Question 1

Which type of currency has intrinsic value?

Accepted Answer

A) commodity money 
B) fiat money 
C) both commodity money and fiat money 
D) neither commodity money nor fiat money 
A) commodity money 
B) fiat money 
C) both commodity money and fiat money 
D) neither commodity money nor fiat money

Question 2

The Federal Reserve does all except which of the following?

Accepted Answer

A) control the supply of money 
B) control the value of money 
C) make loans to individuals 
D) regulate the banking system 
A) control the supply of money 
B) control the value of money 
C) make loans to individuals 
D) regulate the banking system

Question 3

The discount rate is

Accepted Answer

A) the interest rate the Fed charges banks. 
B) one divided by the difference between one and the reserve ratio. 
C) the interest rate banks receive on reserve deposits with the Fed. 
D) the interest rate that banks charge on overnight loans to other banks. 
A) the interest rate the Fed charges banks. 
B) one divided by the difference between one and the reserve ratio. 
C) the interest rate banks receive on reserve deposits with the Fed. 
D) the interest rate that banks charge on overnight loans to other banks.

Question 4

Use the balance sheet for the following questions.
Table 29-2
  
-Refer to Table 29-2.If $1,000 is deposited into the First Bank of Mason City,and the bank takes no other actions,it's

Accepted Answer

A) total reserves will increase by $200. 
B) liabilities will decrease by $1,000. 
C) assets will increase by $1,000. 
D) required reserves will increase by $800. 
A) total reserves will increase by $200. 
B) liabilities will decrease by $1,000. 
C) assets will increase by $1,000. 
D) required reserves will increase by $800.

Question 5

If people decide to hold less currency relative to deposits,the money supply

Accepted Answer

A) falls.The Fed could lessen the impact of this by buying Treasury bonds. 
B) falls.The Fed could lessen the impact of this by selling Treasury bonds. 
C) rises.The Fed could lessen the impact of this by buying Treasury bonds. 
D) rises.The Fed could lessen the impact of this by selling Treasury bonds. 
A) falls.The Fed could lessen the impact of this by buying Treasury bonds. 
B) falls.The Fed could lessen the impact of this by selling Treasury bonds. 
C) rises.The Fed could lessen the impact of this by buying Treasury bonds. 
D) rises.The Fed could lessen the impact of this by selling Treasury bonds.

Question 6

Suppose that the Federal Reserve increases bank reserves and banks lend out some of these reserves,but at some point banks still have $5 million more they wish to lend out.If the required reserve ratio is 10%,how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A) $55 million 
B) $50 million 
C) $45 million 
D) $40 million 
A) $55 million 
B) $50 million 
C) $45 million 
D) $40 million

Question 7

Each Federal Reserve District Bank president is appointed by

Accepted Answer

A) the US president with the approval of the Senate. 
B) the Board of Governors. 
C) the voting members of the FOMC. 
D) each bank's board of directors. 
A) the US president with the approval of the Senate. 
B) the Board of Governors. 
C) the voting members of the FOMC. 
D) each bank's board of directors.

Question 8

A bank loans Zippo's Print Shop $350,000 to remodel a building near campus to use as a new store.On their balance sheets this loan is

Accepted Answer

A) an asset for the bank and a liability for Zippo's.The loan increases the money supply. 
B) an asset for the bank and a liability for Zippo's.The loan does not increase the money supply. 
C) a liability for the bank and an asset for Zippo's.The loan increases the money supply. 
D) a liability for the bank and an asset for Zippo's.The loan does not increase the money supply. 
A) an asset for the bank and a liability for Zippo's.The loan increases the money supply. 
B) an asset for the bank and a liability for Zippo's.The loan does not increase the money supply. 
C) a liability for the bank and an asset for Zippo's.The loan increases the money supply. 
D) a liability for the bank and an asset for Zippo's.The loan does not increase the money supply.

Question 9

Fiat money

Accepted Answer

A) has no intrinsic value. 
B) is backed by gold. 
C) has intrinsic value equal to its value in exchange. 
D) is any close substitute for currency such as checkable deposits. 
A) has no intrinsic value. 
B) is backed by gold. 
C) has intrinsic value equal to its value in exchange. 
D) is any close substitute for currency such as checkable deposits.

Question 10

If the reserve ratio is 5 percent,the money multiplier is

Accepted Answer

A) 25 
B) 20 
C) 2.5. 
D) 1.25. 
A) 25 
B) 20 
C) 2.5. 
D) 1.25.

Question 11

Current U.S.currency is

Accepted Answer

A) fiat money with intrinsic value. 
B) fiat money with no intrinsic value. 
C) commodity money with intrinsic value. 
D) commodity money with no intrinsic value. 
A) fiat money with intrinsic value. 
B) fiat money with no intrinsic value. 
C) commodity money with intrinsic value. 
D) commodity money with no intrinsic value.

Question 12

The money supply increases when the Fed

Accepted Answer

A) lowers the discount rate.The increase will be larger the smaller the reserve ratio is. 
B) lowers the discount rate.The increase will be larger the larger the reserve ratio is. 
C) raises the discount rate.The increase will be larger the smaller the reserve ratio is. 
D) raises the discount rate.The increase will be larger the larger the reserve ratio is. 
A) lowers the discount rate.The increase will be larger the smaller the reserve ratio is. 
B) lowers the discount rate.The increase will be larger the larger the reserve ratio is. 
C) raises the discount rate.The increase will be larger the smaller the reserve ratio is. 
D) raises the discount rate.The increase will be larger the larger the reserve ratio is.

Question 13

The manager of the bank where you work tells you that your bank has $5 million in excess reserves.She also tells you that the bank has $300 million in deposits and $255 million dollars in loans.Given this information you find that the reserve requirement must be

Accepted Answer

A) 50/255. 
B) 40/255. 
C) 50/300. 
D) 40/300. 
A) 50/255. 
B) 40/255. 
C) 50/300. 
D) 40/300.

Question 14

Because of the multiple tools at it's disposal,the Fed can control the money supply very precisely.

Accepted Answer

A) True 
 B)False

Question 15

Table 29-4
  
-Refer to Table 29-4.If the Fed requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Tampa now hold?

Accepted Answer

A) $25 
B) $50 
C) $55 
D) $75 
A) $25 
B) $50 
C) $55 
D) $75

Question 16

To increase the money supply,the Fed could

Accepted Answer

A) sell government bonds. 
B) increase the discount rate. 
C) decrease the reserve requirement. 
D) None of the above is correct. 
A) sell government bonds. 
B) increase the discount rate. 
C) decrease the reserve requirement. 
D) None of the above is correct.

Question 17

The Fed increases the reserve requirement and makes open market purchases.Which of these by itself will increase the money supply?

Accepted Answer

A) Neither the increase in the reserve requirement nor the open market purchases. 
B) Both the increase in the reserve requirement and the open market purchases. 
C) Only the increase in the reserve requirement. 
D) Only the open market purchases. 
A) Neither the increase in the reserve requirement nor the open market purchases. 
B) Both the increase in the reserve requirement and the open market purchases. 
C) Only the increase in the reserve requirement. 
D) Only the open market purchases.

Exam 29: The Monetary System

Which type of currency has intrinsic value?

The Federal Reserve does all except which of the following?

The discount rate is

Use the balance sheet for the following questions. Table 29-2 -Refer to Table 29-2.If $1,000 is deposited into the First Bank of Mason City,and the bank takes no other actions,it's

If people decide to hold less currency relative to deposits,the money supply

Suppose that the Federal Reserve increases bank reserves and banks lend out some of these reserves,but at some point banks still have $5 million more they wish to lend out.If the required reserve ratio is 10%,how much more money can banks create if they lend out the remaining amount?

Each Federal Reserve District Bank president is appointed by

A bank loans Zippo's Print Shop $350,000 to remodel a building near campus to use as a new store.On their balance sheets this loan is

Fiat money

If the reserve ratio is 5 percent,the money multiplier is

Current U.S.currency is

The money supply increases when the Fed

The manager of the bank where you work tells you that your bank has $5 million in excess reserves.She also tells you that the bank has $300 million in deposits and $255 million dollars in loans.Given this information you find that the reserve requirement must be

Because of the multiple tools at it's disposal,the Fed can control the money supply very precisely.

Table 29-4 -Refer to Table 29-4.If the Fed requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Tampa now hold?

To increase the money supply,the Fed could

The Fed increases the reserve requirement and makes open market purchases.Which of these by itself will increase the money supply?

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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