Question 1

The foreign holdings of U.S. dollars

Accepted Answer

A) are hard to explain since the dollar is not legal tender outside the United States. 
B) have decreased substantially during the last decade. 
C) indicate that foreigners have confidence in the monetary policy and economy of the United States. 
D) are largely held in countries with a lengthy historical record of monetary and price stability. 
A) are hard to explain since the dollar is not legal tender outside the United States. 
B) have decreased substantially during the last decade. 
C) indicate that foreigners have confidence in the monetary policy and economy of the United States. 
D) are largely held in countries with a lengthy historical record of monetary and price stability.

Question 2

Other things constant, which of the following would cause the M1 money supply to decline?

Accepted Answer

A) an increase in the quantity of U.S.currency held overseas 
B) a shift of funds from interest-earning checking deposits to money market mutual funds 
C) a reduction in the general public's holdings of currency outside of banks because debit cards have become more popular and widely accepted 
D) a shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined 
A) an increase in the quantity of U.S.currency held overseas 
B) a shift of funds from interest-earning checking deposits to money market mutual funds 
C) a reduction in the general public's holdings of currency outside of banks because debit cards have become more popular and widely accepted 
D) a shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined

Question 3

What is the difference between the Treasury and the Federal Reserve? Is there any difference in the effect on the money supply between the sale of bonds by the Treasury and the sale of bonds by the Fed?

Accepted Answer

The Treasury and the Federal Reserve are

Question 4

What is meant by the expression, "There is too much money chasing too few goods"?

Accepted Answer

A) People spend too much time chasing after money. 
B) An expansion in the supply of money relative to the availability of goods and services is causing an increase in the general level of prices. 
C) The value of money will tend to decline when the supply of gold increases. 
D) People would be better off if the monetary authorities increased the supply of money more rapidly. 
A) People spend too much time chasing after money. 
B) An expansion in the supply of money relative to the availability of goods and services is causing an increase in the general level of prices. 
C) The value of money will tend to decline when the supply of gold increases. 
D) People would be better off if the monetary authorities increased the supply of money more rapidly.

Question 5

The fraction that banks must, by law, hold as reserves against the checking deposits of their customers is called the

Accepted Answer

A) federal deposit insurance premium. 
B) vault cash quota. 
C) excess reserve requirement. 
D) required reserve ratio. 
A) federal deposit insurance premium. 
B) vault cash quota. 
C) excess reserve requirement. 
D) required reserve ratio.

Question 6

Are funds available on a credit card included in a definition of the money supply?

Accepted Answer

A) Yes, because these funds can be used to pay for goods and services. 
B) Yes, because these funds are included in M2. 
C) No, because these funds are hard to measure total credit card spending. 
D) No, because these funds are not a store of value. 
A) Yes, because these funds can be used to pay for goods and services. 
B) Yes, because these funds are included in M2. 
C) No, because these funds are hard to measure total credit card spending. 
D) No, because these funds are not a store of value.

Question 7

When the interest rate decreases, the opportunity cost of holding money

Accepted Answer

A) increases, so the quantity of money demanded increases. 
B) increases, so the quantity of money demanded decreases. 
C) decreases, so the quantity of money demanded increases. 
D) decreases, so the quantity of money demanded decreases. 
A) increases, so the quantity of money demanded increases. 
B) increases, so the quantity of money demanded decreases. 
C) decreases, so the quantity of money demanded increases. 
D) decreases, so the quantity of money demanded decreases.

Question 8

Does the Federal Reserve operate like an ordinary commercial bank? What is the Fed's job?

Accepted Answer

Since the Fed is an independent branch o

Question 9

Citizens Bank confronts a reserve requirement of 20 percent and currently holds millions of dollars in excess reserves. If a depositor withdraws $35,000, the excess reserves of the bank will

Accepted Answer

A) decline by $7,000. 
B) decline by $35,000. 
C) decline by $28,000. 
D) increase by $7,000. 
A) decline by $7,000. 
B) decline by $35,000. 
C) decline by $28,000. 
D) increase by $7,000.

Question 10

An increase in the discount rate impacts the money supply because it

Accepted Answer

A) makes it more attractive for commercial banks to borrow from the Federal Reserve. 
B) decreases the interest yield on new issues of U.S.securities. 
C) reduces the incentive of commercial banks to borrow from the Federal Reserve. 
D) increases the Federal Reserve's earnings and, thereby, expands the money supply. 
A) makes it more attractive for commercial banks to borrow from the Federal Reserve. 
B) decreases the interest yield on new issues of U.S.securities. 
C) reduces the incentive of commercial banks to borrow from the Federal Reserve. 
D) increases the Federal Reserve's earnings and, thereby, expands the money supply.

Question 11

How do changes in open market operations alter the monetary base, and how do changes in the monetary base translate to changes in the money supply?

Accepted Answer

The monetary base is the sum of commerci

Question 12

Suppose the Fed purchases $40,000 of U.S. Treasury bonds from Benjamin, who deposits the money with First National Bank. If the required reserve ratio is 20 percent, this transaction will increase the excess reserves of First National Bank by

Accepted Answer

A) $8,000. 
B) $32,000. 
C) $40,000. 
D) $200,000. 
A) $8,000. 
B) $32,000. 
C) $40,000. 
D) $200,000.

Question 13

Table 13-2
  
-Refer to Table 13-2. If the reserve requirement is 10 percent, then this bank

Accepted Answer

A) is in a position to make a new loan of $15,000. 
B) has less reserves than required. 
C) has excess reserves of less than $15,000. 
D) none of the above is correct. 
A) is in a position to make a new loan of $15,000. 
B) has less reserves than required. 
C) has excess reserves of less than $15,000. 
D) none of the above is correct.

Question 14

If people decide to hold less money as currency and more as checking deposits, this will most likely cause

Accepted Answer

A) a decrease in bank reserves. 
B) a decrease in required reserves. 
C) an increase in the discount rate. 
D) an increase in the money supply. 
A) a decrease in bank reserves. 
B) a decrease in required reserves. 
C) an increase in the discount rate. 
D) an increase in the money supply.

Question 15

In the United States, the money supply (M1) consists of

Accepted Answer

A) paper currency, coins and traveler's checks. 
B) government bonds, currency, demand deposits, other checkable deposits, and traveler's checks. 
C) paper currency, coins, demand deposits, and savings deposits. 
D) coins, paper currency, demand deposits, other checkable deposits, and traveler's checks. 
A) paper currency, coins and traveler's checks. 
B) government bonds, currency, demand deposits, other checkable deposits, and traveler's checks. 
C) paper currency, coins, demand deposits, and savings deposits. 
D) coins, paper currency, demand deposits, other checkable deposits, and traveler's checks.

Question 16

In order for barter trades to occur, there must be a

Accepted Answer

A) singularity of interests. 
B) bargaining intermediary. 
C) double coincidence of wants. 
D) sufficient supply of cash. 
A) singularity of interests. 
B) bargaining intermediary. 
C) double coincidence of wants. 
D) sufficient supply of cash.

Question 17

The federal funds market is the market where

Accepted Answer

A) the federal government raises funds to cover its budget deficit. 
B) the Federal Reserve System makes loans to commercial banks. 
C) commercial banks with excess reserves make loans to commercial banks seeking reserves. 
D) commercial banks make loans to the Federal Reserve. 
A) the federal government raises funds to cover its budget deficit. 
B) the Federal Reserve System makes loans to commercial banks. 
C) commercial banks with excess reserves make loans to commercial banks seeking reserves. 
D) commercial banks make loans to the Federal Reserve.

Question 18

If the required reserve ratio were decreased,

Accepted Answer

A) the money supply would tend to decrease, but the outstanding loans of banks would tend to increase. 
B) both the money supply and the outstanding loans of banks would tend to decrease. 
C) the money supply would tend to increase, but the outstanding loans of banks would tend to decrease. 
D) both the money supply and the outstanding loans of banks would tend to increase. 
A) the money supply would tend to decrease, but the outstanding loans of banks would tend to increase. 
B) both the money supply and the outstanding loans of banks would tend to decrease. 
C) the money supply would tend to increase, but the outstanding loans of banks would tend to decrease. 
D) both the money supply and the outstanding loans of banks would tend to increase.

Question 19

If money were not used as a medium of exchange,

Accepted Answer

A) the gains from trade would be severely limited. 
B) our standard of living would probably improve. 
C) the transaction costs of exchange would be lower. 
D) economic efficiency would increase. 
A) the gains from trade would be severely limited. 
B) our standard of living would probably improve. 
C) the transaction costs of exchange would be lower. 
D) economic efficiency would increase.

Question 20

Which of the following lists two things that both decrease 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

The foreign holdings of U.S. dollars

Other things constant, which of the following would cause the M1 money supply to decline?

What is the difference between the Treasury and the Federal Reserve? Is there any difference in the effect on the money supply between the sale of bonds by the Treasury and the sale of bonds by the Fed?

What is meant by the expression, "There is too much money chasing too few goods"?

The fraction that banks must, by law, hold as reserves against the checking deposits of their customers is called the

Are funds available on a credit card included in a definition of the money supply?

When the interest rate decreases, the opportunity cost of holding money

Does the Federal Reserve operate like an ordinary commercial bank? What is the Fed's job?

Citizens Bank confronts a reserve requirement of 20 percent and currently holds millions of dollars in excess reserves. If a depositor withdraws $35,000, the excess reserves of the bank will

An increase in the discount rate impacts the money supply because it

How do changes in open market operations alter the monetary base, and how do changes in the monetary base translate to changes in the money supply?

Suppose the Fed purchases $40,000 of U.S. Treasury bonds from Benjamin, who deposits the money with First National Bank. If the required reserve ratio is 20 percent, this transaction will increase the excess reserves of First National Bank by

Table 13-2 -Refer to Table 13-2. If the reserve requirement is 10 percent, then this bank

If people decide to hold less money as currency and more as checking deposits, this will most likely cause

In the United States, the money supply (M1) consists of

In order for barter trades to occur, there must be a

The federal funds market is the market where

If the required reserve ratio were decreased,

If money were not used as a medium of exchange,

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

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

The foreign holdings of U.S. dollars

Other things constant, which of the following would cause the M1 money supply to decline?

What is the difference between the Treasury and the Federal Reserve? Is there any difference in the effect on the money supply between the sale of bonds by the Treasury and the sale of bonds by the Fed?

What is meant by the expression, "There is too much money chasing too few goods"?

The fraction that banks must, by law, hold as reserves against the checking deposits of their customers is called the

Are funds available on a credit card included in a definition of the money supply?

When the interest rate decreases, the opportunity cost of holding money

Does the Federal Reserve operate like an ordinary commercial bank? What is the Fed's job?

Citizens Bank confronts a reserve requirement of 20 percent and currently holds millions of dollars in excess reserves. If a depositor withdraws $35,000, the excess reserves of the bank will

An increase in the discount rate impacts the money supply because it

How do changes in open market operations alter the monetary base, and how do changes in the monetary base translate to changes in the money supply?

Suppose the Fed purchases $40,000 of U.S. Treasury bonds from Benjamin, who deposits the money with First National Bank. If the required reserve ratio is 20 percent, this transaction will increase the excess reserves of First National Bank by

Table 13-2 -Refer to Table 13-2. If the reserve requirement is 10 percent, then this bank

If people decide to hold less money as currency and more as checking deposits, this will most likely cause

In the United States, the money supply (M1) consists of

In order for barter trades to occur, there must be a

The federal funds market is the market where

If the required reserve ratio were decreased,

If money were not used as a medium of exchange,

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

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