Question 1

M1 includes

Accepted Answer

A) currency. 
B) demand deposits. 
C) travelers' checks. 
D) All of the above are correct. 
A) currency. 
B) demand deposits. 
C) travelers' checks. 
D) All of the above are correct.

Question 2

Which of the following does the Federal Reserve not do?

Accepted Answer

A) conduct monetary policy 
B) act as a lender of last resort 
C) convert Federal Reserve Notes into gold 
D) serve as a bank regulator 
A) conduct monetary policy 
B) act as a lender of last resort 
C) convert Federal Reserve Notes into gold 
D) serve as a bank regulator

Question 3

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A) M1 growth. 
B) the federal funds rate. 
C) the number of Treasury Securities issued by the federal government. 
D) total reserves of banks. 
A) M1 growth. 
B) the federal funds rate. 
C) the number of Treasury Securities issued by the federal government. 
D) total reserves of banks.

Question 4

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A) the prime rate. 
B) the federal funds rate. 
C) the discount rate. 
D) the LIBOR. 
A) the prime rate. 
B) the federal funds rate. 
C) the discount rate. 
D) the LIBOR.

Question 5

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of

Question 6

If the discount rate is lowered,banks choose to borrow

Accepted Answer

A) less from the Fed so reserves increase. 
B) less from the Fed so reserves decrease. 
C) more from the Fed so reserves increase. 
D) more from the Fed so reserves decrease. 
A) less from the Fed so reserves increase. 
B) less from the Fed so reserves decrease. 
C) more from the Fed so reserves increase. 
D) more from the Fed so reserves decrease.

Question 7

A bank's assets include

Accepted Answer

A) both its reserves and the deposits of its customers. 
B) neither its reserves nor the deposits of its customers. 
C) its reserves, but not the deposits of its customers. 
D) the deposits of its customers, but not its reserves. 
A) both its reserves and the deposits of its customers. 
B) neither its reserves nor the deposits of its customers. 
C) its reserves, but not the deposits of its customers. 
D) the deposits of its customers, but not its reserves.

Question 8

Over one time horizon or another Fed policy decisions influence

Accepted Answer

A) inflation and employment. 
B) inflation but not employment. 
C) employment but not inflation. 
D) neither inflation nor employment. 
A) inflation and employment. 
B) inflation but not employment. 
C) employment but not inflation. 
D) neither inflation nor employment.

Question 9

Which of the following lists two things that both decrease the money supply?

Accepted Answer

A) make open market purchases, raise the reserve requirement ratio 
B) make open market purchases, lower the reserve requirement ratio 
C) make open market sales, raise the reserve requirement ratio 
D) make open market sales, lower the reserve requirement ratio 
A) make open market purchases, raise the reserve requirement ratio 
B) make open market purchases, lower the reserve requirement ratio 
C) make open market sales, raise the reserve requirement ratio 
D) make open market sales, lower the reserve requirement ratio

Question 10

Bank runs

Accepted Answer

A) will affect neither the money supply nor the money multiplier. 
B) are only a problem for insolvent banks. 
C) can be neither prevented nor stopped by the Federal Reserve. 
D) are a problem because banks only hold a fraction of deposits as reserves. 
A) will affect neither the money supply nor the money multiplier. 
B) are only a problem for insolvent banks. 
C) can be neither prevented nor stopped by the Federal Reserve. 
D) are a problem because banks only hold a fraction of deposits as reserves.

Question 11

The amount of currency per person in the United States is about

Accepted Answer

A) $200. 
B) $800. 
C) $1,600. 
D) $3,100. 
A) $200. 
B) $800. 
C) $1,600. 
D) $3,100.

Question 12

In December 1999 people feared that there might be computer problems at banks as the century changed.Consequently,people wanted to hold relatively more in currency and relatively less in deposits.In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands.These actions by the public

Accepted Answer

A) would increase the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B) would increase the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C) would reduce the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D) would reduce the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
A) would increase the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
B) would increase the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds. 
C) would reduce the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have sold bonds. 
D) would reduce the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply, it could have bought bonds.

Question 13

Use the balance sheet for the following questions.
Table 29-3
  
-Refer to Table 29-3.If the Last Bank of Cedar Bend is holding $10,000 in excess reserves,then the reserve requirement is

Accepted Answer

A) 2 percent. 
B) 5 percent. 
C) 7 percent. 
D) 10 percent. 
A) 2 percent. 
B) 5 percent. 
C) 7 percent. 
D) 10 percent.

Question 14

What does the text mean by the question,"Where Is All the Currency?" How does it answer the question?

Accepted Answer

The amount of currency per person is ove

Question 15

Joe wants to trade eggs for sausage.Lashonda wants to trade sausage for eggs.Joe and Lashonda have a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following defer payments?

Accepted Answer

A) credit cards and debit cards 
B) neither credit cards or debit cards 
C) credit cards but not debit cards 
D) debit cards but not credit cards 
A) credit cards and debit cards 
B) neither credit cards or debit cards 
C) credit cards but not debit cards 
D) debit cards but not credit cards

Question 17

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits,then bank reserves will

Accepted Answer

A) decrease and the money supply will eventually decrease. 
B) decrease and the money supply will eventually increase. 
C) increase and the money supply will eventually decrease. 
D) increase and the money supply will eventually increase. 
A) decrease and the money supply will eventually decrease. 
B) decrease and the money supply will eventually increase. 
C) increase and the money supply will eventually decrease. 
D) increase and the money supply will eventually increase.

Question 18

Treasury Bonds are

Accepted Answer

A) liquid, but not a store of value. 
B) a store of value, but not liquid. 
C) both liquid and a store of value. 
D) neither liquid nor a store of value 
A) liquid, but not a store of value. 
B) a store of value, but not liquid. 
C) both liquid and a store of value. 
D) neither liquid nor a store of value

Question 19

Table 29-5
  
-Refer to Figure 29-5.If all banks hold only the required 4 percent of deposits as reserves,then what is the money multiplier?

Accepted Answer

A) 4 
B) 16 
C) 20 
D) 25 
A) 4 
B) 16 
C) 20 
D) 25

Question 20

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

M1 includes

Which of the following does the Federal Reserve not do?

In recent years the Federal Open Market Committee has focused on a target for

The interest rate the Fed charges on loans it makes to banks is called

What is the difference between money and wealth?

If the discount rate is lowered,banks choose to borrow

A bank's assets include

Over one time horizon or another Fed policy decisions influence

Which of the following lists two things that both decrease the money supply?

Bank runs

The amount of currency per person in the United States is about

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.If the Last Bank of Cedar Bend is holding $10,000 in excess reserves,then the reserve requirement is

What does the text mean by the question,"Where Is All the Currency?" How does it answer the question?

Joe wants to trade eggs for sausage.Lashonda wants to trade sausage for eggs.Joe and Lashonda have a double-coincidence of wants.

Which of the following defer payments?

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits,then bank reserves will

Treasury Bonds are

Table 29-5 -Refer to Figure 29-5.If all banks hold only the required 4 percent of deposits as reserves,then what is the money multiplier?

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

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

Filters