Question 1

M2 consists of:

Accepted Answer

A) M1 plus savings accounts,small time deposits,money market mutual funds,and miscellaneous near-monies. 
B) coins,currency,and checkable deposits only. 
C) only near-monies. 
D) M1 plus time deposits only. 
E) M1 plus money market mutual funds only. 
A) M1 plus savings accounts,small time deposits,money market mutual funds,and miscellaneous near-monies. 
B) coins,currency,and checkable deposits only. 
C) only near-monies. 
D) M1 plus time deposits only. 
E) M1 plus money market mutual funds only.

Question 2

The Reserve Bank of Glassen is the apex banking institution in the country of Glassen.Money supply in Glassen will increase when:

Accepted Answer

A) the Reserve Bank of Glassen buys bonds from commercial banks. 
B) the Reserve Bank of Glassen raises the required reserve ratio for commercial banks. 
C) the Reserve Bank of Glassen sells government bonds to commercial banks. 
D) the Reserve Bank of Glassen raises the discount rate for commercial banks. 
E) the Reserve Bank of Glassen prints new checks. 
A) the Reserve Bank of Glassen buys bonds from commercial banks. 
B) the Reserve Bank of Glassen raises the required reserve ratio for commercial banks. 
C) the Reserve Bank of Glassen sells government bonds to commercial banks. 
D) the Reserve Bank of Glassen raises the discount rate for commercial banks. 
E) the Reserve Bank of Glassen prints new checks.

Question 3

If r is the required reserve ratio,which of the following is the simple money multiplier?

Accepted Answer

A) r 
B) 1/(1 - r) 
C) 1 - r 
D) 1/r 
E) 2r 
A) r 
B) 1/(1 - r) 
C) 1 - r 
D) 1/r 
E) 2r

Question 4

To prevent shortages of cash during a crisis,the Fed:

Accepted Answer

A) saves up cash in bank vaults around the country and the world. 
B) reduces liquidity in the economy so that more cash can be saved. 
C) sells U.S.government securities to commercial banks. 
D) demands interest payments on reserves held at the Fed. 
E) increases the discount rate. 
A) saves up cash in bank vaults around the country and the world. 
B) reduces liquidity in the economy so that more cash can be saved. 
C) sells U.S.government securities to commercial banks. 
D) demands interest payments on reserves held at the Fed. 
E) increases the discount rate.

Question 5

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,then:

Accepted Answer

A) the Fed's aim is to increase the money supply. 
B) banks are likely to lend out more money than they would if the Fed left the reserve ratio alone. 
C) banks are likely to earn higher profits than they would. 
D) the money supply will not increase as much as it would if the Fed left the reserve ratio alone. 
E) the Fed's aim is to conduct open market operations without changing the money supply. 
A) the Fed's aim is to increase the money supply. 
B) banks are likely to lend out more money than they would if the Fed left the reserve ratio alone. 
C) banks are likely to earn higher profits than they would. 
D) the money supply will not increase as much as it would if the Fed left the reserve ratio alone. 
E) the Fed's aim is to conduct open market operations without changing the money supply.

Question 6

Which of the following essential factors enables commercial banks to create money?

Accepted Answer

A) Required reserves 
B) Excess reserves​ 
C) State and local government securities 
D) U.S.government securities 
E) Net worth 
A) Required reserves 
B) Excess reserves​ 
C) State and local government securities 
D) U.S.government securities 
E) Net worth

Question 7

M1 includes currency held in bank vaults.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is included in the narrow definition of the money supply?

Accepted Answer

A) Cash in bank vaults 
B) Savings deposits 
C) Money market mutual fund accounts 
D) Negotiable certificates of deposit 
E) Checkable deposits 
A) Cash in bank vaults 
B) Savings deposits 
C) Money market mutual fund accounts 
D) Negotiable certificates of deposit 
E) Checkable deposits

Question 9

Banks are required to hold reserves against the total value of all their assets.

Accepted Answer

A) True 
 B)False

Question 10

Coins in the United States are manufactured and distributed by the:

Accepted Answer

A) Federal Reserve. 
B) U.S.Mint. 
C) International Trade Administration. 
D) Federal Bureau of Investigation. 
E) Comptroller of the Currency. 
A) Federal Reserve. 
B) U.S.Mint. 
C) International Trade Administration. 
D) Federal Bureau of Investigation. 
E) Comptroller of the Currency.

Question 11

If a bank has $1 million in assets and $50,000 in net worth,its liabilities must equal:

Accepted Answer

A) $50,000. 
B) $1,050,000. 
C) $50 million. 
D) $1,000,000. 
E) $950,000. 
A) $50,000. 
B) $1,050,000. 
C) $50 million. 
D) $1,000,000. 
E) $950,000.

Question 12

Banks in need of reserves can borrow from the Fed or in the federal funds market.

Accepted Answer

A) True 
 B)False

Question 13

If you returned a $5 Federal Reserve note to the Fed,you could receive:

Accepted Answer

A) $5 in silver. 
B) $5 in gold. 
C) 5 one-dollar bills. 
D) 10 one-dollar bills. 
E) a small gold bar. 
A) $5 in silver. 
B) $5 in gold. 
C) 5 one-dollar bills. 
D) 10 one-dollar bills. 
E) a small gold bar.

Question 14

The table below shows the balance sheet of Eubank.If Eubank is holding no excess reserves,its required reserve must be:
?Table 14.1
?
EUBANK
?
$$\begin{array} { | l | r | r | r | } 
\hline \text { Assets } &  { \text { Liabilities and Net Worth } } & \
\hline & & & \
\hline \text { Deposits at the Fed } & \$ 40,000 & \text { Checkable deposits } & \$ 500,000 \
\hline \text { Cash } & \$ 10,000 & \text { Net Worth } & \$ 20,000 \
\hline \text { Loans } & \$ 300,000 & & \
\hline \text { Securities } & \$ 150,000 & & \
\hline \text { Fed Stock } & \$ 20,000 & & \
\hline
\end{array}$$

Accepted Answer

A) 5 percent 
B) 4 percent 
C) 10 percent 
D) 20 percent 
E) 2 percent 
A) 5 percent 
B) 4 percent 
C) 10 percent 
D) 20 percent 
E) 2 percent

Question 15

If the required reserve ratio is 20 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves,the money supply:

Accepted Answer

A) decreases by $10,000. 
B) increases by $5,000. 
C) decreases by $5,000. 
D) increases by $50,000. 
E) decreases by $50,000. 
A) decreases by $10,000. 
B) increases by $5,000. 
C) decreases by $5,000. 
D) increases by $50,000. 
E) decreases by $50,000.

Question 16

Which of the following would likely increase the money supply?

Accepted Answer

A) The purchase of government securities by one bank from another bank 
B) An increase in the required reserve ratio 
C) An increase in the reserves of a commercial bank 
D) An increase in the discount rate 
E) The sale of government securities by a bank to the Fed 
A) The purchase of government securities by one bank from another bank 
B) An increase in the required reserve ratio 
C) An increase in the reserves of a commercial bank 
D) An increase in the discount rate 
E) The sale of government securities by a bank to the Fed

Question 17

Suppose the reserve requirement ratio is 20 percent.Assuming no bank holds excess reserves and nobody withdraws cash,a $10,000 injection of new reserves by the Fed can create:

Accepted Answer

A) $2,000 in new checkable deposits. 
B) $10,000 in new checkable deposits. 
C) $50,000 in new checkable deposits. 
D) $500,000 in new checkable deposits. 
E) $5,000 in cash. 
A) $2,000 in new checkable deposits. 
B) $10,000 in new checkable deposits. 
C) $50,000 in new checkable deposits. 
D) $500,000 in new checkable deposits. 
E) $5,000 in cash.

Question 18

Suppose you bank at Bank A and you write a check to your friend,who banks at Bank B.After the check clears,_____.

Accepted Answer

A) both Bank A's and Bank B's assets increase 
B) both Bank A's and Bank B's assets decrease 
C) Bank A's assets increase and Bank B's assets decrease 
D) Bank A's assets decrease and Bank B's assets increase 
E) there is an increase in the Federal Reserve's assets 
A) both Bank A's and Bank B's assets increase 
B) both Bank A's and Bank B's assets decrease 
C) Bank A's assets increase and Bank B's assets decrease 
D) Bank A's assets decrease and Bank B's assets increase 
E) there is an increase in the Federal Reserve's assets

Question 19

The least liquid of the assets listed below is:

Accepted Answer

A) real estate. 
B) currency. 
C) traveler's checks. 
D) oil. 
E) checkable deposits. 
A) real estate. 
B) currency. 
C) traveler's checks. 
D) oil. 
E) checkable deposits.

Question 20

When using a debit card,a customer directly uses his or her checking account.

Accepted Answer

A) True 
 B)False

M2 consists of:

The Reserve Bank of Glassen is the apex banking institution in the country of Glassen.Money supply in Glassen will increase when:

If r is the required reserve ratio,which of the following is the simple money multiplier?

To prevent shortages of cash during a crisis,the Fed:

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,then:

Which of the following essential factors enables commercial banks to create money?

M1 includes currency held in bank vaults.

Which of the following is included in the narrow definition of the money supply?

Banks are required to hold reserves against the total value of all their assets.

Coins in the United States are manufactured and distributed by the:

If a bank has $1 million in assets and $50,000 in net worth,its liabilities must equal:

Banks in need of reserves can borrow from the Fed or in the federal funds market.

If you returned a $5 Federal Reserve note to the Fed,you could receive:

If the required reserve ratio is 20 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves,the money supply:

Which of the following would likely increase the money supply?

Suppose the reserve requirement ratio is 20 percent.Assuming no bank holds excess reserves and nobody withdraws cash,a $10,000 injection of new reserves by the Fed can create:

Suppose you bank at Bank A and you write a check to your friend,who banks at Bank B.After the check clears,_____.

The least liquid of the assets listed below is:

When using a debit card,a customer directly uses his or her checking account.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 14: Banking and the Money Supply

M2 consists of:

The Reserve Bank of Glassen is the apex banking institution in the country of Glassen.Money supply in Glassen will increase when:

If r is the required reserve ratio,which of the following is the simple money multiplier?

To prevent shortages of cash during a crisis,the Fed:

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,then:

Which of the following essential factors enables commercial banks to create money?

M1 includes currency held in bank vaults.

Which of the following is included in the narrow definition of the money supply?

Banks are required to hold reserves against the total value of all their assets.

Coins in the United States are manufactured and distributed by the:

If a bank has $1 million in assets and $50,000 in net worth,its liabilities must equal:

Banks in need of reserves can borrow from the Fed or in the federal funds market.

If you returned a $5 Federal Reserve note to the Fed,you could receive:

If the required reserve ratio is 20 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves,the money supply:

Which of the following would likely increase the money supply?

Suppose the reserve requirement ratio is 20 percent.Assuming no bank holds excess reserves and nobody withdraws cash,a $10,000 injection of new reserves by the Fed can create:

Suppose you bank at Bank A and you write a check to your friend,who banks at Bank B.After the check clears,_____.

The least liquid of the assets listed below is:

When using a debit card,a customer directly uses his or her checking account.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters