Question 1

Which of the following is the best definition of money?

Accepted Answer

A) Anything generally accepted as payment for goods or repayment of debt 
B) Anything that can be converted to a liquid asset 
C) A national currency that is backed by gold or other precious metals 
D) Paper or coin currency that is produced by the Federal Reserve 
A) Anything generally accepted as payment for goods or repayment of debt 
B) Anything that can be converted to a liquid asset 
C) A national currency that is backed by gold or other precious metals 
D) Paper or coin currency that is produced by the Federal Reserve

Question 2

The large increase in the excess reserves held by the commercial banking system during the second half of 2008,

Accepted Answer

A) increases the likelihood of a sharp contraction in the money supply, which would increase the length and severity of the recession. 
B) increases the likelihood of a rapid increase in the money supply, potentially leading to future inflation. 
C) is merely a continuation of the trend present since 1990. 
D) reduces the ability of banks to extend additional loans. 
A) increases the likelihood of a sharp contraction in the money supply, which would increase the length and severity of the recession. 
B) increases the likelihood of a rapid increase in the money supply, potentially leading to future inflation. 
C) is merely a continuation of the trend present since 1990. 
D) reduces the ability of banks to extend additional loans.

Question 3

Money is

Accepted Answer

A) whatever is generally accepted in exchange for goods and services. 
B) an object to be consumed. 
C) a highly illiquid asset. 
D) widely used in a barter economy. 
A) whatever is generally accepted in exchange for goods and services. 
B) an object to be consumed. 
C) a highly illiquid asset. 
D) widely used in a barter economy.

Question 4

Demand deposits are

Accepted Answer

A) deposits held by individuals at one of the twelve Federal Reserve District Banks. 
B) interest-earning savings deposits held by individuals at a banking institution. 
C) deposits of commercial banks at one of the twelve Federal Reserve District Banks. 
D) deposits of individuals that can either be withdrawn or made payable on demand to a third party by a check. 
A) deposits held by individuals at one of the twelve Federal Reserve District Banks. 
B) interest-earning savings deposits held by individuals at a banking institution. 
C) deposits of commercial banks at one of the twelve Federal Reserve District Banks. 
D) deposits of individuals that can either be withdrawn or made payable on demand to a third party by a check.

Question 5

Drawing on her account at Regional Bank, Samantha writes a check to Isabella, who deposits the check in her account at Local Bank. Once the check has cleared, which of the following will occur to the reserves of the banking system and the M1 money supply?

Accepted Answer

A) Bank reserves will increase; M1 will increase. 
B) Bank reserves will increase; there will be no change in M1. 
C) There will be no change in bank reserves; M1 will increase. 
D) There will be no changes in either bank reserves or M1. 
A) Bank reserves will increase; M1 will increase. 
B) Bank reserves will increase; there will be no change in M1. 
C) There will be no change in bank reserves; M1 will increase. 
D) There will be no changes in either bank reserves or M1.

Question 6

Suppose the Fed purchases $100 million of U.S. government securities from the public. How will this affect the money supply and the national debt?

Accepted Answer

A) The money supply will increase; the national debt will decline. 
B) The money supply will decline; the national debt will increase. 
C) The money supply will increase; the national debt will be unaffected. 
D) The money supply will decrease; the national debt will be unaffected. 
A) The money supply will increase; the national debt will decline. 
B) The money supply will decline; the national debt will increase. 
C) The money supply will increase; the national debt will be unaffected. 
D) The money supply will decrease; the national debt will be unaffected.

Question 7

Suppose the Fed sells $100 million of U.S. securities to the public. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a

Accepted Answer

A) $100 million decrease. 
B) $500 million increase. 
C) $500 million decrease. 
D) $100 million increase. 
A) $100 million decrease. 
B) $500 million increase. 
C) $500 million decrease. 
D) $100 million increase.

Question 8

If the Fed wanted to expand the money supply as part of an antirecession strategy, it could

Accepted Answer

A) increase the interest rate paid on excess reserves encouraging banks to extend more loans. 
B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans. 
C) decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans. 
D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans. 
A) increase the interest rate paid on excess reserves encouraging banks to extend more loans. 
B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans. 
C) decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans. 
D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.

Question 9

A decrease in the interest rate, other things being equal, causes

Accepted Answer

A) an upward movement along the demand curve for money. 
B) a downward movement along the demand curve for money. 
C) a rightward shift of the demand curve for money. 
D) a leftward shift of the demand curve for money. 
A) an upward movement along the demand curve for money. 
B) a downward movement along the demand curve for money. 
C) a rightward shift of the demand curve for money. 
D) a leftward shift of the demand curve for money.

Which of the following is the best definition of money?

The large increase in the excess reserves held by the commercial banking system during the second half of 2008,

Money is

Demand deposits are

Drawing on her account at Regional Bank, Samantha writes a check to Isabella, who deposits the check in her account at Local Bank. Once the check has cleared, which of the following will occur to the reserves of the banking system and the M1 money supply?

Suppose the Fed purchases $100 million of U.S. government securities from the public. How will this affect the money supply and the national debt?

Suppose the Fed sells $100 million of U.S. securities to the public. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a

If the Fed wanted to expand the money supply as part of an antirecession strategy, it could

A decrease in the interest rate, other things being equal, causes

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

Which of the following is the best definition of money?

The large increase in the excess reserves held by the commercial banking system during the second half of 2008,

Money is

Demand deposits are

Drawing on her account at Regional Bank, Samantha writes a check to Isabella, who deposits the check in her account at Local Bank. Once the check has cleared, which of the following will occur to the reserves of the banking system and the M1 money supply?

Suppose the Fed purchases $100 million of U.S. government securities from the public. How will this affect the money supply and the national debt?

Suppose the Fed sells $100 million of U.S. securities to the public. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a

If the Fed wanted to expand the money supply as part of an antirecession strategy, it could

A decrease in the interest rate, other things being equal, causes

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