Question 1

M1 includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 2

If the Fed wanted to increase the money supply,it would make open market

Accepted Answer

A) purchases and lower the discount rate. 
B) sales and lower the discount rate. 
C) purchases and raise the discount rate. 
D) sales and raise the discount rate. 
A) purchases and lower the discount rate. 
B) sales and lower the discount rate. 
C) purchases and raise the discount rate. 
D) sales and raise the discount rate.

Question 3

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

Accepted Answer

A) and the money supply increase. 
B) and the money supply decrease. 
C) increase, but leaves the money supply unchanged. 
D) decrease, but leaves the money supply unchanged. 
A) and the money supply increase. 
B) and the money supply decrease. 
C) increase, but leaves the money supply unchanged. 
D) decrease, but leaves the money supply unchanged.

Question 4

A bank's liabilities 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 5

Use the balance sheet for the following questions.
Table 29-3
  
-Refer to Table 29-3.If the reserve requirement is 20 percent,this bank

Accepted Answer

A) has $10,000 of excess reserves. 
B) needs $10,000 more reserves to meet its reserve requirements. 
C) needs $5,000 more reserves to meet its reserve requirements. 
D) just meets its reserve requirement. 
A) has $10,000 of excess reserves. 
B) needs $10,000 more reserves to meet its reserve requirements. 
C) needs $5,000 more reserves to meet its reserve requirements. 
D) just meets its reserve requirement.

Question 6

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

Accepted Answer

(1/.20)× $

Question 7

Debit cards

Accepted Answer

A) defer payments. 
B) are equivalent to credit cards. 
C) are included in M2. 
D) are used as a method of payment. 
A) defer payments. 
B) are equivalent to credit cards. 
C) are included in M2. 
D) are used as a method of payment.

Question 8

If the reserve ratio is 2.5 percent,the money multiplier is

Accepted Answer

A) 40. 
B) 25. 
C) 2.5. 
D) 1.25. 
A) 40. 
B) 25. 
C) 2.5. 
D) 1.25.

Question 9

If the public decides to hold less currency and more deposits in banks,bank reserves

Accepted Answer

A) decrease and the money supply eventually decreases. 
B) decrease but the money supply does not change. 
C) increase and the money supply eventually increases. 
D) increase but the money supply does not change. 
A) decrease and the money supply eventually decreases. 
B) decrease but the money supply does not change. 
C) increase and the money supply eventually increases. 
D) increase but the money supply does not change.

Question 10

Table 29-4
  
-Refer to Table 29-4.Assume that the Bank of Tampa is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves and that people hold only deposits and no currency.What is the money multiplier?

Accepted Answer

A) 5 
B) 10 
C) 15 
D) 20 
A) 5 
B) 10 
C) 15 
D) 20

Question 11

In the US there is about $3,100 of

Accepted Answer

A) currency per person. 
B) demand deposits per person. 
C) M1 per person. 
D) M2 per person. 
A) currency per person. 
B) demand deposits per person. 
C) M1 per person. 
D) M2 per person.

Question 12

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

Accepted Answer

The answer of Which two of the Ten Principles of...

Question 13

In Wellville,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold only required reserves,the required reserve ratio is

Accepted Answer

A) 29 percent. 
B) 22.5 percent. 
C) 16 percent. 
D) None of the above is correct. 
A) 29 percent. 
B) 22.5 percent. 
C) 16 percent. 
D) None of the above is correct.

Question 14

The Fed can directly protect a bank during a bank run by

Accepted Answer

A) increasing reserve requirements. 
B) selling government bonds to the bank. 
C) lending reserves to the bank. 
D) Doing any of the above. 
A) increasing reserve requirements. 
B) selling government bonds to the bank. 
C) lending reserves to the bank. 
D) Doing any of the above.

Question 15

Mia puts money into a piggy bank so she can spend it later.What function of money does this illustrate?

Accepted Answer

A) store of value 
B) medium of exchange 
C) unit of account 
D) None of the above is correct. 
A) store of value 
B) medium of exchange 
C) unit of account 
D) None of the above is correct.

Question 16

The money multiplier equals 1 divided by (1 - the reserve ratio).

Accepted Answer

A) True 
 B)False

Question 17

When the Federal Reserve conducts open-market operations to increase the money supply,it

Accepted Answer

A) redeems Federal Reserve notes. 
B) buys government bonds from the public. 
C) raises the discount rate. 
D) decreases its lending to member banks. 
A) redeems Federal Reserve notes. 
B) buys government bonds from the public. 
C) raises the discount rate. 
D) decreases its lending to member banks.

Question 18

The banking system currently has $200 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 4%.If the Fed raises the reserve requirement to 5% and at the same time buys $50 billion dollars of bonds,then by how much does the money supply change?

Accepted Answer

A) It rises by $1000 billion. 
B) It rises by $1250 billion. 
C) It falls by $950 billion. 
D) None of the above is correct. 
A) It rises by $1000 billion. 
B) It rises by $1250 billion. 
C) It falls by $950 billion. 
D) None of the above is correct.

Question 19

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Accepted Answer

A) rise from 10 to 20. 
B) rise from 5 to 10. 
C) fall from 10 to 5. 
D) not change. 
A) rise from 10 to 20. 
B) rise from 5 to 10. 
C) fall from 10 to 5. 
D) not change.

Question 20

Savings 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.

Exam 29: The Monetary System

M1 includes savings deposits.

If the Fed wanted to increase the money supply,it would make open market

During wars the public tends to hold relatively more currency and relatively fewer deposits.This decision makes reserves

A bank's liabilities include

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.If the reserve requirement is 20 percent,this bank

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

Debit cards

If the reserve ratio is 2.5 percent,the money multiplier is

If the public decides to hold less currency and more deposits in banks,bank reserves

Table 29-4 -Refer to Table 29-4.Assume that the Bank of Tampa is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves and that people hold only deposits and no currency.What is the money multiplier?

In the US there is about $3,100 of

Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?

In Wellville,the money supply is $80,000 and reserves are $18,000.Assuming that people hold only deposits and no currency,and that banks hold only required reserves,the required reserve ratio is

The Fed can directly protect a bank during a bank run by

Mia puts money into a piggy bank so she can spend it later.What function of money does this illustrate?

The money multiplier equals 1 divided by (1 - the reserve ratio).

When the Federal Reserve conducts open-market operations to increase the money supply,it

If the reserve ratio increased from 10 percent to 20 percent,the money multiplier would

Savings deposits are included in

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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