answer

A) M1 will become smaller, and M2 will become larger. 
B) Both M1 and M2 will increase in size. 
C) Both M1 and M2 will decrease in size. 
D) The size of M1 will be reduced, but M2 will be unchanged. 
A) M1 will become smaller, and M2 will become larger. 
B) Both M1 and M2 will increase in size. 
C) Both M1 and M2 will decrease in size. 
D) The size of M1 will be reduced, but M2 will be unchanged.

Question 19

If uncertainty causes commercial banks to increase their holdings of excess reserves, other things constant, this will

Accepted Answer

A) reduce the money supply during a period of inflation and increase it during a recession. 
B) reduce the size of the deposit expansion multiplier. 
C) increase the size of deposit expansion multiplier. 
D) reduce the size of the deposit expansion multiplier during a period of inflation and increase it during a recession. 
A) reduce the money supply during a period of inflation and increase it during a recession. 
B) reduce the size of the deposit expansion multiplier. 
C) increase the size of deposit expansion multiplier. 
D) reduce the size of the deposit expansion multiplier during a period of inflation and increase it during a recession.

Question 20

Which of the following tends to reduce bank failures as the result of bank runs by depositors?

Accepted Answer

A) The Federal Deposit Insurance Corporation 
B) The Federal Open Market Operations Committee 
C) The comptroller of the currency 
D) The Senate Banking Committee 
A) The Federal Deposit Insurance Corporation 
B) The Federal Open Market Operations Committee 
C) The comptroller of the currency 
D) The Senate Banking Committee

Economists who stress the store of value function of money generally

If the Federal Reserve wants to increase the availability of money and credit, it can

If the Fed wanted to use all four of its major monetary control tools to decrease the money supply, it would

The primary benefit of a monetary system of exchange compared to a barter system is the increased

Which of the following is primarily responsible for controlling the money supply in the United States?

During the three years following the financial crisis of 2008,

A bank receives a demand deposit of $1,000. The bank loans out $600 of this deposit and increases its excess reserves by $300. What is the legal reserve requirement?

Are "smart cards" or E-cash cards part of the money supply?

The demand for money varies

Which of the following assets can a commercial bank count as reserves?

The M1 money supply

Excess reserves are

Table 13-2 -Refer to Table 13-2. If the Hometown Bank is holding $10,000 in excess reserves, then the reserve requirement is

During 2008-2013, the Fed initiated several rounds of "quantitative easing." Under this policy, the Fed

The money multiplier will be

The funds that banks are required by law to hold in the form of either vault cash or deposits with the Fed are called

Which of the following lists two things that both increase the money supply?

If banks move a substantial portion of depositors' money from interest-earning checking accounts into money-market deposit accounts, how will the money supply measures be affected?

If uncertainty causes commercial banks to increase their holdings of excess reserves, other things constant, this will

Which of the following tends to reduce bank failures as the result of bank runs by depositors?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 13: Money and the Banking System

Economists who stress the store of value function of money generally

If the Federal Reserve wants to increase the availability of money and credit, it can

If the Fed wanted to use all four of its major monetary control tools to decrease the money supply, it would

The primary benefit of a monetary system of exchange compared to a barter system is the increased

Which of the following is primarily responsible for controlling the money supply in the United States?

During the three years following the financial crisis of 2008,

A bank receives a demand deposit of $1,000. The bank loans out $600 of this deposit and increases its excess reserves by $300. What is the legal reserve requirement?

Are "smart cards" or E-cash cards part of the money supply?

The demand for money varies

Which of the following assets can a commercial bank count as reserves?

The M1 money supply

Excess reserves are

Table 13-2 -Refer to Table 13-2. If the Hometown Bank is holding $10,000 in excess reserves, then the reserve requirement is

During 2008-2013, the Fed initiated several rounds of "quantitative easing." Under this policy, the Fed

The money multiplier will be

The funds that banks are required by law to hold in the form of either vault cash or deposits with the Fed are called

Which of the following lists two things that both increase the money supply?

If banks move a substantial portion of depositors' money from interest-earning checking accounts into money-market deposit accounts, how will the money supply measures be affected?

If uncertainty causes commercial banks to increase their holdings of excess reserves, other things constant, this will

Which of the following tends to reduce bank failures as the result of bank runs by depositors?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters