Question 1

The first paper currency issued by the U.S.government was known as the

Accepted Answer

A)  Federal Reserve note 
B)  treasury bill 
C)  greenback 
D)  pound 
E)  gold certificate 
A)  Federal Reserve note 
B)  treasury bill 
C)  greenback 
D)  pound 
E)  gold certificate

Question 2

Which of the following best describes the history of bank failures in the U.S.from 1863 to the present?

Accepted Answer

A)  Bank failures were eliminated after 1913. 
B)  Bank failures were common until 1940 but were almost nonexistent until the late 1980s and early 2000s. 
C)  Bank failures have always been rare events. 
D)  Bank failures were common until 1940 and were eliminated thereafter. 
E)  Bank failures have always been common. 
A)  Bank failures were eliminated after 1913. 
B)  Bank failures were common until 1940 but were almost nonexistent until the late 1980s and early 2000s. 
C)  Bank failures have always been rare events. 
D)  Bank failures were common until 1940 and were eliminated thereafter. 
E)  Bank failures have always been common.

Question 3

Suppose the required reserve ratio is 5 percent and the Fed buys a $10,000 bond.If money is deposited into a commercial bank,what will initially happen to money supply?

Accepted Answer

A)  It will increase by $10,000. 
B)  It will increase by $5,000. 
C)  It will increase by 5 percent. 
D)  It will increase by $200,000. 
A)  It will increase by $10,000. 
B)  It will increase by $5,000. 
C)  It will increase by 5 percent. 
D)  It will increase by $200,000.

Question 4

If the Federal Reserve sells $1,500 in bonds and the resulting money supply change is $7,500,what is the required reserve ratio?

Accepted Answer

A)  5.0 
B)  0.2 
C)  0.1 
D)  0.4 
E)  0.8 
A)  5.0 
B)  0.2 
C)  0.1 
D)  0.4 
E)  0.8

Question 5

Most changes in the money supply are the consequence of a change in the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not true of the demand deposit multiplier?

Accepted Answer

A)  Its formula is 1/RRR. 
B)  It represents the change in demand deposits generated by a change in reserves. 
C)  It represents the change in demand deposits generated by a change in taxes. 
D)  It is a way to determine the effect on money supply from a given Federal Reserve action. 
E)  It ignores changes in the behavior of the public and the banks. 
A)  Its formula is 1/RRR. 
B)  It represents the change in demand deposits generated by a change in reserves. 
C)  It represents the change in demand deposits generated by a change in taxes. 
D)  It is a way to determine the effect on money supply from a given Federal Reserve action. 
E)  It ignores changes in the behavior of the public and the banks.

Question 7

If the required reserve ratio (RRR)is 10 percent and the Fed sells a $5,000 bond to an individual who pays for it with a check,the money supply will

Accepted Answer

A)  not change 
B)  decrease by $4,500 
C)  increase by $4,500 
D)  decrease by $5,000 
E)  increase by $5,000 
A)  not change 
B)  decrease by $4,500 
C)  increase by $4,500 
D)  decrease by $5,000 
E)  increase by $5,000

Question 8

Which of the following is the most liquid asset?

Accepted Answer

A)  Traveler's checks. 
B)  Savings-type deposits. 
C)  Small time deposits. 
D)  Large time deposits. 
E)  A modern art painting. 
A)  Traveler's checks. 
B)  Savings-type deposits. 
C)  Small time deposits. 
D)  Large time deposits. 
E)  A modern art painting.

Question 9

Which of the following is not an example of a commercial bank's liabilities?

Accepted Answer

A)  Checking account deposits. 
B)  Any type of demand deposit. 
C)  Loans. 
D)  a and B 
E) None of the above. 
A)  Checking account deposits. 
B)  Any type of demand deposit. 
C)  Loans. 
D)  a and B 
E) None of the above.

Question 10

Which of the following is the relationship among excess reserves,required reserves,and total reserves?

Accepted Answer

A)  total reserves = required reserves - excess reserves 
B)  excess reserves = total reserves/required reserves 
C)  total reserves = excess reserves + required reserves 
D)  total reserves = excess reserves - required reserves 
E)  excess reserves = required reserves - total reserves 
A)  total reserves = required reserves - excess reserves 
B)  excess reserves = total reserves/required reserves 
C)  total reserves = excess reserves + required reserves 
D)  total reserves = excess reserves - required reserves 
E)  excess reserves = required reserves - total reserves

Question 11

The 2008 financial crisis peaked in September 2008,when Lehman Brothers declared bankruptcy.

Accepted Answer

A) True 
 B)False

Question 12

Open market sales of bonds by the Federal Reserve do not have a direct effect on the government budget.

Accepted Answer

A) True 
 B)False

Question 13

How many districts does the Federal Reserve System have?

Accepted Answer

A)  50 
B)  1 
C)  12 
D)  51 
E)  4 
A)  50 
B)  1 
C)  12 
D)  51 
E)  4

Question 14

The Federal Open Market Committee is important because

Accepted Answer

A)  its deliberations are extremely private 
B)  it sets the course for the nation's money supply 
C)  it is composed of people who are most knowledgeable about the economy 
D)  it discusses unemployment and inflation 
E)  of its influence on fiscal policy 
A)  its deliberations are extremely private 
B)  it sets the course for the nation's money supply 
C)  it is composed of people who are most knowledgeable about the economy 
D)  it discusses unemployment and inflation 
E)  of its influence on fiscal policy

Question 15

Money is

Accepted Answer

A)  only assets such as gold and silver 
B)  only fiat in nature 
C)  anything that is generally accepted as a means of payment 
D)  acceptable as a means of payment because the government guarantees that it must be 
E)  only those things backed by gold 
A)  only assets such as gold and silver 
B)  only fiat in nature 
C)  anything that is generally accepted as a means of payment 
D)  acceptable as a means of payment because the government guarantees that it must be 
E)  only those things backed by gold

Question 16

The Fed has decreased the money supply.The formula for calculating the resulting change in demand deposits is

Accepted Answer

A)  (1/RRR)minus the change in reserves 
B)  (1/RRR)multiplied by the change in reserves 
C)  the change in reserves divided by [1 - (1/RRR)] 
D)  RRR minus the change in reserves 
E)  [1 - (1/RRR)] multiplied by the change in reserves 
A)  (1/RRR)minus the change in reserves 
B)  (1/RRR)multiplied by the change in reserves 
C)  the change in reserves divided by [1 - (1/RRR)] 
D)  RRR minus the change in reserves 
E)  [1 - (1/RRR)] multiplied by the change in reserves

Question 17

Which of the following policies would most likely increase the money supply?

Accepted Answer

A)  Selling government bonds 
B)  Raising the discount rate 
C)  Lowering tax rates 
D)  Lowering the required reserve ratio 
E)  Decreasing the prime lending rate. 
A)  Selling government bonds 
B)  Raising the discount rate 
C)  Lowering tax rates 
D)  Lowering the required reserve ratio 
E)  Decreasing the prime lending rate.

Question 18

If the Federal Reserve sells bonds,the required reserve ratio is 0.25 and the money supply decreases by $10,000,how did the Fed accomplish this change?

Accepted Answer

A)  The Fed sold $10,000 in bonds. 
B)  The Fed sold $7,500 in bonds. 
C)  The Fed sold $2,500 in bonds. 
D)  The Fed sold $7,518 in bonds. 
E)  The Fed sold $40,000 in bonds. 
A)  The Fed sold $10,000 in bonds. 
B)  The Fed sold $7,500 in bonds. 
C)  The Fed sold $2,500 in bonds. 
D)  The Fed sold $7,518 in bonds. 
E)  The Fed sold $40,000 in bonds.

Question 19

Using open market operations to create or reduce deposits has two advantages over other tools.Those advantages are

Accepted Answer

A)  secrecy and security 
B)  precision and effectiveness 
C)  secrecy and effectiveness 
D)  security and precision 
E)  precision and secrecy 
A)  secrecy and security 
B)  precision and effectiveness 
C)  secrecy and effectiveness 
D)  security and precision 
E)  precision and secrecy

Question 20

One reason for the differences between the Federal Reserve System and its European counterparts is

Accepted Answer

A)  that the Fed was established earlier 
B)  the tendency for Americans to embrace the idea of a central authority 
C)  the fear that a powerful central bank might be dominated by one group's interests to another group's detriment 
D)  the homogeneity of the United States compared with other nations 
E)  because our definition of money is much different from other countries. 
A)  that the Fed was established earlier 
B)  the tendency for Americans to embrace the idea of a central authority 
C)  the fear that a powerful central bank might be dominated by one group's interests to another group's detriment 
D)  the homogeneity of the United States compared with other nations 
E)  because our definition of money is much different from other countries.

The first paper currency issued by the U.S.government was known as the

Which of the following best describes the history of bank failures in the U.S.from 1863 to the present?

Suppose the required reserve ratio is 5 percent and the Fed buys a $10,000 bond.If money is deposited into a commercial bank,what will initially happen to money supply?

If the Federal Reserve sells $1,500 in bonds and the resulting money supply change is $7,500,what is the required reserve ratio?

Most changes in the money supply are the consequence of a change in the required reserve ratio.

Which of the following is not true of the demand deposit multiplier?

If the required reserve ratio (RRR)is 10 percent and the Fed sells a $5,000 bond to an individual who pays for it with a check,the money supply will

Which of the following is the most liquid asset?

Which of the following is not an example of a commercial bank's liabilities?

Which of the following is the relationship among excess reserves,required reserves,and total reserves?

The 2008 financial crisis peaked in September 2008,when Lehman Brothers declared bankruptcy.

Open market sales of bonds by the Federal Reserve do not have a direct effect on the government budget.

How many districts does the Federal Reserve System have?

The Federal Open Market Committee is important because

Money is

The Fed has decreased the money supply.The formula for calculating the resulting change in demand deposits is

Which of the following policies would most likely increase the money supply?

If the Federal Reserve sells bonds,the required reserve ratio is 0.25 and the money supply decreases by $10,000,how did the Fed accomplish this change?

Using open market operations to create or reduce deposits has two advantages over other tools.Those advantages are

One reason for the differences between the Federal Reserve System and its European counterparts is

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

Exam 13: Money, Banks, and the Federal Reserve

The first paper currency issued by the U.S.government was known as the

Which of the following best describes the history of bank failures in the U.S.from 1863 to the present?

Suppose the required reserve ratio is 5 percent and the Fed buys a $10,000 bond.If money is deposited into a commercial bank,what will initially happen to money supply?

If the Federal Reserve sells $1,500 in bonds and the resulting money supply change is $7,500,what is the required reserve ratio?

Most changes in the money supply are the consequence of a change in the required reserve ratio.

Which of the following is not true of the demand deposit multiplier?

If the required reserve ratio (RRR)is 10 percent and the Fed sells a $5,000 bond to an individual who pays for it with a check,the money supply will

Which of the following is the most liquid asset?

Which of the following is not an example of a commercial bank's liabilities?

Which of the following is the relationship among excess reserves,required reserves,and total reserves?

The 2008 financial crisis peaked in September 2008,when Lehman Brothers declared bankruptcy.

Open market sales of bonds by the Federal Reserve do not have a direct effect on the government budget.

How many districts does the Federal Reserve System have?

The Federal Open Market Committee is important because

Money is

The Fed has decreased the money supply.The formula for calculating the resulting change in demand deposits is

Which of the following policies would most likely increase the money supply?

If the Federal Reserve sells bonds,the required reserve ratio is 0.25 and the money supply decreases by $10,000,how did the Fed accomplish this change?

Using open market operations to create or reduce deposits has two advantages over other tools.Those advantages are

One reason for the differences between the Federal Reserve System and its European counterparts is

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