Question 1

The money multiplier is _____ when the reserve ratio is 12.5 percent.

Accepted Answer

The answer of The money multiplier is _____ when the...

Question 2

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Accepted Answer

A) $5,000 billion 
B) $4,937.5 billion 
C) $5,062.5 billion 
D) $4,995 billion 
A) $5,000 billion 
B) $4,937.5 billion 
C) $5,062.5 billion 
D) $4,995 billion

Question 3

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 4

When the Fed purchases government bonds the money supply _____ and the federal funds rate _____.

Accepted Answer

increases,

Question 5

Table 29-4.
The First Bank of Fairfield  
-Refer to Table 29-4. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be

Accepted Answer

A) $40. 
B) $437.50. 
C) $71.42. 
D) $428.57. 
A) $40. 
B) $437.50. 
C) $71.42. 
D) $428.57.

Question 6

The federal funds rate is the

Accepted Answer

A) percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B) percentage of deposits that banks must hold as reserves. 
C) interest rate at which the Federal Reserve makes short-term loans to banks. 
D) interest rate at which banks lend reserves to each other overnight. 
A) percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B) percentage of deposits that banks must hold as reserves. 
C) interest rate at which the Federal Reserve makes short-term loans to banks. 
D) interest rate at which banks lend reserves to each other overnight.

Question 7

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Accepted Answer

A) $6,400. 
B) $8,000. 
C) $12,500. 
D) $10,000. 
A) $6,400. 
B) $8,000. 
C) $12,500. 
D) $10,000.

Question 8

Paper money

Accepted Answer

A) has a high intrinsic value. 
B) is the primary medium of exchange in a barter economy. 
C) is valuable because it is generally accepted in trade. 
D) is valuable only because of the legal tender requirement. 
A) has a high intrinsic value. 
B) is the primary medium of exchange in a barter economy. 
C) is valuable because it is generally accepted in trade. 
D) is valuable only because of the legal tender requirement.

Question 9

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Accepted Answer

A) decrease and the money supply eventually decreases. 
B) decrease but the money supply does not change. 
C) increase and the money supply eventually increases. 
D) increase but the money supply does not change. 
A) decrease and the money supply eventually decreases. 
B) decrease but the money supply does not change. 
C) increase and the money supply eventually increases. 
D) increase but the money supply does not change.

Question 10

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

Accepted Answer

A) money supply to fall. To reduce the impact of this the Fed could lower the discount rate. 
B) money supply to fall. To reduce the impact of this the Fed could raise the discount rate. 
C) money supply to rise. To reduce the impact of this the Fed could lower the discount rate. 
D) money supply to rise. To reduce the impact of this the Fed could raise the discount rate. 
A) money supply to fall. To reduce the impact of this the Fed could lower the discount rate. 
B) money supply to fall. To reduce the impact of this the Fed could raise the discount rate. 
C) money supply to rise. To reduce the impact of this the Fed could lower the discount rate. 
D) money supply to rise. To reduce the impact of this the Fed could raise the discount rate.

Question 11

When a bank loans out $1,000, the money supply

Accepted Answer

A) does not change. 
B) decreases. 
C) increases. 
D) may do any of the above. 
A) does not change. 
B) decreases. 
C) increases. 
D) may do any of the above.

Question 12

Which of the following best illustrates the unit of account function of money?

Accepted Answer

A) You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 
B) You pay for your theater tickets with dollars. 
C) You hold currency even though you don't intend to spend it right away. 
D) None of the above is correct. 
A) You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 
B) You pay for your theater tickets with dollars. 
C) You hold currency even though you don't intend to spend it right away. 
D) None of the above is correct.

Question 13

The set of items that serve as media of exchange clearly includes

Accepted Answer

A) balances that lie behind debit cards. 
B) demand deposits. 
C) other checkable deposits. 
D) All of the above are correct. 
A) balances that lie behind debit cards. 
B) demand deposits. 
C) other checkable deposits. 
D) All of the above are correct.

Question 14

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Accepted Answer

A) FOMC 
B) the Board of Governors 
C) the New York Fed 
D) the regional Federal Reserve Banks 
A) FOMC 
B) the Board of Governors 
C) the New York Fed 
D) the regional Federal Reserve Banks

Question 15

At any given time, the voting members of the Federal Open Market Committee include

Accepted Answer

A) five of the presidents of the regional Federal Reserve banks. 
B) the president of the Federal Reserve Bank of New York. 
C) the seven members of the Board of Governors. 
D) All of the above are correct. 
A) five of the presidents of the regional Federal Reserve banks. 
B) the president of the Federal Reserve Bank of New York. 
C) the seven members of the Board of Governors. 
D) All of the above are correct.

Question 16

The Federal Open Market Committee meets approximately

Accepted Answer

A) every three weeks 
B) every six weeks 
C) every 3 months 
D) every 6 months. 
A) every three weeks 
B) every six weeks 
C) every 3 months 
D) every 6 months.

Question 17

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 18

Which of the following both increase the money supply?

Accepted Answer

A) an increase in the discount rate and an increase in the interest rate on reserves 
B) an increase in the discount rate and a decrease in the interest rate on reserves 
C) a decrease in the discount rate and an increase in the interest rate on reserves 
D) a decrease in the discount rate and a decrease in the interest rate on reserves 
A) an increase in the discount rate and an increase in the interest rate on reserves 
B) an increase in the discount rate and a decrease in the interest rate on reserves 
C) a decrease in the discount rate and an increase in the interest rate on reserves 
D) a decrease in the discount rate and a decrease in the interest rate on reserves

Question 19

​Bank runs are only a concern under a fractional-reserve banking system.

Accepted Answer

A) True 
 B)False

Question 20

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

Accepted Answer

A) $8,000 of new money. 
B) $16,000 of new money. 
C) $32,000 of new money. 
D) None of the above is correct. 
A) $8,000 of new money. 
B) $16,000 of new money. 
C) $32,000 of new money. 
D) None of the above is correct.

Exam 29: The Monetary System

The money multiplier is _____ when the reserve ratio is 12.5 percent.

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

Federal Reserve governors are given long terms to insulate them from politics.

When the Fed purchases government bonds the money supply _____ and the federal funds rate _____.

The federal funds rate is the

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

Paper money

If the public decides to hold more currency and fewer deposits in banks, bank reserves

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the

When a bank loans out $1,000, the money supply

Which of the following best illustrates the unit of account function of money?

The set of items that serve as media of exchange clearly includes

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

At any given time, the voting members of the Federal Open Market Committee include

The Federal Open Market Committee meets approximately

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Which of the following both increase the money supply?

​Bank runs are only a concern under a fractional-reserve banking system.

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

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

When the Fed purchases government bonds the money supply _ and the federal funds rate _.

Bank runs are only a concern under a fractional-reserve banking system.