Question 1

If the Fed increased the discount rate,

Accepted Answer

A)  banks would make more loans 
B)  the money supply would increase 
C)  firms would be more likely to seek out loans 
D)  the required reserve ratio would increase 
E)  banks would make fewer loans 
A)  banks would make more loans 
B)  the money supply would increase 
C)  firms would be more likely to seek out loans 
D)  the required reserve ratio would increase 
E)  banks would make fewer loans

Question 2

It is easy for one financial institution to reduce its leverage by acting alone,but when many financial institutions try to do the same thing at once,asset prices fall rapidly and bank capital declines for all such institutions.

Accepted Answer

A) True 
 B)False

Question 3

If the Federal Reserve sets a required reserve ratio of 0.2 and a bank has $100 million in loans and $80 million in deposits,what is the level of required reserves for the bank?

Accepted Answer

A)  $100 million 
B)  $16 million 
C)  $80 million 
D)  $20 million 
E)  $36 million 
A)  $100 million 
B)  $16 million 
C)  $80 million 
D)  $20 million 
E)  $36 million

Question 4

Given the following information,calculate M1 and M2.
Small time deposits
$800 billion
Checking deposits
$400 billion
Savings-type accounts
$900 billion
Money market mutual funds
$700 billion
Travelers' checks
$50 billion
Large time deposits
$750 billion
Cash on hand
$150 billion

Accepted Answer

A)  M1: $600 billion;M2: $3,150 billion 
B)  M1: $2,100 billion;M2: $1,650 
C)  M1: $2,800 billion;M2: $950 billion 
D)  M1: $1,900 billion;M2: $1,850 billion 
E)  M1: $600 billion;M2: $3,750 billion 
A)  M1: $600 billion;M2: $3,150 billion 
B)  M1: $2,100 billion;M2: $1,650 
C)  M1: $2,800 billion;M2: $950 billion 
D)  M1: $1,900 billion;M2: $1,850 billion 
E)  M1: $600 billion;M2: $3,750 billion

Question 5

The Federal Reserve Open Market Committee meets about ____ times a year.

Accepted Answer

A)  8. 
B)  12. 
C)  4. 
D)  2. 
E)  24. 
A)  8. 
B)  12. 
C)  4. 
D)  2. 
E)  24.

Question 6

The Federal Open Market Committee (FOMC)controls the U.S.money supply by buying and selling loans in the public loan market.

Accepted Answer

A) True 
 B)False

Question 7

One problem with changing the required reserve ratio is that

Accepted Answer

A)  the policy must be kept secret from the public in order to have any effect 
B)  the results are unpredictable 
C)  the changes are usually not effective 
D)  banks will often ignore the changes 
E)  it takes too much time for these changes to affect the economy 
A)  the policy must be kept secret from the public in order to have any effect 
B)  the results are unpredictable 
C)  the changes are usually not effective 
D)  banks will often ignore the changes 
E)  it takes too much time for these changes to affect the economy

Question 8

The rise in bank failures in the late 1980s and early 1990s occurred

Accepted Answer

A)  at Federally-charted banks only. 
B)  because Congress repealed many of the provisions of deposit insurance regulation. 
C)  at state-chartered banks,which are less closely regulated than other banks. 
D)  because the Federal Reserve began to monitor banks less often. 
E)  because they were insured by the Federal Deposit Insurance Corporation instead of state agencies. 
A)  at Federally-charted banks only. 
B)  because Congress repealed many of the provisions of deposit insurance regulation. 
C)  at state-chartered banks,which are less closely regulated than other banks. 
D)  because the Federal Reserve began to monitor banks less often. 
E)  because they were insured by the Federal Deposit Insurance Corporation instead of state agencies.

Question 9

Which of the following is a possible impetus for a banking panic?

Accepted Answer

A)  An individual bank fails. 
B)  A large,very important bank fails. 
C)  Congress increases the amount of demand deposits that are protected by insurance. 
D)  Banking rules change to make it harder for banks to make bad loans. 
E)  Changes in the discount rate. 
A)  An individual bank fails. 
B)  A large,very important bank fails. 
C)  Congress increases the amount of demand deposits that are protected by insurance. 
D)  Banking rules change to make it harder for banks to make bad loans. 
E)  Changes in the discount rate.

Question 10

Deleveraging is the process of reducing leverage,and therefore reducing the risk to capital from any further declines in asset prices.

Accepted Answer

A) True 
 B)False

Question 11

From where do most of a bank's profit come?

Accepted Answer

A)  Issuing currency. 
B)  Subsidies from the Federal Reserve. 
C)  Lending out funds and charging interest. 
D)  Buying and selling bonds. 
E)  Selling mutual fund shares. 
A)  Issuing currency. 
B)  Subsidies from the Federal Reserve. 
C)  Lending out funds and charging interest. 
D)  Buying and selling bonds. 
E)  Selling mutual fund shares.

Question 12

If the required reserve ratio is 0.2,the demand deposit multiplier is

Accepted Answer

A)  0.2 
B)  0.8 
C)  1.25 
D)  5.0 
E)  8.0 
A)  0.2 
B)  0.8 
C)  1.25 
D)  5.0 
E)  8.0

Question 13

Which of the following is not included in the M1 money stock?

Accepted Answer

A)  small time deposits 
B)  demand deposits 
C)  checking account deposits 
D)  travelers' checks 
E)  cash in the hands of the public 
A)  small time deposits 
B)  demand deposits 
C)  checking account deposits 
D)  travelers' checks 
E)  cash in the hands of the public

Question 14

If a bank holds $2000 in demand deposits and the required reserve ratio is 0.15,how much can the bank lend out?

Accepted Answer

A)  $2,000 
B)  $1,700 
C)  $300 
D)  $150 
E)  $2,300 
A)  $2,000 
B)  $1,700 
C)  $300 
D)  $150 
E)  $2,300

Question 15

Commercial banks can increase the money supply by

Accepted Answer

A)  accepting demand deposits 
B)  loaning out required reserves 
C)  loaning out excess reserves 
D)  selling bonds to the public 
E)  buying bonds from the Fed 
A)  accepting demand deposits 
B)  loaning out required reserves 
C)  loaning out excess reserves 
D)  selling bonds to the public 
E)  buying bonds from the Fed

Question 16

A bank can only fail if it is not in good financial health.

Accepted Answer

A) True 
 B)False

Question 17

The Federal Deposit Insurance Corporation helps to reduce the number of bank failures because

Accepted Answer

A)  of its rule that individuals cannot make a run on a bank 
B)  it promises to reimburse up to $10,000 of lost deposits in an account 
C)  depositors will be secure in the fact that their deposits are protected 
D)  it pays attention to the changes in the economy 
E)  it is a soothing agent for individuals who have accounts over $100,000 
A)  of its rule that individuals cannot make a run on a bank 
B)  it promises to reimburse up to $10,000 of lost deposits in an account 
C)  depositors will be secure in the fact that their deposits are protected 
D)  it pays attention to the changes in the economy 
E)  it is a soothing agent for individuals who have accounts over $100,000

Question 18

Financial intermediaries

Accepted Answer

A)  harm both borrowers and lenders because they pay lenders a lower rate of interest than they charge to borrowers 
B)  specialize in assembling loanable funds from households and firms,and channeling those funds to other households,firms,and government agencies 
C)  are all depository institutions 
D)  increase the risk of lending and borrowing because a financial intermediary has nothing to lose from such transactions 
E)  reduce efficiency because they add an extra step to many financial transactions 
A)  harm both borrowers and lenders because they pay lenders a lower rate of interest than they charge to borrowers 
B)  specialize in assembling loanable funds from households and firms,and channeling those funds to other households,firms,and government agencies 
C)  are all depository institutions 
D)  increase the risk of lending and borrowing because a financial intermediary has nothing to lose from such transactions 
E)  reduce efficiency because they add an extra step to many financial transactions

Question 19

Which of the following is included in the M2 money stock?

Accepted Answer

A)  bonds 
B)  stocks 
C)  gold 
D)  savings-type accounts 
E)  credit card balances 
A)  bonds 
B)  stocks 
C)  gold 
D)  savings-type accounts 
E)  credit card balances

Question 20

If the required reserve ratio is 0.2,what is the demand deposit multiplier?

Accepted Answer

A)  10.0 
B)  0.4 
C)  5.0 
D)  2.5 
E)  1.67 
A)  10.0 
B)  0.4 
C)  5.0 
D)  2.5 
E)  1.67

If the Fed increased the discount rate,

It is easy for one financial institution to reduce its leverage by acting alone,but when many financial institutions try to do the same thing at once,asset prices fall rapidly and bank capital declines for all such institutions.

If the Federal Reserve sets a required reserve ratio of 0.2 and a bank has $100 million in loans and $80 million in deposits,what is the level of required reserves for the bank?

Given the following information,calculate M1 and M2. Small time deposits $800 billion Checking deposits $400 billion Savings-type accounts $900 billion Money market mutual funds $700 billion Travelers' checks $50 billion Large time deposits $750 billion Cash on hand $150 billion

The Federal Reserve Open Market Committee meets about ____ times a year.

The Federal Open Market Committee (FOMC)controls the U.S.money supply by buying and selling loans in the public loan market.

One problem with changing the required reserve ratio is that

The rise in bank failures in the late 1980s and early 1990s occurred

Which of the following is a possible impetus for a banking panic?

Deleveraging is the process of reducing leverage,and therefore reducing the risk to capital from any further declines in asset prices.

From where do most of a bank's profit come?

If the required reserve ratio is 0.2,the demand deposit multiplier is

Which of the following is not included in the M1 money stock?

If a bank holds $2000 in demand deposits and the required reserve ratio is 0.15,how much can the bank lend out?

Commercial banks can increase the money supply by

A bank can only fail if it is not in good financial health.

The Federal Deposit Insurance Corporation helps to reduce the number of bank failures because

Financial intermediaries

Which of the following is included in the M2 money stock?

If the required reserve ratio is 0.2,what is the demand deposit multiplier?

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

If the Fed increased the discount rate,

It is easy for one financial institution to reduce its leverage by acting alone,but when many financial institutions try to do the same thing at once,asset prices fall rapidly and bank capital declines for all such institutions.

If the Federal Reserve sets a required reserve ratio of 0.2 and a bank has $100 million in loans and $80 million in deposits,what is the level of required reserves for the bank?

Given the following information,calculate M1 and M2. Small time deposits $800 billion Checking deposits $400 billion Savings-type accounts $900 billion Money market mutual funds $700 billion Travelers' checks $50 billion Large time deposits $750 billion Cash on hand $150 billion

The Federal Reserve Open Market Committee meets about ____ times a year.

The Federal Open Market Committee (FOMC)controls the U.S.money supply by buying and selling loans in the public loan market.

One problem with changing the required reserve ratio is that

The rise in bank failures in the late 1980s and early 1990s occurred

Which of the following is a possible impetus for a banking panic?

Deleveraging is the process of reducing leverage,and therefore reducing the risk to capital from any further declines in asset prices.

From where do most of a bank's profit come?

If the required reserve ratio is 0.2,the demand deposit multiplier is

Which of the following is not included in the M1 money stock?

If a bank holds $2000 in demand deposits and the required reserve ratio is 0.15,how much can the bank lend out?

Commercial banks can increase the money supply by

A bank can only fail if it is not in good financial health.

The Federal Deposit Insurance Corporation helps to reduce the number of bank failures because

Financial intermediaries

Which of the following is included in the M2 money stock?

If the required reserve ratio is 0.2,what is the demand deposit multiplier?

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