Question 1

If the actual reserve-deposit ratio equals 15 per cent and the desired reserve-deposit ratio for this bank is 10 per cent, the bank should:

Accepted Answer

A) do nothing, because this is a profitable situation 
B) stop making loans 
C) send the extra reserves to the central bank 
D) make more loans in order to earn interest 
A) do nothing, because this is a profitable situation 
B) stop making loans 
C) send the extra reserves to the central bank 
D) make more loans in order to earn interest

Question 2

If reserve requirements are increased:

Accepted Answer

A) the reserve ratio will increase, the money multiplier will increase and the money supply will increase 
B) the reserve ratio will decrease, the money multiplier will decrease and the money supply will decrease 
C) the reserve ratio will decrease, the money multiplier will increase and the money supply will increase 
D) the reserve ratio will increase, the money multiplier will decrease and the money supply will decrease 
A) the reserve ratio will increase, the money multiplier will increase and the money supply will increase 
B) the reserve ratio will decrease, the money multiplier will decrease and the money supply will decrease 
C) the reserve ratio will decrease, the money multiplier will increase and the money supply will increase 
D) the reserve ratio will increase, the money multiplier will decrease and the money supply will decrease

Question 3

Use the following balance sheet for the First Bank of Oz:
$\begin{array}{cc|}\text { Assets }&&\text { Liabilities }\
\hline\text { Required reserves } & \$ 15.00 &\text { Deposits }&\$100.00\
\text { Loans } & \$ 85.00
\end{array}$
If $1000 is deposited into the First Bank of Oz, then:

Accepted Answer

A) assets will increase by $1000 
B) liabilities will decrease by $1000 
C) total reserves will initially increase by $150 
D) required reserves will increase by $850 
A) assets will increase by $1000 
B) liabilities will decrease by $1000 
C) total reserves will initially increase by $150 
D) required reserves will increase by $850

Question 4

The money multiplier is the reciprocal of the reserve ratio.

Accepted Answer

A) True 
 B)False

Question 5

Under what circumstances can banks not influence the supply of money?

Accepted Answer

If banks hold all their deposi

Question 6

If banks choose to hold more excess reserves, then:

Accepted Answer

A) the total reserves in the banking system will decrease 
B) the money supply will fall 
C) the money multiplier will increase 
D) the discount rate will decrease 
A) the total reserves in the banking system will decrease 
B) the money supply will fall 
C) the money multiplier will increase 
D) the discount rate will decrease

Question 7

An independent RBA has minimised the level of political influence, and therefore enables better management of inflation.

Accepted Answer

A) True 
 B)False

Question 8

How has the growth in the level of electronic transactions led to a decreased ability for banks to predict the amount of cash they need to have on reserve.

Accepted Answer

With the advent of debit cards, internet

Question 9

If the RBA sold government securities, then:

Accepted Answer

A) the money supply would increase 
B) the money supply would not change 
C) the money supply would decrease 
D) none of the above 
A) the money supply would increase 
B) the money supply would not change 
C) the money supply would decrease 
D) none of the above

Question 10

Money is the set of assets in the economy that people regularly use to buy goods and services from other people.

Accepted Answer

A) True 
 B)False

Question 11

Bank runs:

Accepted Answer

A) occur when the discount rate rises 
B) occur when large numbers of depositors all try to withdraw their deposits at the same time 
C) are only a problem in a 100 per cent reserve banking system 
D) none of the above 
A) occur when the discount rate rises 
B) occur when large numbers of depositors all try to withdraw their deposits at the same time 
C) are only a problem in a 100 per cent reserve banking system 
D) none of the above

Question 12

The growth in the level of electronic transactions has led to an increased ability for banks to predict the amount of cash they have on reserve.

Accepted Answer

A) True 
 B)False

Question 13

If the reserve ratio is 10 per cent, the money multiplier is:

Accepted Answer

A) 10 
B) 10 per cent 
C) 90 per cent 
D) 90 
A) 10 
B) 10 per cent 
C) 90 per cent 
D) 90

Question 14

After the Reserve Bank increases reserves in the banking system through open-market purchases, banks create new deposits through multiple rounds of lending and accepting deposits, until the:

Accepted Answer

A) Reserve Bank requires them to stop 
B) deposit insurance limit is reached 
C) actual reserve-deposit ratio is greater than the desired reserve-deposit ratio 
D) actual reserve-deposit ratio is equal to the desired reserve-deposit ratio 
A) Reserve Bank requires them to stop 
B) deposit insurance limit is reached 
C) actual reserve-deposit ratio is greater than the desired reserve-deposit ratio 
D) actual reserve-deposit ratio is equal to the desired reserve-deposit ratio

Question 15

If the reserve ratio is 100 per cent, depositing $500 of paper money in a bank will increase the money supply by:

Accepted Answer

A) $500 
B) $0 
C) $5000 
D) $500 000 
A) $500 
B) $0 
C) $5000 
D) $500 000

Question 16

If the currency to deposit ratio falls, the money supplier rises.

Accepted Answer

A) True 
 B)False

Question 17

Money is:

Accepted Answer

A) equivalent to income 
B) equivalent to wealth 
C) an asset used as a medium of exchange 
D) backed by gold 
A) equivalent to income 
B) equivalent to wealth 
C) an asset used as a medium of exchange 
D) backed by gold

Question 18

If the RBA purchased government securities, then:

Accepted Answer

A) the money supply would decrease 
B) the money supply would not change 
C) the money supply would increase 
D) none of the above 
A) the money supply would decrease 
B) the money supply would not change 
C) the money supply would increase 
D) none of the above

Question 19

Discuss the problems the RBA has controlling the money supply in a system of fractional-reserve banking.

Accepted Answer

The RBA's control over the cash rate has

Question 20

The purpose of a central bank is to:

Accepted Answer

A) control the value of money 
B) regulate the supply of money 
C) oversee the banking system 
D) all of the above 
A) control the value of money 
B) regulate the supply of money 
C) oversee the banking system 
D) all of the above

Exam 29: The Monetary System

If the actual reserve-deposit ratio equals 15 per cent and the desired reserve-deposit ratio for this bank is 10 per cent, the bank should:

If reserve requirements are increased:

Use the following balance sheet for the First Bank of Oz: Assets Liabilities Required reserves \ 15.00 Deposits \1 00.00 Loans \ 85.00 If $1000 is deposited into the First Bank of Oz, then:

The money multiplier is the reciprocal of the reserve ratio.

Under what circumstances can banks not influence the supply of money?

If banks choose to hold more excess reserves, then:

An independent RBA has minimised the level of political influence, and therefore enables better management of inflation.

How has the growth in the level of electronic transactions led to a decreased ability for banks to predict the amount of cash they need to have on reserve.

If the RBA sold government securities, then:

Money is the set of assets in the economy that people regularly use to buy goods and services from other people.

Bank runs:

The growth in the level of electronic transactions has led to an increased ability for banks to predict the amount of cash they have on reserve.

If the reserve ratio is 10 per cent, the money multiplier is:

After the Reserve Bank increases reserves in the banking system through open-market purchases, banks create new deposits through multiple rounds of lending and accepting deposits, until the:

If the reserve ratio is 100 per cent, depositing $500 of paper money in a bank will increase the money supply by:

If the currency to deposit ratio falls, the money supplier rises.

Money is:

If the RBA purchased government securities, then:

Discuss the problems the RBA has controlling the money supply in a system of fractional-reserve banking.

The purpose of a central bank is to:

Ten Lessons From 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

Application: 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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