Question 1

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A) requires a double coincidence of wants. 
B) leads to less specialization. 
C) makes trades less costly. 
D) None of the above is correct. 
A) requires a double coincidence of wants. 
B) leads to less specialization. 
C) makes trades less costly. 
D) None of the above is correct.

Question 2

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Accepted Answer

A) True 
 B)False

Question 3

Dollar bills, rare paintings, and emerald necklaces are all

Accepted Answer

A) media of exchange. 
B) units of account. 
C) stores of value. 
D) All of the above are correct. 
A) media of exchange. 
B) units of account. 
C) stores of value. 
D) All of the above are correct.

Question 4

The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 million dollars in loans. The Fed then raises the reserve requirement from 5 percent to 10 percent. Assuming everything else stays the same, how much is the bank holding in excess reserves after the increase in the reserve requirement?

Accepted Answer

A) $0 
B) $20 million 
C) $40 million 
D) $60 million 
A) $0 
B) $20 million 
C) $40 million 
D) $60 million

Question 5

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Accepted Answer

A) $114. 
B) $2,166. 
C) $2,400. 
D) $45,600. 
A) $114. 
B) $2,166. 
C) $2,400. 
D) $45,600.

Question 6

Given the following information, what are the values of M1 and M2?

Accepted Answer

A) M1 = $4,310 billion, M2 = $6,285 billion. 
B) M1 = $2,050 billion, M2 = $9,985 billion. 
C) M1 = $2,110 billion, M2 = $8,485 billion. 
D) M1 = $3,610 billion, M2 = $9,985 billion. 
A) M1 = $4,310 billion, M2 = $6,285 billion. 
B) M1 = $2,050 billion, M2 = $9,985 billion. 
C) M1 = $2,110 billion, M2 = $8,485 billion. 
D) M1 = $3,610 billion, M2 = $9,985 billion.

Question 7

The existence of money leads to

Accepted Answer

A) greater specialization in production, but not to a higher standard of living. 
B) a higher standard of living, but not to greater specialization. 
C) greater specialization and to a higher standard of living. 
D) neither greater specialization nor to a higher standard of living. 
A) greater specialization in production, but not to a higher standard of living. 
B) a higher standard of living, but not to greater specialization. 
C) greater specialization and to a higher standard of living. 
D) neither greater specialization nor to a higher standard of living.

Question 8

Money

Accepted Answer

A) is more efficient than barter. 
B) makes trades easier. 
C) allows greater specialization. 
D) All of the above are correct. 
A) is more efficient than barter. 
B) makes trades easier. 
C) allows greater specialization. 
D) All of the above are correct.

Question 9

If a bank has a reserve ratio of 8 percent, then

Accepted Answer

A) government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B) the bank's ratio of loans to deposits is 8 percent. 
C) the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D) the bank keeps 8 percent of its assets as reserves and loans out the rest. 
A) government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B) the bank's ratio of loans to deposits is 8 percent. 
C) the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D) the bank keeps 8 percent of its assets as reserves and loans out the rest.

Question 10

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A) purchased bonds to increase banks reserves. 
B) purchased bonds to decrease banks reserves. 
C) sold bonds to increase banks reserves. 
D) sold bonds to decrease banks reserves. 
A) purchased bonds to increase banks reserves. 
B) purchased bonds to decrease banks reserves. 
C) sold bonds to increase banks reserves. 
D) sold bonds to decrease banks reserves.

Question 11

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

Accepted Answer

A) would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B) would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C) would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D) would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
A) would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B) would increase the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C) would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D) would reduce the multiplier. If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.

Question 12

Table 29-4.
The First Bank of Fairfield  
-Refer to Table 29-4. The reserve ratio for this bank is

Accepted Answer

A) 8 percent. 
B) 12.5 percent. 
C) 87.5 percent. 
D) 25 percent. 
A) 8 percent. 
B) 12.5 percent. 
C) 87.5 percent. 
D) 25 percent.

Question 13

Savings deposits are included in

Accepted Answer

A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) neither M1 nor M2. 
A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) neither M1 nor M2.

Question 14

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 15

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

Accepted Answer

Bank failures cause people to lose confi

Question 16

When the Fed conducts open-market purchases,

Accepted Answer

A) it buys Treasury securities, which increases the money supply. 
B) it buys Treasury securities, which decreases the money supply. 
C) it borrows money from member banks, which increases the money supply. 
D) it lends money to member banks, which decreases the money supply. 
A) it buys Treasury securities, which increases the money supply. 
B) it buys Treasury securities, which decreases the money supply. 
C) it borrows money from member banks, which increases the money supply. 
D) it lends money to member banks, which decreases the money supply.

Question 17

The _____ is the interest rate at which banks make overnight loans to other banks.

Accepted Answer

The answer of The _____ is the interest rate at...

Question 18

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

Accepted Answer

A) $50. 
B) $500. 
C) $4,500. 
D) $4,950. 
A) $50. 
B) $500. 
C) $4,500. 
D) $4,950.

Question 19

If the Fed raised the reserve requirement, the demand for reserves would

Accepted Answer

A) increase, so the federal funds rate would fall. 
B) increase, so the federal funds rate would rise. 
C) decrease, so the federal funds rate would fall. 
D) decrease, so the federal funds rate would rise. 
A) increase, so the federal funds rate would fall. 
B) increase, so the federal funds rate would rise. 
C) decrease, so the federal funds rate would fall. 
D) decrease, so the federal funds rate would rise.

Question 20

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

Accepted Answer

A) members of the Board of Governors and regional Federal Reserve Bank Presidents. 
B) members of the Board of Governors but not the regional Federal Reserve Bank Presidents. 
C) the regional Federal Reserve Bank Presidents, but not members of the Board of Governors. 
D) neither members of the Board of Governors nor regional Federal Reserve Bank Presidents. 
A) members of the Board of Governors and regional Federal Reserve Bank Presidents. 
B) members of the Board of Governors but not the regional Federal Reserve Bank Presidents. 
C) the regional Federal Reserve Bank Presidents, but not members of the Board of Governors. 
D) neither members of the Board of Governors nor regional Federal Reserve Bank Presidents.

Exam 29: The Monetary System

As opposed to a payments system based on barter, a payments system based on money

The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.

Dollar bills, rare paintings, and emerald necklaces are all

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

Given the following information, what are the values of M1 and M2?

The existence of money leads to

Money

If a bank has a reserve ratio of 8 percent, then

A decrease in the money supply might indicate that the Fed had

Table 29-4. The First Bank of Fairfield -Refer to Table 29-4. The reserve ratio for this bank is

Savings deposits are included in

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

When the Fed conducts open-market purchases,

The _____ is the interest rate at which banks make overnight loans to other banks.

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves amount to

If the Fed raised the reserve requirement, the demand for reserves would

Which of the following does the U.S. president appoint and the U.S. Senate confirm?

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

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