Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Accepted Answer

This would

Question 3

​Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 4

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Accepted Answer

A) True 
 B)False

Question 5

If a bank with a required reserve ratio of 15 percent receives a deposit of $600, it now has a

Accepted Answer

A) $600 increase in excess reserves and no increase in required reserves. 
B) $600 increase in required reserves and no increase in excess reserves. 
C) $510 increase in excess reserves and a $90 increase in required reserves. 
D) $90 increase in excess reserves and a $510 increase in required reserves. 
A) $600 increase in excess reserves and no increase in required reserves. 
B) $600 increase in required reserves and no increase in excess reserves. 
C) $510 increase in excess reserves and a $90 increase in required reserves. 
D) $90 increase in excess reserves and a $510 increase in required reserves.

Question 6

Table 29-4
   ​
-Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Cheerton is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Accepted Answer

A) 11.5 
B) 12.5 
C) 9.1 
D) 8.1 
A) 11.5 
B) 12.5 
C) 9.1 
D) 8.1

Question 7

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

Accepted Answer

The answer of When the federal funds rate is below...

Question 8

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have available to lend out if it decides to hold only required reserves?

Accepted Answer

A) $27,000 
B) $27,190 
C) $26,190 
D) $9,000 
A) $27,000 
B) $27,190 
C) $26,190 
D) $9,000

Question 9

Discuss why the Fed rarely changes the reserve requirements.

Accepted Answer

There are two main reasons the Fed does

Question 10

Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

Accepted Answer

A) The U.S.Treasury 
B) The regional Federal Reserve Banks 
C) Federal Deposit Insurance Corporation 
D) The Federal Reserve Board 
A) The U.S.Treasury 
B) The regional Federal Reserve Banks 
C) Federal Deposit Insurance Corporation 
D) The Federal Reserve Board

Question 11

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

Accepted Answer

The answer of When banks decide to increase their reserves,...

Question 12

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

Accepted Answer

A) True 
 B)False

Question 13

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. Suppose the Bank of Tazi loaned the banks of Tazi $30 million. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Accepted Answer

A) $425 million 
B) $375 million 
C) $220 million 
D) $30 million 
A) $425 million 
B) $375 million 
C) $220 million 
D) $30 million

Question 14

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Accepted Answer

The amount of currency per person is nea

Question 15

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 16

The measure of the money stock called M1 includes

Accepted Answer

A) wealth held by people in currency. 
B) wealth held by people in their savings accounts. 
C) wealth held by people in money market mutual funds. 
D) everything that is included in M2 plus some additional items. 
A) wealth held by people in currency. 
B) wealth held by people in their savings accounts. 
C) wealth held by people in money market mutual funds. 
D) everything that is included in M2 plus some additional items.

Question 17

The money multiplier is higher when bankers are more cautious and hold excess reserves.

Accepted Answer

A) True 
 B)False

Question 18

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal

Question 19

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Accepted Answer

A) True 
 B)False

Question 20

Which list ranks assets from least to most liquid?

Accepted Answer

A) Currency, fine art, stocks 
B) Fine art, stocks, currency 
C) Fine art, currency, stocks 
D) Currency, stocks, fine art 
A) Currency, fine art, stocks 
B) Fine art, stocks, currency 
C) Fine art, currency, stocks 
D) Currency, stocks, fine art

Exam 29: The Monetary System

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

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

​Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

If a bank with a required reserve ratio of 15 percent receives a deposit of $600, it now has a

Table 29-4 ​ -Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Cheerton is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have available to lend out if it decides to hold only required reserves?

Discuss why the Fed rarely changes the reserve requirements.

Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

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

The measure of the money stock called M1 includes

The money multiplier is higher when bankers are more cautious and hold excess reserves.

Compare the Board of Governors and the Federal Open Market Committee.

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Which list ranks assets from least to most liquid?

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

Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Table 29-4 -Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Cheerton is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

When the federal funds rate is below the target rate, the Fed will _ bonds. This action will _ the money supply.