Question 1

About ____ of Federal Reserve notes are held abroad.

Accepted Answer

A)  one-tenth 
B)  one-fifth 
C)  one-third 
D)  quarter 
E)  half 
A)  one-tenth 
B)  one-fifth 
C)  one-third 
D)  quarter 
E)  half

Question 2

In order to meet a deficiency of required reserves, a bank could _____

Accepted Answer

A)  buy securities. 
B)  deposit vault cash with the Fed. 
C)  turn some of its deposits at the Fed into cash. 
D)  close some checking accounts. 
E)  borrow from another bank in the federal funds market. 
A)  buy securities. 
B)  deposit vault cash with the Fed. 
C)  turn some of its deposits at the Fed into cash. 
D)  close some checking accounts. 
E)  borrow from another bank in the federal funds market.

Question 3

Bank deposits that allow the account owner to draw down an account with a check or a debit card 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 4

If the required reserve ratio in the banking system is 20% and the Fed buys $1,000 in U.S. bonds, what will happen to supply?

Accepted Answer

A)  It will increase by as much as $5,000. 
B)  It will decrease by as much as $5,000. 
C)  It will increase by as much as $10,000. 
D)  It will decrease by as much as $10,000. 
E)  It will remain unchanged. 
A)  It will increase by as much as $5,000. 
B)  It will decrease by as much as $5,000. 
C)  It will increase by as much as $10,000. 
D)  It will decrease by as much as $10,000. 
E)  It will remain unchanged.

Question 5

If the required reserve ratio in the banking system is 20% and the Fed sells $1,000 in U.S. bonds, what will happen to supply?

Accepted Answer

A)  It will increase by as much as $5,000. 
B)  It will decrease by as much as $5,000. 
C)  It will increase by as much as $10,000. 
D)  It will decrease by as much as $10,000. 
E)  It will remain unchanged. 
A)  It will increase by as much as $5,000. 
B)  It will decrease by as much as $5,000. 
C)  It will increase by as much as $10,000. 
D)  It will decrease by as much as $10,000. 
E)  It will remain unchanged.

Question 6

Currency held by the nonbanking public is a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 7

Bitcoin serves as _____

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  money. 
E)  a traditional currency. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  money. 
E)  a traditional currency.

Question 8

The Fed earns revenue from _____

Accepted Answer

A)  paying interest on banknotes, which are IOUs from the Fed. 
B)  discount lending and other services it provides to banks. 
C)  operating costs. 
D)  paying a 6 percent dividend to the member banks. 
E)  paying a small amount of interest on bank reserves at the Fed. 
A)  paying interest on banknotes, which are IOUs from the Fed. 
B)  discount lending and other services it provides to banks. 
C)  operating costs. 
D)  paying a 6 percent dividend to the member banks. 
E)  paying a small amount of interest on bank reserves at the Fed.

Question 9

Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank. If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500, which of the following is true?

Accepted Answer

A)  The bank must have lent out an additional $4,000. 
B)  $500 is the value of the bank's required reserves. 
C)  The bank now has excess reserves of $100. 
D)  Both the bank's assets and its liabilities rise by $500. 
E)  The bank now has $500 in excess reserves. 
A)  The bank must have lent out an additional $4,000. 
B)  $500 is the value of the bank's required reserves. 
C)  The bank now has excess reserves of $100. 
D)  Both the bank's assets and its liabilities rise by $500. 
E)  The bank now has $500 in excess reserves.

Question 10

Which of the following is true of banks?

Accepted Answer

A)  Banks reduce the opportunity cost of holding idle cash. 
B)  Banks act as intermediaries between the government and private investors. 
C)  Banks can reduce risk by lending to rich borrowers. 
D)  Banks reduce the transaction costs of borrowing and lending money. 
E)  Banks can reduce risks by extending more loans. 
A)  Banks reduce the opportunity cost of holding idle cash. 
B)  Banks act as intermediaries between the government and private investors. 
C)  Banks can reduce risk by lending to rich borrowers. 
D)  Banks reduce the transaction costs of borrowing and lending money. 
E)  Banks can reduce risks by extending more loans.

Question 11

The Reserve Bank of Glassen is the apex banking institution in the country of Glassen. Money supply in Glassen will increase when _____

Accepted Answer

A)  the Reserve Bank of Glassen buys bonds from commercial banks. 
B)  the Reserve Bank of Glassen raises the required reserve ratio for commercial banks. 
C)  the Reserve Bank of Glassen sells government bonds to commercial banks. 
D)  the Reserve Bank of Glassen raises the discount rate for commercial banks. 
E)  the Reserve Bank of Glassen prints new checks. 
A)  the Reserve Bank of Glassen buys bonds from commercial banks. 
B)  the Reserve Bank of Glassen raises the required reserve ratio for commercial banks. 
C)  the Reserve Bank of Glassen sells government bonds to commercial banks. 
D)  the Reserve Bank of Glassen raises the discount rate for commercial banks. 
E)  the Reserve Bank of Glassen prints new checks.

Question 12

If the required reserve ratio is 10 percent and the Fed buys a $5,000 security from a depository institution, the money supply _____

Accepted Answer

A)  increases by $15,000. 
B)  increases by $10,000. 
C)  decreases by $15,000. 
D)  decreases by $10,000. 
E)  decreases by $50,000. 
A)  increases by $15,000. 
B)  increases by $10,000. 
C)  decreases by $15,000. 
D)  decreases by $10,000. 
E)  decreases by $50,000.

Question 13

The United Bank of Glassen lent money to only a limited number of big business houses. After a financial crisis, the bank went out of business. Which of the following reasons could have contributed to the collapse of this bank?

Accepted Answer

A)  their decision not to lend funds to the Federal Reserve 
B)  their decision not to diversify their asset portfolio 
C)  their decision to extend loans to a diversified pool of borrowers 
D)  their decision to extend mainly short-term loans 
E)  their decision to unnecessarily scrutinize each borrower's details 
A)  their decision not to lend funds to the Federal Reserve 
B)  their decision not to diversify their asset portfolio 
C)  their decision to extend loans to a diversified pool of borrowers 
D)  their decision to extend mainly short-term loans 
E)  their decision to unnecessarily scrutinize each borrower's details

Question 14

If banks choose not to lend out their excess reserves, the money supply will not expand.

Accepted Answer

A) True 
 B)False

Question 15

If an increase of $10 million in excess reserves increases checkable deposits in the banking system by a maximum of $200 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 16

Suppose the reserve requirement is 15 percent. Which of the following is true?

Accepted Answer

A)  The simple money multiplier is 15. 
B)  The simple money multiplier is 1/15. 
C)  The simple money multiplier is 30,000. 
D)  The simple money multiplier is 1/30,000. 
E)  The simple money multiplier is 1/0.15. 
A)  The simple money multiplier is 15. 
B)  The simple money multiplier is 1/15. 
C)  The simple money multiplier is 30,000. 
D)  The simple money multiplier is 1/30,000. 
E)  The simple money multiplier is 1/0.15.

Question 17

Which of the following is a liability of a bank?

Accepted Answer

A)  U.S. government securities owned by the bank 
B)  deposits with the Fed 
C)  checkable deposits 
D)  consumer and business loans 
E)  buildings and furniture owned by the bank 
A)  U.S. government securities owned by the bank 
B)  deposits with the Fed 
C)  checkable deposits 
D)  consumer and business loans 
E)  buildings and furniture owned by the bank

Question 18

Suppose the Fed purchases $1,000 in U.S. government securities from the Last National Bank and the Last National Bank's account at the Federal Reserve district bank increases by $1,000. Which of the following is a result of this transaction?

Accepted Answer

A)  The Last National Bank's balance sheet will show a change in the composition of its assets. 
B)  Both the Last National Bank's assets and its liabilities will rise by $1,000. 
C)  Both the Fed's assets and its liabilities will fall by $1,000. 
D)  Only the Fed's liabilities will change, while its assets will remain unchanged. 
E)  This transaction will decrease the money supply. 
A)  The Last National Bank's balance sheet will show a change in the composition of its assets. 
B)  Both the Last National Bank's assets and its liabilities will rise by $1,000. 
C)  Both the Fed's assets and its liabilities will fall by $1,000. 
D)  Only the Fed's liabilities will change, while its assets will remain unchanged. 
E)  This transaction will decrease the money supply.

Question 19

If people choose to hold some of a newly received loan as cash instead of keeping it in a checking account, _____

Accepted Answer

A)  the money supply will not increase as much as it would have had borrowers deposited all of the money in banks. 
B)  the money supply will remain unchanged. 
C)  the money supply will decrease as much as it would have had borrowers deposited all the money in banks. 
D)  the banking system will collapse. 
E)  the economy will experience a recession. 
A)  the money supply will not increase as much as it would have had borrowers deposited all of the money in banks. 
B)  the money supply will remain unchanged. 
C)  the money supply will decrease as much as it would have had borrowers deposited all the money in banks. 
D)  the banking system will collapse. 
E)  the economy will experience a recession.

Question 20

If the simple money multiplier is 20, the required reserve ratio must be equal to _____

Accepted Answer

A)  5 percent. 
B)  0 percent. 
C)  10 percent. 
D)  50 percent. 
E)  20 percent. 
A)  5 percent. 
B)  0 percent. 
C)  10 percent. 
D)  50 percent. 
E)  20 percent.

About ____ of Federal Reserve notes are held abroad.

In order to meet a deficiency of required reserves, a bank could _____

Bank deposits that allow the account owner to draw down an account with a check or a debit card are called _____

If the required reserve ratio in the banking system is 20% and the Fed buys $1,000 in U.S. bonds, what will happen to supply?

If the required reserve ratio in the banking system is 20% and the Fed sells $1,000 in U.S. bonds, what will happen to supply?

Currency held by the nonbanking public is a medium of exchange.

Bitcoin serves as _____

The Fed earns revenue from _____

Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank. If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500, which of the following is true?

Which of the following is true of banks?

The Reserve Bank of Glassen is the apex banking institution in the country of Glassen. Money supply in Glassen will increase when _____

If the required reserve ratio is 10 percent and the Fed buys a $5,000 security from a depository institution, the money supply _____

The United Bank of Glassen lent money to only a limited number of big business houses. After a financial crisis, the bank went out of business. Which of the following reasons could have contributed to the collapse of this bank?

If banks choose not to lend out their excess reserves, the money supply will not expand.

If an increase of $10 million in excess reserves increases checkable deposits in the banking system by a maximum of $200 million, the required reserve ratio would be _____

Suppose the reserve requirement is 15 percent. Which of the following is true?

Which of the following is a liability of a bank?

Suppose the Fed purchases $1,000 in U.S. government securities from the Last National Bank and the Last National Bank's account at the Federal Reserve district bank increases by $1,000. Which of the following is a result of this transaction?

If people choose to hold some of a newly received loan as cash instead of keeping it in a checking account, _____

If the simple money multiplier is 20, the required reserve ratio must be equal to _____

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

Exam 14: Banking and the Money Supply.

About ____ of Federal Reserve notes are held abroad.

In order to meet a deficiency of required reserves, a bank could _____

Bank deposits that allow the account owner to draw down an account with a check or a debit card are called _____

If the required reserve ratio in the banking system is 20% and the Fed buys $1,000 in U.S. bonds, what will happen to supply?

If the required reserve ratio in the banking system is 20% and the Fed sells $1,000 in U.S. bonds, what will happen to supply?

Currency held by the nonbanking public is a medium of exchange.

Bitcoin serves as _____

The Fed earns revenue from _____

Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank. If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500, which of the following is true?

Which of the following is true of banks?

The Reserve Bank of Glassen is the apex banking institution in the country of Glassen. Money supply in Glassen will increase when _____

If the required reserve ratio is 10 percent and the Fed buys a $5,000 security from a depository institution, the money supply _____

The United Bank of Glassen lent money to only a limited number of big business houses. After a financial crisis, the bank went out of business. Which of the following reasons could have contributed to the collapse of this bank?

If banks choose not to lend out their excess reserves, the money supply will not expand.

If an increase of $10 million in excess reserves increases checkable deposits in the banking system by a maximum of $200 million, the required reserve ratio would be _____

Suppose the reserve requirement is 15 percent. Which of the following is true?

Which of the following is a liability of a bank?

Suppose the Fed purchases $1,000 in U.S. government securities from the Last National Bank and the Last National Bank's account at the Federal Reserve district bank increases by $1,000. Which of the following is a result of this transaction?

If people choose to hold some of a newly received loan as cash instead of keeping it in a checking account, _____

If the simple money multiplier is 20, the required reserve ratio must be equal to _____

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