Question 1

At the Federal Reserve,

Accepted Answer

A) the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks. 
B) the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year. 
C) the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks. 
D) the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year. 
A) the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks. 
B) the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year. 
C) the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks. 
D) the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year.

Question 2

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A) the Board of Governors 
B) the FOMC 
C) the regional Federal Reserve Bank presidents 
D) the Central Bank Policy Commission 
A) the Board of Governors 
B) the FOMC 
C) the regional Federal Reserve Bank presidents 
D) the Central Bank Policy Commission

Question 3

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Accepted Answer

A) $30 of new money. 
B) $3,000 of new money. 
C) $12,000 of new money. 
D) None of the above is correct. 
A) $30 of new money. 
B) $3,000 of new money. 
C) $12,000 of new money. 
D) None of the above is correct.

Question 4

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Accepted Answer

A) reserves and the money supply increase by less than $100 million. 
B) reserves increase by $100 million and the money supply increases by $100 million. 
C) reserves increase by $100 million and the money supply increases by more than $100 million. 
D) both reserves and the money supply increase by more than $100 million. 
A) reserves and the money supply increase by less than $100 million. 
B) reserves increase by $100 million and the money supply increases by $100 million. 
C) reserves increase by $100 million and the money supply increases by more than $100 million. 
D) both reserves and the money supply increase by more than $100 million.

Question 5

Which of the following is included in M2 but not in M1?

Accepted Answer

A) currency 
B) demand deposits 
C) savings deposits 
D) All of the above are included in both M1 and M2. 
A) currency 
B) demand deposits 
C) savings deposits 
D) All of the above are included in both M1 and M2.

Question 6

Which type of money has intrinsic value?

Accepted Answer

A) commodity money 
B) fiat money 
C) both commodity money and fiat money 
D) neither commodity money nor fiat money 
A) commodity money 
B) fiat money 
C) both commodity money and fiat money 
D) neither commodity money nor fiat money

Question 7

Which of the following items is not included in the most narrow definition of money, M1?

Accepted Answer

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

Question 8

In the U.S., the average adult holds about $4,490 in

Accepted Answer

A) currency. 
B) wealth. 
C) M1. 
D) M2. 
A) currency. 
B) wealth. 
C) M1. 
D) M2.

Question 9

What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

Accepted Answer

The answer of What is the change in the money...

Question 10

Table 29-7.  
-Refer to Table 29-7. Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase?

Accepted Answer

A) $37,800 
B) $18,000 
C) $2,000 
D) $16,300 
A) $37,800 
B) $18,000 
C) $2,000 
D) $16,300

Question 11

An open-market purchase

Accepted Answer

A) increases the number of dollars and the number of bonds in the hands of the public. 
B) increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C) decreases the number of dollars and the number of bonds in the hands of the public. 
D) decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public. 
A) increases the number of dollars and the number of bonds in the hands of the public. 
B) increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. 
C) decreases the number of dollars and the number of bonds in the hands of the public. 
D) decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Question 12

Which of the following is included in both M1 and M2?

Accepted Answer

A) currency 
B) demand deposits 
C) other checkable deposits 
D) All of the above are correct. 
A) currency 
B) demand deposits 
C) other checkable deposits 
D) All of the above are correct.

Question 13

The Fed decreases reserves if it conducts open market

Accepted Answer

A) purchases or auctions term credit. 
B) purchases but not if it auctions term credit 
C) sales or auctions term credit 
D) sales but not if it auctions term credit 
A) purchases or auctions term credit. 
B) purchases but not if it auctions term credit 
C) sales or auctions term credit 
D) sales but not if it auctions term credit

Question 14

Demand deposits are a type of

Accepted Answer

A) checking account. 
B) time deposit. 
C) money market mutual fund. 
D) savings deposit. 
A) checking account. 
B) time deposit. 
C) money market mutual fund. 
D) savings deposit.

Question 15

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks?

Accepted Answer

A) 625 million dias 
B) 875 million dias 
C) 1,125 million dias 
D) None of the above is correct. 
A) 625 million dias 
B) 875 million dias 
C) 1,125 million dias 
D) None of the above is correct.

Question 16

Which of the following is not included in M1?

Accepted Answer

A) a $5 bill in your wallet 
B) $100 in your checking account 
C) $500 in your savings account 
D) All of the above are included in M1. 
A) a $5 bill in your wallet 
B) $100 in your checking account 
C) $500 in your savings account 
D) All of the above are included in M1.

Question 17

When colonists in Virginia used tobacco as money, their money

Accepted Answer

A) was commodity money. 
B) had no intrinsic value. 
C) was fiat money. 
D) had no store of value. 
A) was commodity money. 
B) had no intrinsic value. 
C) was fiat money. 
D) had no store of value.

Question 18

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A) falls. The larger the reserve ratio is, the more the money supply falls. 
B) falls. The larger the reserve ratio is, the less the money supply falls. 
C) rises. The larger the reserve ratio is, the more the money supply rises. 
D) rises. The larger the reserve ratio is, the less the money supply rises. 
A) falls. The larger the reserve ratio is, the more the money supply falls. 
B) falls. The larger the reserve ratio is, the less the money supply falls. 
C) rises. The larger the reserve ratio is, the more the money supply rises. 
D) rises. The larger the reserve ratio is, the less the money supply rises.

Question 19

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Accepted Answer

A) True 
 B)False

Question 20

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

Accepted Answer

A) increased the money multiplier and the money supply. 
B) decreased the money multiplier and increased the money supply. 
C) increased the money multiplier and decreased the money supply. 
D) decreased both the money multiplier and the money supply. 
A) increased the money multiplier and the money supply. 
B) decreased the money multiplier and increased the money supply. 
C) increased the money multiplier and decreased the money supply. 
D) decreased both the money multiplier and the money supply.

Exam 29: The Monetary System

At the Federal Reserve,

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Which of the following is included in M2 but not in M1?

Which type of money has intrinsic value?

Which of the following items is not included in the most narrow definition of money, M1?

In the U.S., the average adult holds about $4,490 in

What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

An open-market purchase

Which of the following is included in both M1 and M2?

The Fed decreases reserves if it conducts open market

Demand deposits are a type of

Which of the following is not included in M1?

When colonists in Virginia used tobacco as money, their money

If people decide to hold more currency relative to deposits, the money supply

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

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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