Question 1

The Federal Reserve Board of Governors

Accepted Answer

A) rotate each four years. 
B) are appointed by the President and confirmed by the Senate. 
C) are elected by popular vote. 
D) hold lifetime appointments. 
A) rotate each four years. 
B) are appointed by the President and confirmed by the Senate. 
C) are elected by popular vote. 
D) hold lifetime appointments.

Question 2

Which of the following is correct concerning the FOMC?

Accepted Answer

A) the members of the Board of Governors have the majority of the votes 
B) the New York Federal Reserve Bank District President is always a voting member 
C) all Federal Reserve Bank presidents attend the meetings 
D) All of the above are correct. 
A) the members of the Board of Governors have the majority of the votes 
B) the New York Federal Reserve Bank District President is always a voting member 
C) all Federal Reserve Bank presidents attend the meetings 
D) All of the above are correct.

Question 3

Monetary policy is made by the ______.

Accepted Answer

Federal Op

Question 4

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A) $27,000 
B) $27,190 
C) $26,190 
D) $9,000 
A) $27,000 
B) $27,190 
C) $26,190 
D) $9,000

Question 5

Which of the following does the Federal Reserve not do?

Accepted Answer

A) conduct monetary policy 
B) act as a lender of last resort 
C) convert Federal Reserve Notes into gold 
D) serve as a bank regulator 
A) conduct monetary policy 
B) act as a lender of last resort 
C) convert Federal Reserve Notes into gold 
D) serve as a bank regulator

Question 6

Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.  
-Refer to Table 29-9. Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

Accepted Answer

A) $190,000 
B) $200,000 
C) $240,000 
D) None of the above are correct. 
A) $190,000 
B) $200,000 
C) $240,000 
D) None of the above are correct.

Question 7

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A) falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B) falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C) rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D) rises. The Fed could lessen the impact of the by selling Treasury bonds. 
A) falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B) falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C) rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D) rises. The Fed could lessen the impact of the by selling Treasury bonds.

Question 8

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Accepted Answer

A) $600 increase in excess reserves and no increase in required reserves. 
B) $600 increase in required reserves and no increase in excess reserves. 
C) $510 increase in excess reserves and a $90 increase in required reserves. 
D) $90 increase in excess reserves and a $510 increase in required reserves. 
A) $600 increase in excess reserves and no increase in required reserves. 
B) $600 increase in required reserves and no increase in excess reserves. 
C) $510 increase in excess reserves and a $90 increase in required reserves. 
D) $90 increase in excess reserves and a $510 increase in required reserves.

Question 9

Commodity money is

Accepted Answer

A) backed by gold. 
B) the principal type of money in use today. 
C) money with intrinsic value. 
D) receipts created in international trade that are used as a medium of exchange. 
A) backed by gold. 
B) the principal type of money in use today. 
C) money with intrinsic value. 
D) receipts created in international trade that are used as a medium of exchange.

Question 10

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Accepted Answer

A) $140 of new money. 
B) $14,000 of new money. 
C) $140,000 of new money. 
D) None of the above is correct. 
A) $140 of new money. 
B) $14,000 of new money. 
C) $140,000 of new money. 
D) None of the above is correct.

Question 11

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A) U.S. citizens are holding a lot of foreign currency. 
B) Currency may be a preferable store of wealth for criminals. 
C) People use credit and debit cards more frequently. 
D) All of the above help explain the abundance of currency. 
A) U.S. citizens are holding a lot of foreign currency. 
B) Currency may be a preferable store of wealth for criminals. 
C) People use credit and debit cards more frequently. 
D) All of the above help explain the abundance of currency.

Question 12

When the Fed buys government bonds,

Accepted Answer

A) the money supply increases and the federal funds rate increases. 
B) the money supply increases and the federal funds rate decreases. 
C) the money supply decreases and the federal funds rate increases. 
D) the money supply decreases and the federal funds rate decreases. 
A) the money supply increases and the federal funds rate increases. 
B) the money supply increases and the federal funds rate decreases. 
C) the money supply decreases and the federal funds rate increases. 
D) the money supply decreases and the federal funds rate decreases.

Question 13

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 14

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Fed does not control the amou

Question 15

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

Accepted Answer

The answer of When banks decide to increase their reserves,...

Question 16

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.

Accepted Answer

The answer of If you withdraw $500 from your savings...

Question 17

The Federal Reserve

Accepted Answer

A) was created in 1913. 
B) is the U.S.'s central bank. 
C) has other duties in addition to controlling the money supply. 
D) All of the above are correct. 
A) was created in 1913. 
B) is the U.S.'s central bank. 
C) has other duties in addition to controlling the money supply. 
D) All of the above are correct.

Question 18

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Accepted Answer

A) being a unit of account. 
B) being a medium of exchange. 
C) serving as a store of value. 
D) having intrinsic value. 
A) being a unit of account. 
B) being a medium of exchange. 
C) serving as a store of value. 
D) having intrinsic value.

Question 19

Table 29-1. The information in the table pertains to an imaginary economy.  
-Refer to Table 29-1. What is the value of M1 in billions of dollars?

Accepted Answer

A) $1,915 billion 
B) $1,900 billion 
C) $2,665 billion 
D) $2,825 billion 
A) $1,915 billion 
B) $1,900 billion 
C) $2,665 billion 
D) $2,825 billion

Question 20

Which list ranks assets from most to least liquid?

Accepted Answer

A) currency, demand deposits, money market mutual funds 
B) currency, money market mutual funds, demand deposits 
C) money market mutual funds, demand deposits, currency 
D) demand deposits, money market mutual funds, currency 
A) currency, demand deposits, money market mutual funds 
B) currency, money market mutual funds, demand deposits 
C) money market mutual funds, demand deposits, currency 
D) demand deposits, money market mutual funds, currency

Exam 29: The Monetary System

The Federal Reserve Board of Governors

Which of the following is correct concerning the FOMC?

Monetary policy is made by the ______.

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Which of the following does the Federal Reserve not do?

If people decide to hold more currency relative to deposits, the money supply

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

Commodity money is

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

Which of the following might explain why the United States has so much currency per person?

When the Fed buys government bonds,

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _____ and M2 will change by _____.

The Federal Reserve

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Which list ranks assets from most to least liquid?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

If you withdraw $500 from your savings account and deposit it in your checking account, then M1 will change by _ and M2 will change by _.