Question 1

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

Accepted Answer

A) M1 = $3,150 billion, M2 = $6,200 billion. 
B) M1 = $1,350 billion, M2 = $5,600 billion. 
C) M1 = $1,400 billion, M2 = $6,200 billion. 
D) M1 = $1,300 billion, M2 = $5,600 billion. 
A) M1 = $3,150 billion, M2 = $6,200 billion. 
B) M1 = $1,350 billion, M2 = $5,600 billion. 
C) M1 = $1,400 billion, M2 = $6,200 billion. 
D) M1 = $1,300 billion, M2 = $5,600 billion.

Question 2

What is the Term Auction Facility?

Accepted Answer

The Term Auction Facility is the market

Question 3

Banks are able to create money only when

Accepted Answer

A) interest rates are above 2%. 
B) the Fed sells U.S. government bonds. 
C) the reserve ratio is 100%. 
D) only a fraction of deposits are held in reserve. 
A) interest rates are above 2%. 
B) the Fed sells U.S. government bonds. 
C) the reserve ratio is 100%. 
D) only a fraction of deposits are held in reserve.

Question 4

Small time 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 5

The Federal Reserve was created

Accepted Answer

A) in 1913 by Congress 
B) as a result of the Great Depression 
C) according to the standards enforced by NATO 
D) by President Kennedy 
A) in 1913 by Congress 
B) as a result of the Great Depression 
C) according to the standards enforced by NATO 
D) by President Kennedy

Question 6

Table 29-7.  
-Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Accepted Answer

A) 8.1 percent 
B) 11.0 percent 
C) 12.4 percent 
D) 89.0 percent 
A) 8.1 percent 
B) 11.0 percent 
C) 12.4 percent 
D) 89.0 percent

Question 7

Which of the following can the Fed do to change the money supply?

Accepted Answer

A) change reserves or change the reserve ratio 
B) change reserves but not change the reserve ratio 
C) change the reserve ratio but not change the reserve ratio 
D) neither change reserves nor change the reserve ratio 
A) change reserves or change the reserve ratio 
B) change reserves but not change the reserve ratio 
C) change the reserve ratio but not change the reserve ratio 
D) neither change reserves nor change the reserve ratio

Question 8

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

Accepted Answer

A) First Raven's required reserves increase by $480. 
B) First Raven will be able to lend out $7,520. 
C) First Raven's assets and liabilities both will increase by $8,000. 
D) All of the above are correct. 
A) First Raven's required reserves increase by $480. 
B) First Raven will be able to lend out $7,520. 
C) First Raven's assets and liabilities both will increase by $8,000. 
D) All of the above are correct.

Question 9

To increase the money supply, the Fed could

Accepted Answer

A) sell government bonds. 
B) auction more loans to banks. 
C) increase the reserve requirement. 
D) None of the above is correct. 
A) sell government bonds. 
B) auction more loans to banks. 
C) increase the reserve requirement. 
D) None of the above is correct.

Question 10

The discount rate is the interest rate that

Accepted Answer

A) banks charge one another for loans. 
B) banks charge the Fed for loans. 
C) the Fed charges banks for loans. 
D) the Fed charges Congress for loans. 
A) banks charge one another for loans. 
B) banks charge the Fed for loans. 
C) the Fed charges banks for loans. 
D) the Fed charges Congress for loans.

Question 11

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

Accepted Answer

A) the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy. 
B) the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. 
C) the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. 
D) the Fed does not control the amount of money that households choose to hold as deposits in banks. 
A) the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy. 
B) the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. 
C) the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. 
D) the Fed does not control the amount of money that households choose to hold as deposits in banks.

Question 12

The primary tool used by the Federal Reserve to change the money supply is _____.

Accepted Answer

open-marke

Question 13

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Accepted Answer

A) eventually increases the money supply by $1000. 
B) leaves the size of the money supply unchanged. 
C) eventually decreases the size of the money supply by $1000. 
D) eventually increases the money supply by $2000. 
A) eventually increases the money supply by $1000. 
B) leaves the size of the money supply unchanged. 
C) eventually decreases the size of the money supply by $1000. 
D) eventually increases the money supply by $2000.

Question 14

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are

Question 15

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 16

On a bank's T-account, which are part of the banks liabilities?

Accepted Answer

A) both deposits made by its customers and reserves 
B) deposits made by its customers but not reserves 
C) reserves but not deposits made by its customers 
D) neither deposits made by its customers nor reserves 
A) both deposits made by its customers and reserves 
B) deposits made by its customers but not reserves 
C) reserves but not deposits made by its customers 
D) neither deposits made by its customers nor reserves

Question 17

Table 29-5.  
-Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

Accepted Answer

A) is in a position to make a new loan of $14,000. 
B) has fewer reserves than are required. 
C) has excess reserves of $16,400. 
D) None of the above is correct. 
A) is in a position to make a new loan of $14,000. 
B) has fewer reserves than are required. 
C) has excess reserves of $16,400. 
D) None of the above is correct.

Question 18

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Accepted Answer

A) and the money supply increase. 
B) and the money supply decrease. 
C) increase, but leaves the money supply unchanged. 
D) decrease, but leaves the money supply unchanged. 
A) and the money supply increase. 
B) and the money supply decrease. 
C) increase, but leaves the money supply unchanged. 
D) decrease, but leaves the money supply unchanged.

Question 19

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 20

Credit cards are a medium of exchange.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

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

What is the Term Auction Facility?

Banks are able to create money only when

Small time deposits are included in

The Federal Reserve was created

Table 29-7. -Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

Which of the following can the Fed do to change the money supply?

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

To increase the money supply, the Fed could

The discount rate is the interest rate that

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

The primary tool used by the Federal Reserve to change the money supply is _____.

If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account

Are credit cards and debit cards money? What's the difference between credit and debit cards?

On a bank's T-account, which are part of the banks liabilities?

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Credit cards are a medium of exchange.

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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