Question 1

Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are

Accepted Answer

A) $5. 
B) $50. 
C) $95. 
D) $950. 
A) $5. 
B) $50. 
C) $95. 
D) $950.

Question 2

Other things the same,if reserve requirements are increased,the reserve ratio

Accepted Answer

A) increases, the money multiplier increases, and the money supply increases. 
B) increases, the money multiplier decreases, and the money supply decreases. 
C) decreases, the money multiplier increases, and the money supply increases. 
D) decreases, the money multiplier decreases, and the money supply increases. 
A) increases, the money multiplier increases, and the money supply increases. 
B) increases, the money multiplier decreases, and the money supply decreases. 
C) decreases, the money multiplier increases, and the money supply increases. 
D) decreases, the money multiplier decreases, and the money supply increases.

Question 3

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $40 in reserves and $3,960 in loans. 
B) It has $400 in reserves and $3,600 in loans. 
C) It has $444 in reserves and $3,556 in loans. 
D) None of the above is correct. 
A) It has $40 in reserves and $3,960 in loans. 
B) It has $400 in reserves and $3,600 in loans. 
C) It has $444 in reserves and $3,556 in loans. 
D) None of the above is correct.

Question 4

In a fractional reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

Accepted Answer

A) reserves and the money supply increase by less than $100 million. 
B) reserves increase by $100 million and the money supply increases by $100 million. 
C) reserves increase by $100 million and the money supply increases by more than $100 million. 
D) both reserves and the money supply increase by more than $100 million. 
A) reserves and the money supply increase by less than $100 million. 
B) reserves increase by $100 million and the money supply increases by $100 million. 
C) reserves increase by $100 million and the money supply increases by more than $100 million. 
D) both reserves and the money supply increase by more than $100 million.

Question 5

In a fractional reserve banking system,an increase in reserve requirements

Accepted Answer

A) increases both the money multiplier and the money supply. 
B) decreases both the money multiplier and the money supply. 
C) increases the money multiplier, but decreases the money supply. 
D) decreases the money multiplier, but increases the money supply. 
A) increases both the money multiplier and the money supply. 
B) decreases both the money multiplier and the money supply. 
C) increases the money multiplier, but decreases the money supply. 
D) decreases the money multiplier, but increases the money supply.

Question 6

An increase in the money supply might indicate that the Fed had

Accepted Answer

A) purchased bonds in an attempt to increase the federal funds rate. 
B) purchased bonds in an attempt to reduce the federal funds rate. 
C) sold bonds in an attempt to increase the federal funds rate. 
D) sold bonds in an attempt to reduce the federal funds rate. 
A) purchased bonds in an attempt to increase the federal funds rate. 
B) purchased bonds in an attempt to reduce the federal funds rate. 
C) sold bonds in an attempt to increase the federal funds rate. 
D) sold bonds in an attempt to reduce the federal funds rate.

Question 7

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Accepted Answer

A) True 
 B)False

Question 8

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

Accepted Answer

First,the Fed does not control the amoun

Question 9

The reserve requirement ratio is 10%.Which of the following pair of changes would both allow a bank to lend out an additional $10,000?

Accepted Answer

A) the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank 
B) the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000 
C) the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank 
D) the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000 
A) the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank 
B) the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000 
C) the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank 
D) the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000

Question 10

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to

Question 11

What part of the Fed meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A) the Board of Governors 
B) the FOMC 
C) the regional Federal Reserve Bank presidents 
D) the Central Bank Policy Commission. 
A) the Board of Governors 
B) the FOMC 
C) the regional Federal Reserve Bank presidents 
D) the Central Bank Policy Commission.

Question 12

Banks could not change the size of the money supply if they were required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a country the total holdings of banks were as follows:
required reserves = $45 million
excess reserves = $15 million
deposits = $750 million
loans = $600 million
Treasury bonds = $90 million
Show that the balance sheet balances if these are the only assets and liabilities.
Assuming that people hold no currency,what happens to each of these values if the central bank changes the reserve requirement ratio to 3%,banks still want to hold the same percentage of excess reserves,and banks don't change their holdings of Treasury bonds? How much does the money supply change by?

Accepted Answer

The only liability is deposits which equ

Question 14

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

Accepted Answer

A) lower the discount rate, raise the reserve requirement ratio 
B) lower the discount rate, lower the reserve requirement ratio 
C) raise the discount rate, raise the reserve requirement ratio 
D) raise the discount rate, lower the reserve requirement ratio 
A) lower the discount rate, raise the reserve requirement ratio 
B) lower the discount rate, lower the reserve requirement ratio 
C) raise the discount rate, raise the reserve requirement ratio 
D) raise the discount rate, lower the reserve requirement ratio

Question 15

Suppose that banks desire to hold no excess reserves the reserve ratio is 5 percent and a bank receives a new deposit of $1,000.This bank

Accepted Answer

A) will increase its required reserves by $50. 
B) will initially see its total reserves increase by $1,000. 
C) will be able to make a new loan of $950. 
D) All of the above are correct. 
A) will increase its required reserves by $50. 
B) will initially see its total reserves increase by $1,000. 
C) will be able to make a new loan of $950. 
D) All of the above are correct.

Question 16

If the Fed makes open market purchases of bonds,

Accepted Answer

A) the money supply increases by more than the amount of bonds purchased. 
B) the money supply increases by less than the amount of bonds purchased. 
C) the money supply decreases by more than the amount of bonds purchased. 
D) the money supply decreases by less than the amount of bonds purchased. 
A) the money supply increases by more than the amount of bonds purchased. 
B) the money supply increases by less than the amount of bonds purchased. 
C) the money supply decreases by more than the amount of bonds purchased. 
D) the money supply decreases by less than the amount of bonds purchased.

Question 17

Which of the following has a four-year term?

Accepted Answer

A) the members of the Board of Governors 
B) the Chair of the Board of Governors 
C) the members of the FOMC 
D) All of the above are correct. 
A) the members of the Board of Governors 
B) the Chair of the Board of Governors 
C) the members of the FOMC 
D) All of the above are correct.

Question 18

The New York Federal Reserve Bank

Accepted Answer

A) president always gets to vote at the FOMC meetings. 
B) conducts open market transactions. 
C) is located in the traditional financial center of the United States. 
D) All of the above are correct. 
A) president always gets to vote at the FOMC meetings. 
B) conducts open market transactions. 
C) is located in the traditional financial center of the United States. 
D) All of the above are correct.

Question 19

Tazian Banking Statistics
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves, 75 million Tazes of excess reserves, have issued 7,500 million Tazes of deposits, and hold 225 million Tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all currency is on deposit at the bank.
-Refer to Tazian Banking Statistics.Suppose that the Bank of Tazi purchased 50 million Tazes of Tazian Treasury Bonds from the banks.Suppose also that both the required reserve ratio and the percentage of deposits held as excess reserves stay the same.By how much does the money supply change?

Accepted Answer

A) 625 million Tazes 
B) 1,000 million Tazes 
C) 1,250 million Tazes 
D) None of the above is correct. 
A) 625 million Tazes 
B) 1,000 million Tazes 
C) 1,250 million Tazes 
D) None of the above is correct.

Question 20

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Accepted Answer

A) True 
 B)False

Exam 29: The Monetary System

Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are

Other things the same,if reserve requirements are increased,the reserve ratio

Suppose a bank has a 10 percent reserve requirement,$4,000 in deposits,and has loaned out all it can given the reserve requirement.

In a fractional reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

In a fractional reserve banking system,an increase in reserve requirements

An increase in the money supply might indicate that the Fed had

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control.

The reserve requirement ratio is 10%.Which of the following pair of changes would both allow a bank to lend out an additional $10,000?

What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?

What part of the Fed meets to discuss changes in the economy and determine monetary policy?

Banks could not change the size of the money supply if they were required to hold all deposits in reserve.

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

Suppose that banks desire to hold no excess reserves the reserve ratio is 5 percent and a bank receives a new deposit of $1,000.This bank

If the Fed makes open market purchases of bonds,

Which of the following has a four-year term?

The New York Federal Reserve Bank

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

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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