Question 1

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 2

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Accepted Answer

1. Prices rise when the govern

Question 3

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Accepted Answer

A) True 
 B)False

Question 4

Describe the role of the Federal Deposit Insurance Corporation (FDIC).

Accepted Answer

The FDIC is the primary mechanism by whi

Question 5

In a system of 100-percent-reserve banking,

Accepted Answer

A) banks do not accept deposits. 
B) banks do not influence the supply of money. 
C) loans are the only asset item for banks. 
D) banks can increase the money supply. 
A) banks do not accept deposits. 
B) banks do not influence the supply of money. 
C) loans are the only asset item for banks. 
D) banks can increase the money supply.

Question 6

How are Federal Reserve Board Governors selected?

Accepted Answer

The Fed Governors are appointed by the p

Question 7

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

Accepted Answer

A) True 
 B)False

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

Draw a simple T-account for First National Bank which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $300. Make sure your balance sheet balances.

Accepted Answer

The answer of Draw a simple T-account for First National...

Question 10

Which of the following is included in M2 but not 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 11

Scenario 29-1
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $375 million of required reserves, $225 million of excess reserves, have issued $7,500 million of deposits, and hold $750 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-1. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks?

Accepted Answer

A) $6,150 million 
B) $6,900 million 
C) $7,200 million 
D) $6,000 million 
A) $6,150 million 
B) $6,900 million 
C) $7,200 million 
D) $6,000 million

Question 12

The ease with which an asset can be converted into the economy's medium of exchange is known as _____.

Accepted Answer

The answer of The ease with which an asset can...

Question 13

A bank's reserve ratio is 7 percent and the bank has $1,000 in deposits. Its reserves amount to

Accepted Answer

A) $930. 
B) $70. 
C) $7. 
D) $93. 
A) $930. 
B) $70. 
C) $7. 
D) $93.

Question 14

The set of items that serve as media of exchange includes

Accepted Answer

A) demand deposits. 
B) short-term bonds. 
C) credit cards. 
D) savings accounts. 
A) demand deposits. 
B) short-term bonds. 
C) credit cards. 
D) savings accounts.

Question 15

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 16

Name three actions the Fed can take to increase the money supply.

Accepted Answer

Open-market purchases (buy gov

Question 17

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 United States 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 United States 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 18

In an economy that relies on barter, trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 19

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 20

When conducting an open-market purchase, the Fed

Accepted Answer

A) buys government bonds, and in so doing increases the money supply. 
B) sells government bonds, and in so doing decreases the money supply. 
C) buys government bonds, and in so doing decreases the money supply. 
D) sells government bonds, and in so doing increases the money supply. 
A) buys government bonds, and in so doing increases the money supply. 
B) sells government bonds, and in so doing decreases the money supply. 
C) buys government bonds, and in so doing decreases the money supply. 
D) sells government bonds, and in so doing increases the money supply.

Exam 29: The Monetary System

Bottles of very fine wine are less liquid than demand deposits.

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

Describe the role of the Federal Deposit Insurance Corporation (FDIC).

In a system of 100-percent-reserve banking,

How are Federal Reserve Board Governors selected?

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

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

Draw a simple T-account for First National Bank which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $300. Make sure your balance sheet balances.

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

The ease with which an asset can be converted into the economy's medium of exchange is known as _____.

A bank's reserve ratio is 7 percent and the bank has $1,000 in deposits. Its reserves amount to

The set of items that serve as media of exchange includes

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Name three actions the Fed can take to increase the money supply.

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

In an economy that relies on barter, trade requires a double-coincidence of wants.

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

When conducting an open-market purchase, the Fed

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 Nations 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