Question 1

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Accepted Answer

A) has no intrinsic value. The exchange is an example of barter. 
B) has no intrinsic value. The exchange is not an example of barter. 
C) has intrinsic value. The exchange is not an example of barter. 
D) Has intrinsic value. The exchange is not an example of barter. 
A) has no intrinsic value. The exchange is an example of barter. 
B) has no intrinsic value. The exchange is not an example of barter. 
C) has intrinsic value. The exchange is not an example of barter. 
D) Has intrinsic value. The exchange is not an example of barter.

Question 2

Which of the following statements is correct?

Accepted Answer

A) All items that are included in M1 are included also in M2. 
B) All items that are included in M2 are included also in M1. 
C) Credit cards are included in both M1 and M2. 
D) Savings deposits are included in both M1 and M2. 
A) All items that are included in M1 are included also in M2. 
B) All items that are included in M2 are included also in M1. 
C) Credit cards are included in both M1 and M2. 
D) Savings deposits are included in both M1 and M2.

Question 3

​Which of the following policies can the Fed follow to increase the money supply?

Accepted Answer

A) ​Reduce the interest rate on reserves 
B) ​Increase reserve requirements for banks 
C) ​Reduce the quantity of funds available through the Term Auction Facility 
D) ​Sell government bonds 
A) ​Reduce the interest rate on reserves 
B) ​Increase reserve requirements for banks 
C) ​Reduce the quantity of funds available through the Term Auction Facility 
D) ​Sell government bonds

Question 4

The Fed ____ bonds when it conducts an open-market purchase. This action _____ the money supply.

Accepted Answer

The answer of The Fed ____ bonds when it conducts...

Question 5

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A) attend each FOMC meeting. 
B) have voting rights at each FOMC meeting. 
C) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
D) All of the above are correct. 
A) attend each FOMC meeting. 
B) have voting rights at each FOMC meeting. 
C) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
D) All of the above are correct.

Question 6

Monetary policy affects employment

Accepted Answer

A) only in the long run. 
B) only in the short run. 
C) in both the long run and the short run. 
D) in neither the long run nor the short run. 
A) only in the long run. 
B) only in the short run. 
C) in both the long run and the short run. 
D) in neither the long run nor the short run.

Question 7

Money is the most liquid asset available because

Accepted Answer

A) it is a store of value. 
B) it is a medium of exchange. 
C) it is a unit of account. 
D) it has intrinsic value. 
A) it is a store of value. 
B) it is a medium of exchange. 
C) it is a unit of account. 
D) it has intrinsic value.

Question 8

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o

Question 9

The leverage ratio is calculated as

Accepted Answer

A) assets minus liabilities. 
B) assets divided by bank capital 
C) the reciprocal of the required reserve ratio 
D) the required reserve ratio multiplied by bank capital. 
A) assets minus liabilities. 
B) assets divided by bank capital 
C) the reciprocal of the required reserve ratio 
D) the required reserve ratio multiplied by bank capital.

Question 10

Which of the following lists is included in what economists call "money"?

Accepted Answer

A) cash 
B) cash and stocks and bonds 
C) cash and stocks and bonds and real estate 
D) cash and stocks and bonds and real estate and all other assets 
A) cash 
B) cash and stocks and bonds 
C) cash and stocks and bonds and real estate 
D) cash and stocks and bonds and real estate and all other assets

Question 11

A double coincidence of wants

Accepted Answer

A) is required when there is no item in an economy that is widely accepted in exchange for goods and services. 
B) is required in an economy that relies on barter. 
C) is a hindrance to the allocation of resources when it is required for trade. 
D) All of the above are correct. 
A) is required when there is no item in an economy that is widely accepted in exchange for goods and services. 
B) is required in an economy that relies on barter. 
C) is a hindrance to the allocation of resources when it is required for trade. 
D) All of the above are correct.

Question 12

Imagine an economy in which: (1) pieces of paper called yollars are the only thing that buyers give to sellers when they buy goods and services, so it would be common to use, say, 50 yollars to buy a pair of shoes; (2) prices are posted in terms of yardsticks, so you might walk into a grocery store and see that, today, an apple is worth 2 yardsticks; and (3) yardsticks disintegrate overnight, so no yardstick has any value for more than 24 hours. In this economy,

Accepted Answer

A) the yardstick is a medium of exchange but it cannot serve as a unit of account. 
B) the yardstick is a unit of account but it cannot serve as a store of value. 
C) the yardstick is a medium of exchange but it cannot serve as a store of value, and the yollar is a unit of account. 
D) the yollar is a unit of account, but it is not a medium of exchange and it is not a liquid asset. 
A) the yardstick is a medium of exchange but it cannot serve as a unit of account. 
B) the yardstick is a unit of account but it cannot serve as a store of value. 
C) the yardstick is a medium of exchange but it cannot serve as a store of value, and the yollar is a unit of account. 
D) the yollar is a unit of account, but it is not a medium of exchange and it is not a liquid asset.

Question 13

If the reserve ratio is 7.5 percent, the money multiplier is

Accepted Answer

A) 7.5. 
B) 10.3. 
C) 13.3. 
D) 11.3. 
A) 7.5. 
B) 10.3. 
C) 13.3. 
D) 11.3.

Question 14

M1 equals currency plus demand deposits plus

Accepted Answer

A) nothing else. 
B) other checkable deposits. 
C) traveler's checks plus other checkable deposits. 
D) traveler's checks plus other checkable deposits plus savings deposits. 
A) nothing else. 
B) other checkable deposits. 
C) traveler's checks plus other checkable deposits. 
D) traveler's checks plus other checkable deposits plus savings deposits.

Question 15

Which of the following is NOT required for paper dollars to work as a medium of exchange?

Accepted Answer

A) An established and regulated system of fiat money 
B) ​Intrinsic value backed by gold 
C) ​Government prosecution of counterfeiters 
D) Acceptance as part of social convention 
A) An established and regulated system of fiat money 
B) ​Intrinsic value backed by gold 
C) ​Government prosecution of counterfeiters 
D) Acceptance as part of social convention

Question 16

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of

Accepted Answer

A) ​barter, since the sneakers in the correct size represent a medium of exchange. 
B) ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher. 
C) ​money, since the sneakers in the correct size do not have any intrinsic value. 
D) money, since the sneakers in the correct size represent a medium of exchange. 
A) ​barter, since the sneakers in the correct size represent a medium of exchange. 
B) ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher. 
C) ​money, since the sneakers in the correct size do not have any intrinsic value. 
D) money, since the sneakers in the correct size represent a medium of exchange.

Question 17

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A) the Fed increased the reserve ratio from 5 percent to 8 percent. 
B) the Fed increased the fed funds rate from 5 percent to 8 percent. 
C) the Fed decreased the reserve ratio from 8 percent to 5 percent. 
D) the Fed decreased the fed funds rate from 8 percent to 5 percent. 
A) the Fed increased the reserve ratio from 5 percent to 8 percent. 
B) the Fed increased the fed funds rate from 5 percent to 8 percent. 
C) the Fed decreased the reserve ratio from 8 percent to 5 percent. 
D) the Fed decreased the fed funds rate from 8 percent to 5 percent.

Question 18

What is bank insolvancy?

Accepted Answer

Bank insolvancy is when bank c

Question 19

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $3,600 in deposits. 
B) It has $32,400 in deposits. 
C) It has $39,600 in deposits. 
D) It has $40,000 in deposits. 
A) It has $3,600 in deposits. 
B) It has $32,400 in deposits. 
C) It has $39,600 in deposits. 
D) It has $40,000 in deposits.

Question 20

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Which of the following statements is correct?

​Which of the following policies can the Fed follow to increase the money supply?

The Fed ____ bonds when it conducts an open-market purchase. This action _____ the money supply.

All of the presidents of the regional Federal Reserve banks

Monetary policy affects employment

Money is the most liquid asset available because

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

The leverage ratio is calculated as

Which of the following lists is included in what economists call "money"?

A double coincidence of wants

If the reserve ratio is 7.5 percent, the money multiplier is

M1 equals currency plus demand deposits plus

Which of the following is NOT required for paper dollars to work as a medium of exchange?

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of

If the money multiplier decreased from 20 to 12.5, then

What is bank insolvancy?

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

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

Which of the following policies can the Fed follow to increase the money supply?

The Fed bonds when it conducts an open-market purchase. This action _ the money supply.