Question 1

If the Fed lowered the required reserve ratio,

Accepted Answer

A)  excess reserves would decrease 
B)  the money supply would decrease 
C)  the money supply would increase 
D)  banks would borrow more from the Fed 
E)  loans would earn more interest. 
A)  excess reserves would decrease 
B)  the money supply would decrease 
C)  the money supply would increase 
D)  banks would borrow more from the Fed 
E)  loans would earn more interest.

Question 2

Which of the following is a role of a financial intermediary?

Accepted Answer

A)  Increasing risk to lenders 
B)  Combining a large number of loans of small borrowers into a small number of deposits of large savers 
C)  Decreasing liquidity for savers 
D)  Reducing risk to depositors 
E)  Increasing interest rates for both borrowers and lenders. 
A)  Increasing risk to lenders 
B)  Combining a large number of loans of small borrowers into a small number of deposits of large savers 
C)  Decreasing liquidity for savers 
D)  Reducing risk to depositors 
E)  Increasing interest rates for both borrowers and lenders.

Question 3

The most liquid asset(s)of all is (are)

Accepted Answer

A)  cash in the hands of the public 
B)  cash in the hands of banks 
C)  demand deposits held by households and businesses at commercial banks 
D)  travelers' checks 
E)  credit cards 
A)  cash in the hands of the public 
B)  cash in the hands of banks 
C)  demand deposits held by households and businesses at commercial banks 
D)  travelers' checks 
E)  credit cards

Question 4

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)must the bank hold in required reserves?

Accepted Answer

A)  $2 million 
B)  $3 million 
C)  $4 million 
D)  $7 million 
E)  $16 million 
A)  $2 million 
B)  $3 million 
C)  $4 million 
D)  $7 million 
E)  $16 million

Question 5

If the Federal Reserve purchases a $2,000 bond from a bond dealer who deposits the check in a bank,what changes will occur on that bank's balance sheet?

Accepted Answer

A)  Reserves,demand deposits,total assets,and total liabilities will all increase by $2,000. 
B)  Reserves and assets will increase by $2,000;demand deposits and total liabilities will decrease by $2,000. 
C)  Reserves and total assets will decrease by $2,000;demand deposits and total liabilities will increase by $2,000. 
D)  Reserves and total liabilities will decrease by $2,000;demand deposits and total assets will increase by $2,000. 
E)  Reserves and assets will increase by $2,000;demand deposits and total assets will decrease by $2,000. 
A)  Reserves,demand deposits,total assets,and total liabilities will all increase by $2,000. 
B)  Reserves and assets will increase by $2,000;demand deposits and total liabilities will decrease by $2,000. 
C)  Reserves and total assets will decrease by $2,000;demand deposits and total liabilities will increase by $2,000. 
D)  Reserves and total liabilities will decrease by $2,000;demand deposits and total assets will increase by $2,000. 
E)  Reserves and assets will increase by $2,000;demand deposits and total assets will decrease by $2,000.

Question 6

Countries like _________ have no reserve requirements at all.

Accepted Answer

A)  England 
B)  Canada 
C)  Australia 
D)  all of the above 
E)  none of the above. 
A)  England 
B)  Canada 
C)  Australia 
D)  all of the above 
E)  none of the above.

Question 7

There have been no major banking panics in the U.S.since the creation of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 8

The simple leverage ratio is defined as:

Accepted Answer

A)  Depreciation of an asset / Value of an asset 
B)  Current assets / current liabilities. 
C)  Equity of an asset / Value of an asset 
D)  Value of an asset / Equity of an asset. 
E)  Equity of an asset / Original cost of an asset. 
A)  Depreciation of an asset / Value of an asset 
B)  Current assets / current liabilities. 
C)  Equity of an asset / Value of an asset 
D)  Value of an asset / Equity of an asset. 
E)  Equity of an asset / Original cost of an asset.

Question 9

If the required reserve ratio is 0.2,and a bank has $100 million in demand deposits and $40 million in property and buildings,it must hold reserves of at least

Accepted Answer

A)  $28 million 
B)  $20 million 
C)  $26 million 
D)  $12 million 
E)  $8 million 
A)  $28 million 
B)  $20 million 
C)  $26 million 
D)  $12 million 
E)  $8 million

Question 10

Suppose a bank has total assets of $300 million and a net worth of $15 million.Its demand deposit liabilities must be equal to

Accepted Answer

A)  $20 million 
B)  $315 million 
C)  $0.05 million 
D)  $285 million 
E)  $585 million. 
A)  $20 million 
B)  $315 million 
C)  $0.05 million 
D)  $285 million 
E)  $585 million.

Question 11

Which of the following is not a function of the Fed?

Accepted Answer

A)  To supervise and regulate banks. 
B)  Dealing with financial crises. 
C)  To print currency. 
D)  Check clearing. 
E)  Acting as a "bank for banks". 
A)  To supervise and regulate banks. 
B)  Dealing with financial crises. 
C)  To print currency. 
D)  Check clearing. 
E)  Acting as a "bank for banks".

Question 12

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A)  Supervising the banking system. 
B)  Deciding the maximum interest rates banks can charge for loans. 
C)  Clearing checks. 
D)  Acting as a bank for banks. 
E)  Dealing with financial crises. 
A)  Supervising the banking system. 
B)  Deciding the maximum interest rates banks can charge for loans. 
C)  Clearing checks. 
D)  Acting as a bank for banks. 
E)  Dealing with financial crises.

Question 13

Which of the following could lead to a bank's failure,even if the bank has positive net worth?

Accepted Answer

A)  The bank may encounter difficulty selling its government bonds. 
B)  Most of the bank's liabilities are illiquid. 
C)  A bank with positive net worth cannot fail. 
D)  The bank may encounter difficulty borrowing reserves from the Federal Reserve. 
E)  Most of the bank's assets are illiquid. 
A)  The bank may encounter difficulty selling its government bonds. 
B)  Most of the bank's liabilities are illiquid. 
C)  A bank with positive net worth cannot fail. 
D)  The bank may encounter difficulty borrowing reserves from the Federal Reserve. 
E)  Most of the bank's assets are illiquid.

Question 14

If the Fed reduces the money supply,banks will often initially have

Accepted Answer

A)  more reserves than they are required to hold 
B)  excess reserves 
C)  increased demand deposits 
D)  fewer loans than normal 
E)  deficient reserves 
A)  more reserves than they are required to hold 
B)  excess reserves 
C)  increased demand deposits 
D)  fewer loans than normal 
E)  deficient reserves

Question 15

Which of the following would lead to a decrease in the money supply?

Accepted Answer

A)  Banks decide to use excess reserves to purchase corporate bonds. 
B)  The Fed decreases the discount rate. 
C)  The Fed decreases the required reserve ratio. 
D)  The Fed sells government bonds. 
E)  The Fed purchases government bonds. 
A)  Banks decide to use excess reserves to purchase corporate bonds. 
B)  The Fed decreases the discount rate. 
C)  The Fed decreases the required reserve ratio. 
D)  The Fed sells government bonds. 
E)  The Fed purchases government bonds.

Question 16

Establishing a unit of value and establishing a standard means of payment are two functions of a monetary system.

Accepted Answer

A) True 
 B)False

Question 17

All cash within the geographical boundaries of the United States is counted as part of the U.S.money supply.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the Federal Reserve wants to increase the money supply.Which combination of actions would lead to the appropriate effect?

Accepted Answer

A)  Increase the discount rate,decrease the reserve ratio,sell bonds. 
B)  Increase the discount rate,decrease the reserve ratio,buy bonds. 
C)  Decrease the discount rate,decrease the reserve ratio,buy bonds. 
D)  Decrease the discount rate,increase the reserve ratio,buy bonds. 
E)  Decrease the discount rate,decrease the reserve ratio,sell bonds. 
A)  Increase the discount rate,decrease the reserve ratio,sell bonds. 
B)  Increase the discount rate,decrease the reserve ratio,buy bonds. 
C)  Decrease the discount rate,decrease the reserve ratio,buy bonds. 
D)  Decrease the discount rate,increase the reserve ratio,buy bonds. 
E)  Decrease the discount rate,decrease the reserve ratio,sell bonds.

Question 19

If a bank's total assets are $150 million and total liabilities are $110 million,the bank's net worth is

Accepted Answer

A)  $15 million 
B)  $260 million 
C)  $40 million 
D)  -$40 million 
E)  $5 million 
A)  $15 million 
B)  $260 million 
C)  $40 million 
D)  -$40 million 
E)  $5 million

Question 20

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A)  Setting the required reserve ratio 
B)  Establishing the prime lending rate 
C)  Clearing checks 
D)  Regulating banking activity 
E)  Controlling the money supply. 
A)  Setting the required reserve ratio 
B)  Establishing the prime lending rate 
C)  Clearing checks 
D)  Regulating banking activity 
E)  Controlling the money supply.

If the Fed lowered the required reserve ratio,

Which of the following is a role of a financial intermediary?

The most liquid asset(s)of all is (are)

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)must the bank hold in required reserves?

If the Federal Reserve purchases a $2,000 bond from a bond dealer who deposits the check in a bank,what changes will occur on that bank's balance sheet?

Countries like _________ have no reserve requirements at all.

There have been no major banking panics in the U.S.since the creation of the Federal Reserve System.

The simple leverage ratio is defined as:

If the required reserve ratio is 0.2,and a bank has $100 million in demand deposits and $40 million in property and buildings,it must hold reserves of at least

Suppose a bank has total assets of $300 million and a net worth of $15 million.Its demand deposit liabilities must be equal to

Which of the following is not a function of the Fed?

Which of the following is not a function of the Federal Reserve System?

Which of the following could lead to a bank's failure,even if the bank has positive net worth?

If the Fed reduces the money supply,banks will often initially have

Which of the following would lead to a decrease in the money supply?

Establishing a unit of value and establishing a standard means of payment are two functions of a monetary system.

All cash within the geographical boundaries of the United States is counted as part of the U.S.money supply.

Suppose the Federal Reserve wants to increase the money supply.Which combination of actions would lead to the appropriate effect?

If a bank's total assets are $150 million and total liabilities are $110 million,the bank's net worth is

Which of the following is not a function of the Federal Reserve System?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

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Exam 13: Money, Banks, and the Federal Reserve

If the Fed lowered the required reserve ratio,

Which of the following is a role of a financial intermediary?

The most liquid asset(s)of all is (are)

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)must the bank hold in required reserves?

If the Federal Reserve purchases a $2,000 bond from a bond dealer who deposits the check in a bank,what changes will occur on that bank's balance sheet?

Countries like _________ have no reserve requirements at all.

There have been no major banking panics in the U.S.since the creation of the Federal Reserve System.

The simple leverage ratio is defined as:

If the required reserve ratio is 0.2,and a bank has $100 million in demand deposits and $40 million in property and buildings,it must hold reserves of at least

Suppose a bank has total assets of $300 million and a net worth of $15 million.Its demand deposit liabilities must be equal to

Which of the following is not a function of the Fed?

Which of the following is not a function of the Federal Reserve System?

Which of the following could lead to a bank's failure,even if the bank has positive net worth?

If the Fed reduces the money supply,banks will often initially have

Which of the following would lead to a decrease in the money supply?

Establishing a unit of value and establishing a standard means of payment are two functions of a monetary system.

All cash within the geographical boundaries of the United States is counted as part of the U.S.money supply.

Suppose the Federal Reserve wants to increase the money supply.Which combination of actions would lead to the appropriate effect?

If a bank's total assets are $150 million and total liabilities are $110 million,the bank's net worth is

Which of the following is not a function of the Federal Reserve System?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters