Question 1

There is a

Accepted Answer

A) short-run tradeoff between inflation and unemployment. 
B) short-run tradeoff between an increase in the money supply and inflation. 
C) long-run tradeoff between inflation and unemployment. 
D) long-run tradeoff between an increase in the money supply and inflation. 
A) short-run tradeoff between inflation and unemployment. 
B) short-run tradeoff between an increase in the money supply and inflation. 
C) long-run tradeoff between inflation and unemployment. 
D) long-run tradeoff between an increase in the money supply and inflation.

Question 2

The Fed's control of the money supply is not precise because

Accepted Answer

A) Congress can also make changes to the money supply. 
B) there are not always government bonds available for purchase when the Fed wants to perform open-market operations. 
C) the Fed does not know where all U.S. currency is located. 
D) the amount of money in the economy depends in part on the behavior of depositors and bankers. 
A) Congress can also make changes to the money supply. 
B) there are not always government bonds available for purchase when the Fed wants to perform open-market operations. 
C) the Fed does not know where all U.S. currency is located. 
D) the amount of money in the economy depends in part on the behavior of depositors and bankers.

Question 3

Which of the following is not correct?

Accepted Answer

A) The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B) The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C) The Fed's primary monetary policy tool is open-market operations. 
D) All of the above are correct. 
A) The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B) The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C) The Fed's primary monetary policy tool is open-market operations. 
D) All of the above are correct.

Question 4

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A) $55 million 
B) $50 million 
C) $45 million 
D) $40 million 
A) $55 million 
B) $50 million 
C) $45 million 
D) $40 million

Question 5

Table 29-6.  
-Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

Accepted Answer

A) $500 
B) $250 
C) $2,000 
D) $3,600 
A) $500 
B) $250 
C) $2,000 
D) $3,600

Question 6

​Which of the following policies is NOT in the Fed's monetary toolbox?

Accepted Answer

A) ​Buying government bonds 
B) ​Increasing the quantity of reserves 
C) ​Lending reserves to banks 
D) ​Issuing a bank run 
A) ​Buying government bonds 
B) ​Increasing the quantity of reserves 
C) ​Lending reserves to banks 
D) ​Issuing a bank run

Question 7

Table 29-2. The information in the table pertains to an imaginary economy.  
-Refer to Table 29-2. What is the M2 money supply?

Accepted Answer

A) $1,300 billion 
B) $580 billion 
C) $880 billion 
D) $1,000 billion 
A) $1,300 billion 
B) $580 billion 
C) $880 billion 
D) $1,000 billion

Question 8

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

Accepted Answer

Since Assets - Liabilities equals Bank C

Question 9

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

Accepted Answer

A) $500 higher and M2 would be $1,500 higher. 
B) $1,000 higher and M2 would be $1,500 higher. 
C) M2 and M1 would be $1,500 higher. 
D) $1,000 high and M2 would be $500 higher. 
A) $500 higher and M2 would be $1,500 higher. 
B) $1,000 higher and M2 would be $1,500 higher. 
C) M2 and M1 would be $1,500 higher. 
D) $1,000 high and M2 would be $500 higher.

Question 10

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A) since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers. 
B) the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. 
C) while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount. 
D) federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks. 
A) since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers. 
B) the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. 
C) while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount. 
D) federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.

Question 11

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A) $48,000. 
B) $75,000. 
C) $55,200. 
D) $10,800. 
A) $48,000. 
B) $75,000. 
C) $55,200. 
D) $10,800.

Question 12

A central bank's setting (or altering) of the money supply is known as

Accepted Answer

A) open-market operation. 
B) interest rate policy. 
C) monetary policy. 
D) employment policy. 
A) open-market operation. 
B) interest rate policy. 
C) monetary policy. 
D) employment policy.

Question 13

Table 29-4.
The First Bank of Fairfield  
-Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Accepted Answer

A) reserves will increase by $100. 
B) liabilities will increase by $800. 
C) assets will decrease by $800. 
D) loans will increase by $800. 
A) reserves will increase by $100. 
B) liabilities will increase by $800. 
C) assets will decrease by $800. 
D) loans will increase by $800.

Question 14

Table 29-1. The information in the table pertains to an imaginary economy.  
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A) $9,815 billion 
B) $8,315 billion 
C) $7,565 billion 
D) $7,405 billion 
A) $9,815 billion 
B) $8,315 billion 
C) $7,565 billion 
D) $7,405 billion

Question 15

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 16

The Fed can decrease the money supply by conducting open-market

Accepted Answer

A) sales or by raising the discount rate. 
B) sales or by lowering the discount rate. 
C) purchases or by raising the discount rate. 
D) purchases or by lowering the discount rate. 
A) sales or by raising the discount rate. 
B) sales or by lowering the discount rate. 
C) purchases or by raising the discount rate. 
D) purchases or by lowering the discount rate.

Question 17

Table 29-8  
-Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will

Accepted Answer

A) increase First National's reserves by $120. Its excess reserves are $240. 
B) decrease First National's reserves by $120. Its excess reserves are $0. 
C) increase First National's loans by $120. Its reserves decrease by $120. 
D) decrease First National's loans by $120. Its reserves increase by $120. 
A) increase First National's reserves by $120. Its excess reserves are $240. 
B) decrease First National's reserves by $120. Its excess reserves are $0. 
C) increase First National's loans by $120. Its reserves decrease by $120. 
D) decrease First National's loans by $120. Its reserves increase by $120.

Question 18

The members of the Federal Reserve's Board of Governors

Accepted Answer

A) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
B) serve six-year terms. 
C) are also the presidents of the regional Federal Reserve banks. 
D) share power equally, with no governor having any more influence or power than any other governor. 
A) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
B) serve six-year terms. 
C) are also the presidents of the regional Federal Reserve banks. 
D) share power equally, with no governor having any more influence or power than any other governor.

Question 19

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

Accepted Answer

The answer of Suppose a bank has $3,000 in reserves,...

Question 20

If the discount rate is raised then banks borrow

Accepted Answer

A) more from the Fed so reserves increase. 
B) more from the Fed so reserves decrease. 
C) less from the Fed so reserves increase. 
D) less from the Fed so reserves decrease. 
A) more from the Fed so reserves increase. 
B) more from the Fed so reserves decrease. 
C) less from the Fed so reserves increase. 
D) less from the Fed so reserves decrease.

Exam 29: The Monetary System

There is a

The Fed's control of the money supply is not precise because

Which of the following is not correct?

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?

Table 29-6. -Refer to Table 29-6. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?

​Which of the following policies is NOT in the Fed's monetary toolbox?

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M2 money supply?

A bank operates with reserves of $100, loans of $300 and securities of $100. The bank's only liability is deposits of $400 since it has zero debt. Calculate the bank's leverage ratio.

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be

A problem that the Fed faces when it attempts to control the money supply is that

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

A central bank's setting (or altering) of the money supply is known as

Table 29-4. The First Bank of Fairfield -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

The money multiplier equals 1/(1 - R), where R represents the reserve ratio.

The Fed can decrease the money supply by conducting open-market

Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent and First National Bank sells $120 of its short-term securities to the Federal Reserve. This action will

The members of the Federal Reserve's Board of Governors

Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?

If the discount rate is raised then banks borrow

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 is NOT in the Fed's monetary toolbox?