Question 1

Table 29-5.  
-Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

Accepted Answer

A) is in a position to make a new loan of $12,000. 
B) is in a position to make a new loan of $18,000. 
C) has excess reserves of $12,000. 
D) None of the above is correct. 
A) is in a position to make a new loan of $12,000. 
B) is in a position to make a new loan of $18,000. 
C) has excess reserves of $12,000. 
D) None of the above is correct.

Question 2

The regional Federal Reserve Banks

Accepted Answer

A) are not allowed to make loans to banks in their region. 
B) regulate banks in their regions. 
C) have more voting members on the FOMC than does the Board of Governors. 
D) are each headed by a member of the Board of Governors. 
A) are not allowed to make loans to banks in their region. 
B) regulate banks in their regions. 
C) have more voting members on the FOMC than does the Board of Governors. 
D) are each headed by a member of the Board of Governors.

Question 3

When conducting an open-market sale, the Fed

Accepted Answer

A) buys government bonds, and in so doing increases the money supply. 
B) buys government bonds, and in so doing decreases the money supply. 
C) sells government bonds, and in so doing increases the money supply. 
D) sells government bonds, and in so doing decreases the money supply. 
A) buys government bonds, and in so doing increases the money supply. 
B) buys government bonds, and in so doing decreases the money supply. 
C) sells government bonds, and in so doing increases the money supply. 
D) sells government bonds, and in so doing decreases the money supply.

Question 4

If an economy used gold as money, its money would be

Accepted Answer

A) commodity money, but not fiat money. 
B) fiat money, but not commodity money. 
C) both fiat and commodity money. 
D) functioning as a store of value and as a unit of account, but not as a medium of exchange. 
A) commodity money, but not fiat money. 
B) fiat money, but not commodity money. 
C) both fiat and commodity money. 
D) functioning as a store of value and as a unit of account, but not as a medium of exchange.

Question 5

Reserve requirements are regulations concerning

Accepted Answer

A) the amount banks are allowed to borrow from the Fed. 
B) the amount of reserves banks must hold against deposits. 
C) reserves banks must hold based on the number and type of loans they make. 
D) the interest rate at which banks can borrow from the Fed. 
A) the amount banks are allowed to borrow from the Fed. 
B) the amount of reserves banks must hold against deposits. 
C) reserves banks must hold based on the number and type of loans they make. 
D) the interest rate at which banks can borrow from the Fed.

Question 6

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

Accepted Answer

A) 1/(1-R). 
B) 1/R. 
C) 1/(1+R). 
D) (1+R)/R. 
A) 1/(1-R). 
B) 1/R. 
C) 1/(1+R). 
D) (1+R)/R.

Question 7

​The 2008 credit crunch occurred when banks reduced lending in response to

Accepted Answer

A) ​the loss of asset value for mortgage backed securities and mortgage loans. 
B) ​having too little capital to satisfy capital requirements. 
C) ​an excess of bank capital. 
D) ​an increase in the required reserve ratio. 
A) ​the loss of asset value for mortgage backed securities and mortgage loans. 
B) ​having too little capital to satisfy capital requirements. 
C) ​an excess of bank capital. 
D) ​an increase in the required reserve ratio.

Question 8

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Accepted Answer

No.
Any good that provides the three fun

Question 9

Commodity money cannot be used as a unit of account.

Accepted Answer

A) True 
 B)False

Question 10

Diana tutors Tiago for two hours before his economics final exam. Tiago pays Diana through a direct transfer from his bank on a payment app. Diana then uses her debit card to buy pizza for dinner from the local pizza parlor. This is an example of

Accepted Answer

A) ​the exchange of money facilitating production and trade. 
B) trade between two people who each have a good or service that the other wants. 
C) ​an inefficient allocation of scarce resources. 
D) ​the creation of money through monetary policy. 
A) ​the exchange of money facilitating production and trade. 
B) trade between two people who each have a good or service that the other wants. 
C) ​an inefficient allocation of scarce resources. 
D) ​the creation of money through monetary policy.

Question 11

The agency responsible for regulating the U.S. monetary system is the

Accepted Answer

A) U.S. Treasury 
B) Federal Reserve 
C) Department of Justice 
D) Federal Trade Commission 
A) U.S. Treasury 
B) Federal Reserve 
C) Department of Justice 
D) Federal Trade Commission

Question 12

Which of the following is not included in either M1 or M2?

Accepted Answer

A) money market deposit accounts 
B) large time deposit 
C) demand deposits 
D) money market mutual funds 
A) money market deposit accounts 
B) large time deposit 
C) demand deposits 
D) money market mutual funds

Question 13

The president of each regional Federal Reserve Bank is appointed by

Accepted Answer

A) the U.S. president with the approval of the Senate. 
B) the Board of Governors. 
C) the voting members of the Federal Open Market Committee. 
D) the board of directors of that regional Federal Reserve Bank. 
A) the U.S. president with the approval of the Senate. 
B) the Board of Governors. 
C) the voting members of the Federal Open Market Committee. 
D) the board of directors of that regional Federal Reserve Bank.

Question 14

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Accepted Answer

A) must increase required reserves by $50. 
B) will initially see reserves increase by $500. 
C) will be able to use this deposit to make new loans amounting to $450. 
D) All of the above are correct. 
A) must increase required reserves by $50. 
B) will initially see reserves increase by $500. 
C) will be able to use this deposit to make new loans amounting to $450. 
D) All of the above are correct.

Question 15

Monetary policy has an important influence on _____ and _____ in the short run.

Accepted Answer

inflation,

Question 16

Which of the following is correct?

Accepted Answer

A) The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
B) The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
C) The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
D) The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
A) The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
B) The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. 
C) The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. 
D) The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

Question 17

The money multiplier equals

Accepted Answer

A) 1/R, where R represents the quantity of reserves in the economy. 
B) 1/R, where R represents the reserve ratio for all banks in the economy. 
C) 1/(1+R), where R represents the quantity of reserves in the economy. 
D) 1/(1+R), where R represents the reserve ratio for all banks in the economy. 
A) 1/R, where R represents the quantity of reserves in the economy. 
B) 1/R, where R represents the reserve ratio for all banks in the economy. 
C) 1/(1+R), where R represents the quantity of reserves in the economy. 
D) 1/(1+R), where R represents the reserve ratio for all banks in the economy.

Question 18

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

Accepted Answer

A) 5 percent, 8 percent 
B) 4 percent, 8 percent 
C) 4 percent, 5 percent 
D) None of the above is correct. 
A) 5 percent, 8 percent 
B) 4 percent, 8 percent 
C) 4 percent, 5 percent 
D) None of the above is correct.

Question 19

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

Accepted Answer

A) must increase its required reserves by $10. 
B) will initially see its total reserves increase by $10.50. 
C) will be able to make new loans up to a maximum of $9.50. 
D) All of the above are correct. 
A) must increase its required reserves by $10. 
B) will initially see its total reserves increase by $10.50. 
C) will be able to make new loans up to a maximum of $9.50. 
D) All of the above are correct.

Question 20

Consider five high school students working on homework in study hall.   Which of the following pairs of students has a double coincidence of wants?

Accepted Answer

A) Rosie and Piper 
B) Piper and Molly 
C) Dewey and Molly 
D) Bob and Dewey 
A) Rosie and Piper 
B) Piper and Molly 
C) Dewey and Molly 
D) Bob and Dewey

Exam 29: The Monetary System

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

The regional Federal Reserve Banks

When conducting an open-market sale, the Fed

If an economy used gold as money, its money would be

Reserve requirements are regulations concerning

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

​The 2008 credit crunch occurred when banks reduced lending in response to

In many circumstances, prisoners are not allowed to possess cash. Does this mean there is no money in prison? Explain.

Commodity money cannot be used as a unit of account.

Diana tutors Tiago for two hours before his economics final exam. Tiago pays Diana through a direct transfer from his bank on a payment app. Diana then uses her debit card to buy pizza for dinner from the local pizza parlor. This is an example of

The agency responsible for regulating the U.S. monetary system is the

Which of the following is not included in either M1 or M2?

The president of each regional Federal Reserve Bank is appointed by

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Monetary policy has an important influence on _____ and _____ in the short run.

Which of the following is correct?

The money multiplier equals

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

Consider five high school students working on homework in study hall. Which of the following pairs of students has a double coincidence of wants?

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

The 2008 credit crunch occurred when banks reduced lending in response to

Monetary policy has an important influence on _ and _ in the short run.