Question 1

Savings accounts have specific maturity dates.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an advantage of using a credit card?

Accepted Answer

A)  Credit cards help account holders tap directly into their checking account. 
B)  Credit cards help account holders get a loan from the card issuer. 
C)  Credit cards require a PIN number and are therefore safe. 
D)  Credit card holders can earn a fixed interest on their accounts. 
E)  Credit cards help eliminate the use of money. 
A)  Credit cards help account holders tap directly into their checking account. 
B)  Credit cards help account holders get a loan from the card issuer. 
C)  Credit cards require a PIN number and are therefore safe. 
D)  Credit card holders can earn a fixed interest on their accounts. 
E)  Credit cards help eliminate the use of money.

Question 3

When the Fed sells U.S. government securities to a member bank, the immediate effect on that bank's balance sheet is a(n) _____

Accepted Answer

A)  decrease in assets and an increase in liabilities. 
B)  increase in assets and a decrease in liabilities. 
C)  increase in both assets and liabilities. 
D)  decrease in both assets and liabilities. 
E)  change in the type of assets the bank is holding, but no change in liabilities. 
A)  decrease in assets and an increase in liabilities. 
B)  increase in assets and a decrease in liabilities. 
C)  increase in both assets and liabilities. 
D)  decrease in both assets and liabilities. 
E)  change in the type of assets the bank is holding, but no change in liabilities.

Question 4

If an increase of $5 million in excess reserves increases checkable deposits in the banking system by a maximum of $50 million, the required reserve ratio would be _____

Accepted Answer

A)  0 percent. 
B)  5 percent. 
C)  10 percent. 
D)  20 percent. 
E)  2 percent. 
A)  0 percent. 
B)  5 percent. 
C)  10 percent. 
D)  20 percent. 
E)  2 percent.

Question 5

If a bank has $950,000 million in liabilities and $1,000,000 in assets, its net worth must equal _____

Accepted Answer

A)  $50,000. 
B)  $1,050,000. 
C)  $50,000,000. 
D)  $1,000,000. 
E)  $950,000. 
A)  $50,000. 
B)  $1,050,000. 
C)  $50,000,000. 
D)  $1,000,000. 
E)  $950,000.

Question 6

The extent of money expansion will be _____

Accepted Answer

A)  greater if banks hold on to excess reserves. 
B)  greater if private individuals hold on to cash. 
C)  greater if banks hold on to excess reserves but less if private individuals hold on to cash. 
D)  less if banks hold on to excess reserves but greater if private individuals hold on to cash. 
E)  less if banks hold on to excess reserves or private individuals hold on to cash. 
A)  greater if banks hold on to excess reserves. 
B)  greater if private individuals hold on to cash. 
C)  greater if banks hold on to excess reserves but less if private individuals hold on to cash. 
D)  less if banks hold on to excess reserves but greater if private individuals hold on to cash. 
E)  less if banks hold on to excess reserves or private individuals hold on to cash.

Question 7

Usually, a commercial bank's depositors and its owners are the same individuals.

Accepted Answer

A) True 
 B)False

Question 8

The Federal Reserve may increase the money supply by _____

Accepted Answer

A)  selling a bond to a member bank. 
B)  selling a bond to a securities dealer. 
C)  lending reserves to banks. 
D)  increasing the required reserve ratio. 
E)  increasing the discount rate. 
A)  selling a bond to a member bank. 
B)  selling a bond to a securities dealer. 
C)  lending reserves to banks. 
D)  increasing the required reserve ratio. 
E)  increasing the discount rate.

Question 9

The banking system creates money in the sense that it _____

Accepted Answer

A)  prints money. 
B)  creates excess reserves from loans. 
C)  creates loans from excess reserves. 
D)  creates required reserves from loans. 
E)  creates loans from required reserves. 
A)  prints money. 
B)  creates excess reserves from loans. 
C)  creates loans from excess reserves. 
D)  creates required reserves from loans. 
E)  creates loans from required reserves.

Question 10

Bank deposits that earn interest but have no specific maturity date are called _____

Accepted Answer

A)  cash in bank vaults. 
B)  savings deposits. 
C)  money market mutual fund accounts. 
D)  time deposits. 
E)  checkable deposits. 
A)  cash in bank vaults. 
B)  savings deposits. 
C)  money market mutual fund accounts. 
D)  time deposits. 
E)  checkable deposits.

Question 11

Suppose a bank has $8,000 in checkable deposits and the required reserve ratio is 0.2. If actual reserves equal $3,000, then excess reserves equal _____

Accepted Answer

A)  $1,600. 
B)  $1,400. 
C)  $2,400. 
D)  $5,000. 
E)  zero. 
A)  $1,600. 
B)  $1,400. 
C)  $2,400. 
D)  $5,000. 
E)  zero.

Question 12

Compared to bitcoin, the supply of M1 in 2017 was about _____

Accepted Answer

A)  $1 trillion, or about 900 times greater. 
B)  $3 trillion, or about 900 times greater. 
C)  $1 trillion, or about 300 times greater. 
D)  $3 trillion, or about 300 times greater. 
E)  $5 trillion, or about 1000 times greater. 
A)  $1 trillion, or about 900 times greater. 
B)  $3 trillion, or about 900 times greater. 
C)  $1 trillion, or about 300 times greater. 
D)  $3 trillion, or about 300 times greater. 
E)  $5 trillion, or about 1000 times greater.

Question 13

Raising the discount rate is _____

Accepted Answer

A)  an expansionary policy, because it raises the ratio of excess reserves to total reserves in the banking system. 
B)  a contractionary policy on the part of the member banks of the Fed, because it raises the firms' costs of borrowing from them. 
C)  a contractionary policy on the part of the Fed, because it raises the commercial banks' cost of borrowing from it. 
D)  an expansionary policy on the part of the member banks of the Fed, because it raises their profits relative to those of the nonmember banks. 
E)  an expansionary policy on the part of the Fed, because increasing the interest rates that the banks are allowed to charge will increase their willingness to make loans. 
A)  an expansionary policy, because it raises the ratio of excess reserves to total reserves in the banking system. 
B)  a contractionary policy on the part of the member banks of the Fed, because it raises the firms' costs of borrowing from them. 
C)  a contractionary policy on the part of the Fed, because it raises the commercial banks' cost of borrowing from it. 
D)  an expansionary policy on the part of the member banks of the Fed, because it raises their profits relative to those of the nonmember banks. 
E)  an expansionary policy on the part of the Fed, because increasing the interest rates that the banks are allowed to charge will increase their willingness to make loans.

Question 14

Suppose the First National Bank acquires $500,000 in new deposits and the required reserve ratio is 12 percent. Which of the following is true?

Accepted Answer

A)  Required reserves on the new deposits are $12,000. 
B)  Excess reserves on the new deposits are $500,000. 
C)  Required reserves on the new deposits are $60,000. 
D)  Excess reserves on the new deposits are $12,000. 
E)  Total reserves on the new deposits are $440,000. 
A)  Required reserves on the new deposits are $12,000. 
B)  Excess reserves on the new deposits are $500,000. 
C)  Required reserves on the new deposits are $60,000. 
D)  Excess reserves on the new deposits are $12,000. 
E)  Total reserves on the new deposits are $440,000.

Question 15

If the Fed decreases the required reserve ratio at a time when banks are holding no excess reserves, the Fed is _____

Accepted Answer

A)  forcing banks to increase the money supply. 
B)  forcing banks to decrease the money supply. 
C)  making it possible for banks to increase the money supply but not forcing them to do so. 
D)  making it possible for banks to decrease the money supply but not forcing them to do so. 
E)  conducting open market operations but not changing the money supply. 
A)  forcing banks to increase the money supply. 
B)  forcing banks to decrease the money supply. 
C)  making it possible for banks to increase the money supply but not forcing them to do so. 
D)  making it possible for banks to decrease the money supply but not forcing them to do so. 
E)  conducting open market operations but not changing the money supply.

Question 16

If the required reserve ratio is 10 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves, the money supply _____

Accepted Answer

A)  decreases by $10,000. 
B)  increases by $100,000. 
C)  decreases by $100,000. 
D)  increases by $50,000. 
E)  decreases by $50,000. 
A)  decreases by $10,000. 
B)  increases by $100,000. 
C)  decreases by $100,000. 
D)  increases by $50,000. 
E)  decreases by $50,000.

Question 17

Which of the following enables commercial banks to create money?

Accepted Answer

A)  required reserves 
B)  excess reserves 
C)  state and local government securities 
D)  U.S. government securities 
E)  net worth 
A)  required reserves 
B)  excess reserves 
C)  state and local government securities 
D)  U.S. government securities 
E)  net worth

Question 18

To calm fears during a rash of mortgage defaults in 2007 and 2008, the Fed lowered the discount rate from 6.25 percent to _____

Accepted Answer

A)  4.25 percent. 
B)  3.25 percent. 
C)  2.25 percent. 
D)  1.25 percent. 
E)  0.25 percent. 
A)  4.25 percent. 
B)  3.25 percent. 
C)  2.25 percent. 
D)  1.25 percent. 
E)  0.25 percent.

Question 19

When the Fed buys U.S. government securities from a member bank, that bank's excess reserves, required reserves, and total reserves all increase.

Accepted Answer

A) True 
 B)False

Question 20

To increase the money supply, the Fed might _____

Accepted Answer

A)  increase the reserve requirement. 
B)  decrease the discount rate. 
C)  increase the reserve requirement and decrease the discount rate. 
D)  sell government securities and increase the discount rate. 
E)  sell bonds on the open market and increase the reserve requirement. 
A)  increase the reserve requirement. 
B)  decrease the discount rate. 
C)  increase the reserve requirement and decrease the discount rate. 
D)  sell government securities and increase the discount rate. 
E)  sell bonds on the open market and increase the reserve requirement.

Savings accounts have specific maturity dates.

Which of the following is an advantage of using a credit card?

When the Fed sells U.S. government securities to a member bank, the immediate effect on that bank's balance sheet is a(n) _____

If an increase of $5 million in excess reserves increases checkable deposits in the banking system by a maximum of $50 million, the required reserve ratio would be _____

If a bank has $950,000 million in liabilities and $1,000,000 in assets, its net worth must equal _____

The extent of money expansion will be _____

Usually, a commercial bank's depositors and its owners are the same individuals.

The Federal Reserve may increase the money supply by _____

The banking system creates money in the sense that it _____

Bank deposits that earn interest but have no specific maturity date are called _____

Suppose a bank has $8,000 in checkable deposits and the required reserve ratio is 0.2. If actual reserves equal $3,000, then excess reserves equal _____

Compared to bitcoin, the supply of M1 in 2017 was about _____

Raising the discount rate is _____

Suppose the First National Bank acquires $500,000 in new deposits and the required reserve ratio is 12 percent. Which of the following is true?

If the Fed decreases the required reserve ratio at a time when banks are holding no excess reserves, the Fed is _____

If the required reserve ratio is 10 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves, the money supply _____

Which of the following enables commercial banks to create money?

To calm fears during a rash of mortgage defaults in 2007 and 2008, the Fed lowered the discount rate from 6.25 percent to _____

When the Fed buys U.S. government securities from a member bank, that bank's excess reserves, required reserves, and total reserves all increase.

To increase the money supply, the Fed might _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

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Exam 14: Banking and the Money Supply.

Savings accounts have specific maturity dates.

Which of the following is an advantage of using a credit card?

When the Fed sells U.S. government securities to a member bank, the immediate effect on that bank's balance sheet is a(n) _____

If an increase of $5 million in excess reserves increases checkable deposits in the banking system by a maximum of $50 million, the required reserve ratio would be _____

If a bank has $950,000 million in liabilities and $1,000,000 in assets, its net worth must equal _____

The extent of money expansion will be _____

Usually, a commercial bank's depositors and its owners are the same individuals.

The Federal Reserve may increase the money supply by _____

The banking system creates money in the sense that it _____

Bank deposits that earn interest but have no specific maturity date are called _____

Suppose a bank has $8,000 in checkable deposits and the required reserve ratio is 0.2. If actual reserves equal $3,000, then excess reserves equal _____

Compared to bitcoin, the supply of M1 in 2017 was about _____

Raising the discount rate is _____

Suppose the First National Bank acquires $500,000 in new deposits and the required reserve ratio is 12 percent. Which of the following is true?

If the Fed decreases the required reserve ratio at a time when banks are holding no excess reserves, the Fed is _____

If the required reserve ratio is 10 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves, the money supply _____

Which of the following enables commercial banks to create money?

To calm fears during a rash of mortgage defaults in 2007 and 2008, the Fed lowered the discount rate from 6.25 percent to _____

When the Fed buys U.S. government securities from a member bank, that bank's excess reserves, required reserves, and total reserves all increase.

To increase the money supply, the Fed might _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters