Question 1

Cash in a commercial bank's vault is not part of the money supply.

Accepted Answer

A) True 
 B)False

Question 2

How would an increase in the required reserve ratio affect banks' ability to create money?

Accepted Answer

A)  Banks will be able to create more money because of the decrease in excess reserves. 
B)  Banks will be able to create more money because of the increase in the demand deposit multiplier. 
C)  It will have no effect on banks' ability to create money. 
D)  It will reduce banks' ability to create money by forcing them to hold more reserves. 
E)  It will reduce the banks' ability to create money by increasing excess reserves. 
A)  Banks will be able to create more money because of the decrease in excess reserves. 
B)  Banks will be able to create more money because of the increase in the demand deposit multiplier. 
C)  It will have no effect on banks' ability to create money. 
D)  It will reduce banks' ability to create money by forcing them to hold more reserves. 
E)  It will reduce the banks' ability to create money by increasing excess reserves.

Question 3

If you use a check to purchase a textbook,the check is

Accepted Answer

A)  the unit of value 
B)  the means of payment 
C)  the means of payment and the unit of value 
D)  outside the monetary system 
E)  worth less than an equivalent amount of currency 
A)  the unit of value 
B)  the means of payment 
C)  the means of payment and the unit of value 
D)  outside the monetary system 
E)  worth less than an equivalent amount of currency

Question 4

The Fed can decrease money supply by

Accepted Answer

A)  buying government bonds. 
B)  increasing the reserve requirement. 
C)  printing less currency. 
D)  making open market purchases. 
E)  decreasing the discount rate. 
A)  buying government bonds. 
B)  increasing the reserve requirement. 
C)  printing less currency. 
D)  making open market purchases. 
E)  decreasing the discount rate.

Question 5

If the required reserve ratio is 0.25,what is the demand deposit multiplier?

Accepted Answer

A)  4.00 
B)  0.50 
C)  0.75 
D)  1.33 
E)  1.25 
A)  4.00 
B)  0.50 
C)  0.75 
D)  1.33 
E)  1.25

Question 6

Which of the following Federal Reserve policy tools is used most often?

Accepted Answer

A)  Open market operations 
B)  Changing the required reserve ratio 
C)  Changing the discount rate 
D)  Changing the prime lending rate 
E)  Moral suasion 
A)  Open market operations 
B)  Changing the required reserve ratio 
C)  Changing the discount rate 
D)  Changing the prime lending rate 
E)  Moral suasion

Question 7

A major difference between the Federal Reserve System and foreign central banks is that the

Accepted Answer

A)  Fed is considered part of our government while central banks in other countries are not part of the government 
B)  Fed is completely independent of government influence while central banks in other countries are under government influence 
C)  Fed deals with less money than its foreign counterparts 
D)  U.S.does not have a single central bank like its foreign counterparts 
E)  purpose of the Fed is to make a profit while other countries' central banks exist to serve the public. 
A)  Fed is considered part of our government while central banks in other countries are not part of the government 
B)  Fed is completely independent of government influence while central banks in other countries are under government influence 
C)  Fed deals with less money than its foreign counterparts 
D)  U.S.does not have a single central bank like its foreign counterparts 
E)  purpose of the Fed is to make a profit while other countries' central banks exist to serve the public.

Question 8

To determine the total change in deposits as a result of an injection of reserves,we must

Accepted Answer

A)  sum the number of loans a bank has made 
B)  multiply the injection of reserves by 10 
C)  multiply the number of loans by the expenditure multiplier 
D)  sum the reserves of each bank 
E)  multiply the injection of reserves by the demand deposit multiplier 
A)  sum the number of loans a bank has made 
B)  multiply the injection of reserves by 10 
C)  multiply the number of loans by the expenditure multiplier 
D)  sum the reserves of each bank 
E)  multiply the injection of reserves by the demand deposit multiplier

Question 9

Money is

Accepted Answer

A)  any asset that is convertible into cash. 
B)  any asset with intrinsic value such as gold or silver. 
C)  any asset widely accepted as a means of payment. 
D)  anything that facilitates exchange. 
E)  cash only. 
A)  any asset that is convertible into cash. 
B)  any asset with intrinsic value such as gold or silver. 
C)  any asset widely accepted as a means of payment. 
D)  anything that facilitates exchange. 
E)  cash only.

Question 10

A bank's balance sheet shows

Accepted Answer

A)  information about the riskiness of its loans 
B)  the amount of money loaned to each individual borrower 
C)  the amount of cash in the hands of the public 
D)  the number of checking accounts it maintains 
E)  the bank's assets and liabilities 
A)  information about the riskiness of its loans 
B)  the amount of money loaned to each individual borrower 
C)  the amount of cash in the hands of the public 
D)  the number of checking accounts it maintains 
E)  the bank's assets and liabilities

Question 11

Assuming that households do not change their cash holdings and banks loan out all of their excess reserves,if the required reserve ratio (RRR)is 20 percent and the Fed purchases $2,000 worth of bonds from banks,how much money will be eventually created?

Accepted Answer

A)  $1,800 
B)  $2,000 
C)  $10,000 
D)  $18,000 
E)  $20,000 
A)  $1,800 
B)  $2,000 
C)  $10,000 
D)  $18,000 
E)  $20,000

Question 12

Which of the following is not part of M2?

Accepted Answer

A)  savings-type deposits 
B)  noninstitutional money market mutual fund balances 
C)  small time deposits 
D)  large time deposits (over $100,000) 
E)  cash held by the public 
A)  savings-type deposits 
B)  noninstitutional money market mutual fund balances 
C)  small time deposits 
D)  large time deposits (over $100,000) 
E)  cash held by the public

Question 13

The demand deposit multiplier is likely to be smaller than 1/RRR if

Accepted Answer

A)  the public will not want to change its holdings of currency 
B)  the public holds no currency 
C)  banks want to hold excess reserves 
D)  want to hold no excess reserves 
E)  banks increase the number of loans they offer to make a larger profit 
A)  the public will not want to change its holdings of currency 
B)  the public holds no currency 
C)  banks want to hold excess reserves 
D)  want to hold no excess reserves 
E)  banks increase the number of loans they offer to make a larger profit

Question 14

An important function of the Federal Reserve is

Accepted Answer

A)  clearing checks 
B)  printing currency 
C)  overturning reserve requirements 
D)  controlling the demand for money 
E)  making a large profit 
A)  clearing checks 
B)  printing currency 
C)  overturning reserve requirements 
D)  controlling the demand for money 
E)  making a large profit

Question 15

Who owns a commercial bank?

Accepted Answer

A)  Its depositors 
B)  Its stockholders 
C)  Lenders 
D)  Savers 
E)  The Federal Reserve 
A)  Its depositors 
B)  Its stockholders 
C)  Lenders 
D)  Savers 
E)  The Federal Reserve

Question 16

The Federal Reserve

Accepted Answer

A)  issues new government bonds to finance budget deficits 
B)  issues bonds for the U.S.Treasury 
C)  buys and sells already-existing bonds 
D)  increases the money supply by selling bonds 
E)  raises and lowers tax rates and disburses money for government purchases and transfer payments 
A)  issues new government bonds to finance budget deficits 
B)  issues bonds for the U.S.Treasury 
C)  buys and sells already-existing bonds 
D)  increases the money supply by selling bonds 
E)  raises and lowers tax rates and disburses money for government purchases and transfer payments

Question 17

If a commercial bank has assets valued at $200 million and a net worth of $20 million,what is the value of the bank's liabilities?

Accepted Answer

A)  There is not enough information to determine. 
B)  $20 million 
C)  $220 million 
D)  $180 million 
E)  $200 million 
A)  There is not enough information to determine. 
B)  $20 million 
C)  $220 million 
D)  $180 million 
E)  $200 million

Question 18

A bank's most important service is

Accepted Answer

A)  making money 
B)  providing checking account services 
C)  organizing money flowing into accounts 
D)  providing investment advice 
E)  increasing the amount of cash the public holds 
A)  making money 
B)  providing checking account services 
C)  organizing money flowing into accounts 
D)  providing investment advice 
E)  increasing the amount of cash the public holds

Question 19

Which of the following could not serve as commodity money?

Accepted Answer

A)  diamond 
B)  gold 
C)  paper 
D)  fur 
E)  silver 
A)  diamond 
B)  gold 
C)  paper 
D)  fur 
E)  silver

Question 20

The institution charged with creating and regulating the U.S.money supply is the

Accepted Answer

A)  U.S.Treasury 
B)  Federal Reserve System 
C)  Department of Commerce 
D)  Department of Weights and Measures 
E)  U.S.Mint 
A)  U.S.Treasury 
B)  Federal Reserve System 
C)  Department of Commerce 
D)  Department of Weights and Measures 
E)  U.S.Mint

Cash in a commercial bank's vault is not part of the money supply.

How would an increase in the required reserve ratio affect banks' ability to create money?

If you use a check to purchase a textbook,the check is

The Fed can decrease money supply by

If the required reserve ratio is 0.25,what is the demand deposit multiplier?

Which of the following Federal Reserve policy tools is used most often?

A major difference between the Federal Reserve System and foreign central banks is that the

To determine the total change in deposits as a result of an injection of reserves,we must

Money is

A bank's balance sheet shows

Assuming that households do not change their cash holdings and banks loan out all of their excess reserves,if the required reserve ratio (RRR)is 20 percent and the Fed purchases $2,000 worth of bonds from banks,how much money will be eventually created?

Which of the following is not part of M2?

The demand deposit multiplier is likely to be smaller than 1/RRR if

An important function of the Federal Reserve is

Who owns a commercial bank?

The Federal Reserve

If a commercial bank has assets valued at $200 million and a net worth of $20 million,what is the value of the bank's liabilities?

A bank's most important service is

Which of the following could not serve as commodity money?

The institution charged with creating and regulating the U.S.money supply is the

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

Cash in a commercial bank's vault is not part of the money supply.

How would an increase in the required reserve ratio affect banks' ability to create money?

If you use a check to purchase a textbook,the check is

The Fed can decrease money supply by

If the required reserve ratio is 0.25,what is the demand deposit multiplier?

Which of the following Federal Reserve policy tools is used most often?

A major difference between the Federal Reserve System and foreign central banks is that the

To determine the total change in deposits as a result of an injection of reserves,we must

Money is

A bank's balance sheet shows

Assuming that households do not change their cash holdings and banks loan out all of their excess reserves,if the required reserve ratio (RRR)is 20 percent and the Fed purchases $2,000 worth of bonds from banks,how much money will be eventually created?

Which of the following is not part of M2?

The demand deposit multiplier is likely to be smaller than 1/RRR if

An important function of the Federal Reserve is

Who owns a commercial bank?

The Federal Reserve

If a commercial bank has assets valued at $200 million and a net worth of $20 million,what is the value of the bank's liabilities?

A bank's most important service is

Which of the following could not serve as commodity money?

The institution charged with creating and regulating the U.S.money supply is the

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