Question 1

Use the (hypothetical) information in the following table to answer the following Questions.
Table 29-1
  
-Refer to Table 29-1.What is the M2 money supply?

Accepted Answer

A) $125 billion 
B) $341 billion 
C) $421 billion 
D) $431 billion 
A) $125 billion 
B) $341 billion 
C) $421 billion 
D) $431 billion

Question 2

When a bank loans out $1,000,the money supply

Accepted Answer

A) does not change. 
B) decreases. 
C) increases. 
D) may do any of the above. 
A) does not change. 
B) decreases. 
C) increases. 
D) may do any of the above.

Question 3

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

Accepted Answer

A) $8,000 of new money. 
B) $12,500 of new money. 
C) $25,000 of new money. 
D) None of the above is correct. 
A) $8,000 of new money. 
B) $12,500 of new money. 
C) $25,000 of new money. 
D) None of the above is correct.

Question 4

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

Accepted Answer

A) raise the discount rate, make open market purchases 
B) raise the discount rate, make open market sales 
C) lower the discount rate, make open market purchases 
D) lower the discount rate, make open market sales 
A) raise the discount rate, make open market purchases 
B) raise the discount rate, make open market sales 
C) lower the discount rate, make open market purchases 
D) lower the discount rate, make open market sales

Question 5

The Fed's primary tool to change the money supply is

Accepted Answer

A) changing the discount rate. 
B) changing the reserve requirement. 
C) conducting open market operations. 
D) redeeming Federal Reserve notes. 
A) changing the discount rate. 
B) changing the reserve requirement. 
C) conducting open market operations. 
D) redeeming Federal Reserve notes.

Question 6

Demand deposits are included in

Accepted Answer

A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) neither M1 nor M2. 
A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) neither M1 nor M2.

Question 7

Given the following information,what would be the values of M1 and M2?

Accepted Answer

A) M1 = $400 billion, M2 = $2,475 billion. 
B) M1 = $125 billion, M2 = $3,025 billion. 
C) M1 = $425 billion, M2 = $2, 450 billion. 
D) M1 = $425 billion, M2 = $1,875 billion. 
A) M1 = $400 billion, M2 = $2,475 billion. 
B) M1 = $125 billion, M2 = $3,025 billion. 
C) M1 = $425 billion, M2 = $2, 450 billion. 
D) M1 = $425 billion, M2 = $1,875 billion.

Question 8

If the reserve ratio is 5 percent,$1,000 of additional reserves can create

Accepted Answer

A) $25,000 of new money. 
B) $20,000 of new money. 
C) $19,000 of new money. 
D) $15,000 of new money. 
A) $25,000 of new money. 
B) $20,000 of new money. 
C) $19,000 of new money. 
D) $15,000 of new money.

Question 9

Imagine that the Federal Funds rate was below 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 reduce reserves. 
B) buy bonds.This buying would increase reserves. 
C) sell bonds.This selling would reduce reserves. 
D) sell bonds.This selling would increase reserves. 
A) buy bonds.This buying would reduce reserves. 
B) buy bonds.This buying would increase reserves. 
C) sell bonds.This selling would reduce reserves. 
D) sell bonds.This selling would increase reserves.

Question 10

The money supply of Hooba is $10,000 under a 100 percent reserve banking system.If Hooba decreases the reserve requirement to 10 percent,the money supply could increase by no more than $9,000.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

Accepted Answer

A) money supply to fall.To reduce the impact of this the Fed could lower the discount rate. 
B) money supply to fall.To reduce the impact of this the Fed could raise the discount rate. 
C) money supply to rise.To reduce the impact of this the Fed could lower the discount rate. 
D) money supply to rise.To reduce the impact of this the Fed could raise the discount rate. 
A) money supply to fall.To reduce the impact of this the Fed could lower the discount rate. 
B) money supply to fall.To reduce the impact of this the Fed could raise the discount rate. 
C) money supply to rise.To reduce the impact of this the Fed could lower the discount rate. 
D) money supply to rise.To reduce the impact of this the Fed could raise the discount rate.

Question 12

M1 equals currency + demand deposits +

Accepted Answer

A) nothing else. 
B) other checkable deposits. 
C) traveler's checks + other checkable deposits. 
D) traveler's checks + other checkable deposits + savings deposits. 
A) nothing else. 
B) other checkable deposits. 
C) traveler's checks + other checkable deposits. 
D) traveler's checks + other checkable deposits + savings deposits.

Question 13

If an economy used gold as money,its money would be

Accepted Answer

A) commodity money, but not fiat money. 
B) fiat money, but not commodity money. 
C) both fiat and commodity money. 
D) neither fiat nor commodity money. 
A) commodity money, but not fiat money. 
B) fiat money, but not commodity money. 
C) both fiat and commodity money. 
D) neither fiat nor commodity money.

Question 14

The Federal Funds rate is the

Accepted Answer

A) percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B) percentage of deposits that banks must hold as reserves. 
C) interest rate at which the Federal Reserve makes short-term loans to banks. 
D) interest rate at which banks lend reserves to each other overnight. 
A) percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. 
B) percentage of deposits that banks must hold as reserves. 
C) interest rate at which the Federal Reserve makes short-term loans to banks. 
D) interest rate at which banks lend reserves to each other overnight.

Question 15

Other things the same,if the Fed raises the discount rate,then banks choose to borrow

Accepted Answer

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

Question 16

If the central bank in some country lowered the reserve ratio,the money multiplier

Accepted Answer

A) would increase. 
B) would not change. 
C) would decrease. 
D) could do any of the above. 
A) would increase. 
B) would not change. 
C) would decrease. 
D) could do any of the above.

Question 17

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A) You keep some money hidden in your shoe. 
B) You keep track of the value of your assets in terms of currency. 
C) You pay for your double latte using currency. 
D) None of the above is correct. 
A) You keep some money hidden in your shoe. 
B) You keep track of the value of your assets in terms of currency. 
C) You pay for your double latte using currency. 
D) None of the above is correct.

Question 18

An important part of the Fed is the Board of Governors.Its members are appointed by the president and confirmed by the senate.

Accepted Answer

A) True 
 B)False

Question 19

Monetary policy affects employment

Accepted Answer

A) only in the long run. 
B) only in the short run. 
C) in both the long run and the short run. 
D) in neither the long run nor the short run. 
A) only in the long run. 
B) only in the short run. 
C) in both the long run and the short run. 
D) in neither the long run nor the short run.

Question 20

Paper money

Accepted Answer

A) has a high intrinsic value. 
B) is the primary medium of exchange in a barter economy. 
C) is valuable because it is generally accepted in trade. 
D) is valuable only because of the legal tender requirement. 
A) has a high intrinsic value. 
B) is the primary medium of exchange in a barter economy. 
C) is valuable because it is generally accepted in trade. 
D) is valuable only because of the legal tender requirement.

Exam 29: The Monetary System

Use the (hypothetical) information in the following table to answer the following Questions. Table 29-1 -Refer to Table 29-1.What is the M2 money supply?

When a bank loans out $1,000,the money supply

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

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

The Fed's primary tool to change the money supply is

Demand deposits are included in

Given the following information,what would be the values of M1 and M2?

If the reserve ratio is 5 percent,$1,000 of additional reserves can create

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

The money supply of Hooba is $10,000 under a 100 percent reserve banking system.If Hooba decreases the reserve requirement to 10 percent,the money supply could increase by no more than $9,000.

Suppose that banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

M1 equals currency + demand deposits +

If an economy used gold as money,its money would be

The Federal Funds rate is the

Other things the same,if the Fed raises the discount rate,then banks choose to borrow

If the central bank in some country lowered the reserve ratio,the money multiplier

Which of the following best illustrates the medium of exchange function of money?

An important part of the Fed is the Board of Governors.Its members are appointed by the president and confirmed by the senate.

Monetary policy affects employment

Paper money

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