Question 1

Checking accounts that pay interest are included in the

Accepted Answer

A)  "demand deposits" part of M1. 
B)  "other checkable deposits" part of M1. 
C)  "savings deposits" part of M2. 
D)  "money market mutual funds deposits" part of M2. 
A)  "demand deposits" part of M1. 
B)  "other checkable deposits" part of M1. 
C)  "savings deposits" part of M2. 
D)  "money market mutual funds deposits" part of M2.

Question 2

By law, banks are required to

Accepted Answer

A)  hold 100 percent of customer deposits as reserves. 
B)  hold a fraction of their reserves at the Federal Reserve bank. 
C)  hold a fraction of demand deposits as reserves. 
D)  lend out no more than the amount of their required reserves. 
A)  hold 100 percent of customer deposits as reserves. 
B)  hold a fraction of their reserves at the Federal Reserve bank. 
C)  hold a fraction of demand deposits as reserves. 
D)  lend out no more than the amount of their required reserves.

Question 3

Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to

Accepted Answer

A)  0.5. 
B)  2.5. 
C)  4. 
D)  5. 
A)  0.5. 
B)  2.5. 
C)  4. 
D)  5.

Question 4

Which of the following is a bank asset?

Accepted Answer

A)  demand deposits 
B)  savings account deposits 
C)  certificates of deposit held by the public 
D)  loans made to customers 
A)  demand deposits 
B)  savings account deposits 
C)  certificates of deposit held by the public 
D)  loans made to customers

Question 5

List and explain the three subgroups of the Federal Reserve System.

Accepted Answer

The 12 Federal Reserve banks are the reg

Question 6

U.S. banks are required by law to keep most of their assets as reserves.

Accepted Answer

A) True 
 B)False

Question 7

If the reserve ratio is 0.9, the money multiplier will be 10.

Accepted Answer

A) True 
 B)False

Question 8

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

Accepted Answer

A)  $0 
B)  $4,000 
C)  $6,000 
D)  $12,000 
A)  $0 
B)  $4,000 
C)  $6,000 
D)  $12,000

Question 9

Define "money."

Accepted Answer

anything that is use

Question 10

The formula for an infinite sum is

Accepted Answer

A)  1 + b + b2 + b3 + b4 + ... = 1 / b. 
B)  1 + b + b2 + b3 + b4 + ... = 1 / (1 + b). 
C)  1 + b + b2 + b3 + b4 + ... = 1 / (1 - b). 
D)  1 + b + b2 + b3 + b4 + ... = b / (1 - b). 
A)  1 + b + b2 + b3 + b4 + ... = 1 / b. 
B)  1 + b + b2 + b3 + b4 + ... = 1 / (1 + b). 
C)  1 + b + b2 + b3 + b4 + ... = 1 / (1 - b). 
D)  1 + b + b2 + b3 + b4 + ... = b / (1 - b).

Question 11

An example of money is

Accepted Answer

A)  a dollar bill. 
B)  a checking account balance. 
C)  a traveler's check. 
D)  all of the above 
A)  a dollar bill. 
B)  a checking account balance. 
C)  a traveler's check. 
D)  all of the above

Question 12

Which of the following is included in M2?

Accepted Answer

A)  commercial paper 
B)  U.S. Treasury bonds 
C)  savings accounts 
D)  stocks 
A)  commercial paper 
B)  U.S. Treasury bonds 
C)  savings accounts 
D)  stocks

Question 13

Money market mutual funds are hard to classify because they are used both for making transactions and savings.

Accepted Answer

A) True 
 B)False

Question 14

A bank's reserves

Accepted Answer

A)  are the sum of its excess and required reserves. 
B)  can be held as cash in its vault. 
C)  can be held as deposits with the Federal Reserve. 
D)  all of the above 
A)  are the sum of its excess and required reserves. 
B)  can be held as cash in its vault. 
C)  can be held as deposits with the Federal Reserve. 
D)  all of the above

Question 15

Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of

Accepted Answer

A)  $250,000. 
B)  $125,000. 
C)  $62,500. 
D)  $0. 
A)  $250,000. 
B)  $125,000. 
C)  $62,500. 
D)  $0.

Question 16

Economists use different definitions of money because

Accepted Answer

A)  there are differences in the frequency with which depositors use their accounts. 
B)  deposits can be domestic or international. 
C)  deposits may be held at banks or savings and loans. 
D)  it is not always clear which assets are used primarily as money. 
A)  there are differences in the frequency with which depositors use their accounts. 
B)  deposits can be domestic or international. 
C)  deposits may be held at banks or savings and loans. 
D)  it is not always clear which assets are used primarily as money.

Question 17

If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).

Accepted Answer

A) True 
 B)False

Question 18

Which of the following appears in M2 and NOT M1?

Accepted Answer

A)  currency 
B)  checking account balances 
C)  money market mutual funds 
D)  traveler's checks 
A)  currency 
B)  checking account balances 
C)  money market mutual funds 
D)  traveler's checks

Question 19

Given the following information about Gotham Bank:
Bank Deposits $50,000
Loans 34,000
Reserves 12,000
Reserve Requirement 20 percent
Gotham Bank is holding ________ in excess reserves.

Accepted Answer

A)  $22,000 
B)  $12,000 
C)  $2,000 
D)  -$2,000 
A)  $22,000 
B)  $12,000 
C)  $2,000 
D)  -$2,000

Question 20

Recall the Application about the Fed increasing bank reserves during the financial crisis in 2008 to answer the following question(s). During the height of the financial crisis in September 2008, The Fed injected large amounts of reserves into banks, and in the next month, they started paying interest to banks on these reserves. Prior to this time, banks earned no interest on either required or excess reserves.
-According to this Application, the Fed injected large amounts of reserves into banks during the 2008 financial crisis. The Fed needs to make sure that, in the long run, banks do not loan out too many of these reserves or the result will be

Accepted Answer

A)  higher inflation. 
B)  higher interest rates. 
C)  additional unemployment. 
D)  a smaller money multiplier. 
A)  higher inflation. 
B)  higher interest rates. 
C)  additional unemployment. 
D)  a smaller money multiplier.

Checking accounts that pay interest are included in the

By law, banks are required to

Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to

Which of the following is a bank asset?

List and explain the three subgroups of the Federal Reserve System.

U.S. banks are required by law to keep most of their assets as reserves.

If the reserve ratio is 0.9, the money multiplier will be 10.

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

Define "money."

The formula for an infinite sum is

An example of money is

Which of the following is included in M2?

Money market mutual funds are hard to classify because they are used both for making transactions and savings.

A bank's reserves

Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of

Economists use different definitions of money because

If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).

Which of the following appears in M2 and NOT M1?

Given the following information about Gotham Bank: Bank Deposits $50,000 Loans 34,000 Reserves 12,000 Reserve Requirement 20 percent Gotham Bank is holding ________ in excess reserves.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 13: Money and the Banking System

Checking accounts that pay interest are included in the

By law, banks are required to

Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to

Which of the following is a bank asset?

List and explain the three subgroups of the Federal Reserve System.

U.S. banks are required by law to keep most of their assets as reserves.

If the reserve ratio is 0.9, the money multiplier will be 10.

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

Define "money."

The formula for an infinite sum is

An example of money is

Which of the following is included in M2?

Money market mutual funds are hard to classify because they are used both for making transactions and savings.

A bank's reserves

Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of

Economists use different definitions of money because

If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).

Which of the following appears in M2 and NOT M1?

Given the following information about Gotham Bank: Bank Deposits $50,000 Loans 34,000 Reserves 12,000 Reserve Requirement 20 percent Gotham Bank is holding ________ in excess reserves.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters