Question 1

Liquidity refers to

Accepted Answer

A) the ease with which an asset is converted to the medium of exchange. 
B) a measurement of the intrinsic value of commodity money. 
C) the suitability of an asset to serve as a store of value. 
D) how many time a dollar circulates in a given year. 
A) the ease with which an asset is converted to the medium of exchange. 
B) a measurement of the intrinsic value of commodity money. 
C) the suitability of an asset to serve as a store of value. 
D) how many time a dollar circulates in a given year.

Question 2

During a bank run depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. 
C) The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease. 
D) The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease 
A) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. 
C) The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease. 
D) The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease

Question 3

The money multiplier is defined as

Accepted Answer

A) 1/(1-R) 
B) 1/R 
C) 1/(1+R) 
D) (1+R)/R 
A) 1/(1-R) 
B) 1/R 
C) 1/(1+R) 
D) (1+R)/R

Question 4

One puzzle about the U.S.money stock is that

Accepted Answer

A) banks hold so much currency relative to the public. 
B) the public holds so much currency relative to banks. 
C) there is so little currency per person. 
D) there is so much currency per person. 
A) banks hold so much currency relative to the public. 
B) the public holds so much currency relative to banks. 
C) there is so little currency per person. 
D) there is so much currency per person.

Question 5

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A) U.S.citizens are holding a lot of foreign currency. 
B) Currency may be a preferable store of wealth for criminals. 
C) People use credit and debit cards more frequently. 
D) All of the above help explain the abundance of currency. 
A) U.S.citizens are holding a lot of foreign currency. 
B) Currency may be a preferable store of wealth for criminals. 
C) People use credit and debit cards more frequently. 
D) All of the above help explain the abundance of currency.

Question 6

In a 100-percent-reserve banking system,

Accepted Answer

A) banks can create money by issuing currency. 
B) banks can create money by lending out reserves. 
C) the Fed can increase the money supply with open-market sales. 
D) banks hold as many reserves as they hold deposits. 
A) banks can create money by issuing currency. 
B) banks can create money by lending out reserves. 
C) the Fed can increase the money supply with open-market sales. 
D) banks hold as many reserves as they hold deposits.

Question 7

The Fed can increase the price level by conducting open market

Accepted Answer

A) sales and raising the discount rate. 
B) sales and lowering the discount rate. 
C) purchases and raising the discount rate. 
D) purchases and lowering the discount rate. 
A) sales and raising the discount rate. 
B) sales and lowering the discount rate. 
C) purchases and raising the discount rate. 
D) purchases and lowering the discount rate.

Question 8

If the reserve ratio is 8 percent,an additional $1,000 of reserves can increase the money supply by

Accepted Answer

A) $6,400 
B) $8,000 
C) $12,500 
D) $20,000 
A) $6,400 
B) $8,000 
C) $12,500 
D) $20,000

Question 9

Suppose a bank has a 10 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $50 in reserves and $4,950 in loans. 
B) It has $500 in reserves and $4,500 in loans. 
C) It has $555 in reserves and $4,445 in loans. 
D) None of the above is correct. 
A) It has $50 in reserves and $4,950 in loans. 
B) It has $500 in reserves and $4,500 in loans. 
C) It has $555 in reserves and $4,445 in loans. 
D) None of the above is correct.

Question 10

Use the balance sheet for the following questions.
Table 29-3
  
-Refer to Table 29-3.If the reserve requirement is 10 percent,then this bank

Accepted Answer

A) is in a position to make a new loan of $15,000. 
B) has less reserves than required. 
C) has excess reserves of less than $15,000. 
D) None of the above is correct. 
A) is in a position to make a new loan of $15,000. 
B) has less reserves than required. 
C) has excess reserves of less than $15,000. 
D) None of the above is correct.

Question 11

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 12

Meditorian Banking Statistics
The monetary policy of Meditor is determined by the Meditorian Central Bank. The local currency is the medit. Meditorian banks collectively hold 100 million medits of required reserves, 25 million medits of excess reserves, 250 million medits of Meditorian Treasury Bonds, and their customers hold 1,000 million medits of deposits. Meditorians prefer to use only demand deposits and so all currency is on deposit at the bank.
-Refer to Meditorian Central Banking.Suppose that the Central Bank of Meditor loaned the banks of Meditor 5 million medits.Suppose also that both the required reserve ratio and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Meditor change?

Accepted Answer

A) 60 million medits 
B) 50 million medits 
C) 40 million medits 
D) None of the above is correct. 
A) 60 million medits 
B) 50 million medits 
C) 40 million medits 
D) None of the above is correct.

Question 13

If the reserve ratio is 10 percent,$1,000 of additional reserves can create

Accepted Answer

A) $5,000 of new money. 
B) $9,000 of new money. 
C) $10,000 of new money. 
D) None of the above is correct. 
A) $5,000 of new money. 
B) $9,000 of new money. 
C) $10,000 of new money. 
D) None of the above is correct.

Question 14

If the reserve ratio is 12.5 percent,$1,000 of additional reserves can create

Accepted Answer

A) $7,000 of new money. 
B) $8,000 of new money. 
C) $11,500 of new money. 
D) $12,500 of new money. 
A) $7,000 of new money. 
B) $8,000 of new money. 
C) $11,500 of new money. 
D) $12,500 of new money.

Question 15

Use the (hypothetical) information in the following table to answer the following Questions.
Table 29-1
  
-Refer to Table 29-1.What is the M1 money supply?

Accepted Answer

A) $215 billion 
B) $216 billion 
C) $226 billion 
D) $301 billion 
A) $215 billion 
B) $216 billion 
C) $226 billion 
D) $301 billion

Question 16

If the Fed buys bonds in the open market,the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 17

The Fed can influence unemployment in

Accepted Answer

A) the short and long run. 
B) the short run, but not the long run. 
C) the long run, but not the short run. 
D) neither the short nor long run. 
A) the short and long run. 
B) the short run, but not the long run. 
C) the long run, but not the short run. 
D) neither the short nor long run.

Question 18

The Federal Deposit Insurance Corporation

Accepted Answer

A) protects depositors in the event of bank failures. 
B) has become insolvent in recent years due to a large number of bank failures. 
C) is part of the Federal Reserve System. 
D) in practice has seldom been of much use. 
A) protects depositors in the event of bank failures. 
B) has become insolvent in recent years due to a large number of bank failures. 
C) is part of the Federal Reserve System. 
D) in practice has seldom been of much use.

Question 19

As banks create money,they create wealth.

Accepted Answer

A) True 
 B)False

Question 20

Imagine that the Federal Funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Accepted Answer

A) buy bonds.This buying would increase the money supply. 
B) buy bonds.This buying would reduce the money supply. 
C) sell bonds.This selling would increase the money supply.. 
D) sell bonds.This selling would reduce the money supply.. 
A) buy bonds.This buying would increase the money supply. 
B) buy bonds.This buying would reduce the money supply. 
C) sell bonds.This selling would increase the money supply.. 
D) sell bonds.This selling would reduce the money supply..

Exam 29: The Monetary System

Liquidity refers to

During a bank run depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

The money multiplier is defined as

One puzzle about the U.S.money stock is that

Which of the following might explain why the United States has so much currency per person?

In a 100-percent-reserve banking system,

The Fed can increase the price level by conducting open market

If the reserve ratio is 8 percent,an additional $1,000 of reserves can increase the money supply by

Suppose a bank has a 10 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.If the reserve requirement is 10 percent,then this bank

The use of money allows trade to be roundabout.

If the reserve ratio is 10 percent,$1,000 of additional reserves can create

If the reserve ratio is 12.5 percent,$1,000 of additional reserves can create

Use the (hypothetical) information in the following table to answer the following Questions. Table 29-1 -Refer to Table 29-1.What is the M1 money supply?

If the Fed buys bonds in the open market,the money supply decreases.

The Fed can influence unemployment in

The Federal Deposit Insurance Corporation

As banks create money,they create wealth.

Imagine that the Federal Funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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