Question 1

Which of the following is included in the M2 definition of the money supply?

Accepted Answer

A) credit cards 
B) money market mutual funds 
C) corporate bonds 
D) large time deposits 
A) credit cards 
B) money market mutual funds 
C) corporate bonds 
D) large time deposits

Question 2

Table 29-5
  
-Refer to Table 29-5.Assume that the Bank of Springfield is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves.What is the money multiplier?

Accepted Answer

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

Question 3

Which of the following best illustrates the unit of account function of money?

Accepted Answer

A) You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 
B) You pay for your WNBA tickets with dollars. 
C) You keep $10 in your backpack for emergencies. 
D) None of the above is correct. 
A) You list prices for candy sold on your Web site, www.sweettooth.com, in dollars. 
B) You pay for your WNBA tickets with dollars. 
C) You keep $10 in your backpack for emergencies. 
D) None of the above is correct.

Question 4

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 increase the money supply. 
B) buy bonds.This buying would reduce the money supply. 
C) sell bonds.This selling would increase the money supply. 
D) sell bonds.This selling would reduce the money supply. 
A) buy bonds.This buying would increase the money supply. 
B) buy bonds.This buying would reduce the money supply. 
C) sell bonds.This selling would increase the money supply. 
D) sell bonds.This selling would reduce the money supply.

Question 5

Which of the following is not included in M1?

Accepted Answer

A) currency 
B) demand deposits 
C) savings deposits 
D) travelers' checks 
A) currency 
B) demand deposits 
C) savings deposits 
D) travelers' checks

Question 6

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Accepted Answer

A) True 
 B)False

Question 7

During recessions,banks typically choose to hold more excess reserves relative to their deposits.This action

Accepted Answer

A) increases the money multiplier and increases the money supply. 
B) decreases the money multiplier and decreases the money supply. 
C) does not change the money multiplier, but increases the money supply. 
D) does not change the money multiplier, but decreases the money supply. 
A) increases the money multiplier and increases the money supply. 
B) decreases the money multiplier and decreases the money supply. 
C) does not change the money multiplier, but increases the money supply. 
D) does not change the money multiplier, but decreases the money supply.

Question 8

Which of the following isn't included in either M1 or M2?

Accepted Answer

A) U.S.Treasury bills 
B) small time deposits 
C) demand deposits 
D) money market mutual funds 
A) U.S.Treasury bills 
B) small time deposits 
C) demand deposits 
D) money market mutual funds

Question 9

Today,bank runs are

Accepted Answer

A) uncommon because of the high required reserve ratio. 
B) uncommon because of FDIC deposit insurance. 
C) common because of the low required reserve ratio. 
D) common because the FDIC is nearly bankrupt. 
A) uncommon because of the high required reserve ratio. 
B) uncommon because of FDIC deposit insurance. 
C) common because of the low required reserve ratio. 
D) common because the FDIC is nearly bankrupt.

Question 10

Which of the following lists two things that both decrease 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 11

Money

Accepted Answer

A) is more efficient than barter. 
B) makes trades easier. 
C) allows greater specialization. 
D) All of the above are correct. 
A) is more efficient than barter. 
B) makes trades easier. 
C) allows greater specialization. 
D) All of the above are correct.

Question 12

Members of the Board of Governors

Accepted Answer

A) are appointed by the U.S.president, while presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. 
B) are appointed by the banks' boards of directors while the presidents of the Federal Reserve regional banks are appointed by the U.S.president. 
C) and the presidents of the Federal Reserve regional banks are appointed by the U.S.president. 
D) and the presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. 
A) are appointed by the U.S.president, while presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. 
B) are appointed by the banks' boards of directors while the presidents of the Federal Reserve regional banks are appointed by the U.S.president. 
C) and the presidents of the Federal Reserve regional banks are appointed by the U.S.president. 
D) and the presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors.

Question 13

Use the balance sheet for the following questions.
Table 29-3
  
-Refer to Table 29-3.The reserve requirement is 10 percent and then someone deposits an additional $50,000 into the bank,then if the bank takes no other action it will

Accepted Answer

A) have $65,000 in excess reserves. 
B) have $55,000 in excess reserves. 
C) need to raise an additional $5,000 of reserves to meet the reserve requirement 
D) None of the above is correct. 
A) have $65,000 in excess reserves. 
B) have $55,000 in excess reserves. 
C) need to raise an additional $5,000 of reserves to meet the reserve requirement 
D) None of the above is correct.

Question 14

Credit cards

Accepted Answer

A) are included in M1 but not M2. 
B) are included in M1 and M2. 
C) are included in M2 but not M1 
D) are not included in any measure of the money supply. 
A) are included in M1 but not M2. 
B) are included in M1 and M2. 
C) are included in M2 but not M1 
D) are not included in any measure of the money supply.

Question 15

Which of the following statements about the Federal Reserve is not correct?

Accepted Answer

A) The members of the Board of Governors are also presidents of the Federal Reserve's regional banks. 
B) The Federal Open Market Committee makes monetary policy. 
C) All members of the Board of Governors sit on the Federal Open Market Committee. 
D) The Federal Reserve serves as a bank regulator. 
A) The members of the Board of Governors are also presidents of the Federal Reserve's regional banks. 
B) The Federal Open Market Committee makes monetary policy. 
C) All members of the Board of Governors sit on the Federal Open Market Committee. 
D) The Federal Reserve serves as a bank regulator.

Question 16

M2 is both larger and more liquid than M1.

Accepted Answer

A) True 
 B)False

Question 17

Fiat money

Accepted Answer

A) is worthless. 
B) has no intrinsic value. 
C) may be used as a medium of exchange, but is not legal tender. 
D) performs all the functions of money except providing a unit of account. 
A) is worthless. 
B) has no intrinsic value. 
C) may be used as a medium of exchange, but is not legal tender. 
D) performs all the functions of money except providing a unit of account.

Question 18

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

Accepted Answer

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

Question 19

A bank's

Accepted Answer

A) reserves and the deposits of its customers are both assets. 
B) reserves and the deposits of its customers are both liabilities. 
C) reserves are assets and the deposits of its customers are liabilities. 
D) reserves are liabilities and the deposits of its customers are assets. 
A) reserves and the deposits of its customers are both assets. 
B) reserves and the deposits of its customers are both liabilities. 
C) reserves are assets and the deposits of its customers are liabilities. 
D) reserves are liabilities and the deposits of its customers are assets.

Question 20

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

Accepted Answer

A) the Fed buys bonds and lowers the discount rate 
B) the Fed buys bonds and raises the discount rate 
C) the Fed sells bonds and lowers the discount rate 
D) the Fed sells bonds and raises the discount rate 
A) the Fed buys bonds and lowers the discount rate 
B) the Fed buys bonds and raises the discount rate 
C) the Fed sells bonds and lowers the discount rate 
D) the Fed sells bonds and raises the discount rate

Exam 29: The Monetary System

Which of the following is included in the M2 definition of the money supply?

Table 29-5 -Refer to Table 29-5.Assume that the Bank of Springfield is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves.What is the money multiplier?

Which of the following best illustrates the unit of account function of money?

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

Which of the following is not included in M1?

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

During recessions,banks typically choose to hold more excess reserves relative to their deposits.This action

Which of the following isn't included in either M1 or M2?

Today,bank runs are

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

Money

Members of the Board of Governors

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3.The reserve requirement is 10 percent and then someone deposits an additional $50,000 into the bank,then if the bank takes no other action it will

Credit cards

Which of the following statements about the Federal Reserve is not correct?

M2 is both larger and more liquid than M1.

Fiat money

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

A bank's

Which of the following lists two things that both 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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