Question 1

One surprising thing about the U.S. money stock is that

Accepted Answer

A) banks hold so much currency relative to the public. 
B) the public holds so much currency relative to banks. 
C) there is so little currency per person. 
D) there is so much currency per person. 
A) banks hold so much currency relative to the public. 
B) the public holds so much currency relative to banks. 
C) there is so little currency per person. 
D) there is so much currency per person.

Question 2

The Board of Governors

Accepted Answer

A) is chaired by the U.S. Secretary of the Treasury. 
B) members are elected by the U.S. public. 
C) has 7 members. 
D) All of the above are correct. 
A) is chaired by the U.S. Secretary of the Treasury. 
B) members are elected by the U.S. public. 
C) has 7 members. 
D) All of the above are correct.

Question 3

The discount rate is

Accepted Answer

A) the rate at which public banks lend to other public banks. 
B) the rate at which the Fed lends to banks. 
C) the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D) the percentage of deposits banks hold as excess reserves. 
A) the rate at which public banks lend to other public banks. 
B) the rate at which the Fed lends to banks. 
C) the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D) the percentage of deposits banks hold as excess reserves.

Question 4

Which of the following is not included in M1?

Accepted Answer

A) currency 
B) demand deposits 
C) savings deposits 
D) traveler's checks 
A) currency 
B) demand deposits 
C) savings deposits 
D) traveler's checks

Question 5

In a system of 100-percent-reserve banking, the purpose of a bank is to

Accepted Answer

A) make loans to households. 
B) influence the money supply. 
C) give depositors a safe place to keep their money. 
D) buy and sell gold. 
A) make loans to households. 
B) influence the money supply. 
C) give depositors a safe place to keep their money. 
D) buy and sell gold.

Question 6

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

Accepted Answer

A) the Board of Governors. 
B) the FOMC. 
C) the regional Federal Reserve Bank presidents. 
D) the U.S. Treasury. 
A) the Board of Governors. 
B) the FOMC. 
C) the regional Federal Reserve Bank presidents. 
D) the U.S. Treasury.

Question 7

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Accepted Answer

A) New York is the traditional financial center of the U.S. economy. 
B) All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C) New York has higher population than other cities in the U.S. 
D) All of the above are reasons. 
A) New York is the traditional financial center of the U.S. economy. 
B) All Fed purchases and sales of bonds go through the New York Fed's trading desk. 
C) New York has higher population than other cities in the U.S. 
D) All of the above are reasons.

Question 8

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

Accepted Answer

A) buy $300,000 worth of bonds. 
B) buy $225,000 worth of bonds. 
C) sell $300,000 worth of bonds. 
D) sell $225,000 worth of bonds. 
A) buy $300,000 worth of bonds. 
B) buy $225,000 worth of bonds. 
C) sell $300,000 worth of bonds. 
D) sell $225,000 worth of bonds.

Question 9

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Accepted Answer

A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply. 
A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply.

Question 10

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 11

The money stock in the economy is​

Accepted Answer

A) ​the amount of wealth accumulating in the economy, such as currency and demand deposits. 
B) ​the amount of wealth accumulating in the economy, such as money market mutual funds and stocks. 
C) ​the quantity of money circulating in the economy, such as currency and demand deposits. 
D) ​​the quantity of money circulating in the economy, such as money market mutual funds and stocks. 
A) ​the amount of wealth accumulating in the economy, such as currency and demand deposits. 
B) ​the amount of wealth accumulating in the economy, such as money market mutual funds and stocks. 
C) ​the quantity of money circulating in the economy, such as currency and demand deposits. 
D) ​​the quantity of money circulating in the economy, such as money market mutual funds and stocks.

Question 12

Which of the following is an example of commodity money?

Accepted Answer

A) ​Rare baseball cards 
B) ​Euros 
C) ​Stocks 
D) ​The gold standard 
A) ​Rare baseball cards 
B) ​Euros 
C) ​Stocks 
D) ​The gold standard

Question 13

To decrease the money supply, the Fed could

Accepted Answer

A) sell government bonds. 
B) increase the discount rate. 
C) increase the reserve requirement. 
D) All of the above are correct. 
A) sell government bonds. 
B) increase the discount rate. 
C) increase the reserve requirement. 
D) All of the above are correct.

Question 14

The money supply decreases if

Accepted Answer

A) households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
B) households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. 
C) households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
D) households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans. 
A) households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
B) households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. 
C) households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. 
D) households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.

Question 15

Credit cards are

Accepted Answer

A) a medium of exchange. 
B) counted as part of M2 but not as part of M1. 
C) important for analyzing the monetary system. 
D) All of the above are correct. 
A) a medium of exchange. 
B) counted as part of M2 but not as part of M1. 
C) important for analyzing the monetary system. 
D) All of the above are correct.

Question 16

In a fractional-reserve banking system, a decrease in reserve requirements

Accepted Answer

A) increases both the money multiplier and the money supply. 
B) decreases both the money multiplier and the money supply. 
C) increases the money multiplier, but decreases the money supply. 
D) decreases the money multiplier, but increases the money supply. 
A) increases both the money multiplier and the money supply. 
B) decreases both the money multiplier and the money supply. 
C) increases the money multiplier, but decreases the money supply. 
D) decreases the money multiplier, but increases the money supply.

Question 17

​If $500 of new reserves generates $1000 of new money in the economy, then the money multiplier is

Accepted Answer

A) 2 and the reserve ratio is 50 percent. 
B) ​2 and the reserve ratio is 2 percent. 
C) ​0.5 and the reserve ratio is 50 percent. 
D) ​0.5 and the reserve ratio is 2 percent. 
A) 2 and the reserve ratio is 50 percent. 
B) ​2 and the reserve ratio is 2 percent. 
C) ​0.5 and the reserve ratio is 50 percent. 
D) ​0.5 and the reserve ratio is 2 percent.

Question 18

​FOMC voting rights

Accepted Answer

A) are given to all twelve regional bank presidents. 
B) ​rotate among the twelve regional bank presidents. 
C) ​rotate among the twelve regional bank presidents, except the president of the New York Fed, who always gets a vote. 
D) ​are all given to the president of the New York Fed, since all of the Fed's bond sales and purchases are conducted at the New York Fed trading desk. 
A) are given to all twelve regional bank presidents. 
B) ​rotate among the twelve regional bank presidents. 
C) ​rotate among the twelve regional bank presidents, except the president of the New York Fed, who always gets a vote. 
D) ​are all given to the president of the New York Fed, since all of the Fed's bond sales and purchases are conducted at the New York Fed trading desk.

Question 19

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

Question 20

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

One surprising thing about the U.S. money stock is that

The Board of Governors

The discount rate is

Which of the following is not included in M1?

In a system of 100-percent-reserve banking, the purpose of a bank is to

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

The money stock in the economy is​

Which of the following is an example of commodity money?

To decrease the money supply, the Fed could

The money supply decreases if

Credit cards are

In a fractional-reserve banking system, a decrease in reserve requirements

​If $500 of new reserves generates $1000 of new money in the economy, then the money multiplier is

​FOMC voting rights

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

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 money stock in the economy is

If $500 of new reserves generates $1000 of new money in the economy, then the money multiplier is

FOMC voting rights