Question 1

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 2

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re

Question 3

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

Accepted Answer

A) falls.The larger the reserve ratio is, the more it falls. 
B) falls.The larger the reserve ratio is, the less it falls. 
C) rises.The larger the reserve ratio is, the more it rises. 
D) rises.The larger the reserve ratio is, the less it rises. 
A) falls.The larger the reserve ratio is, the more it falls. 
B) falls.The larger the reserve ratio is, the less it falls. 
C) rises.The larger the reserve ratio is, the more it rises. 
D) rises.The larger the reserve ratio is, the less it rises.

Question 4

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Accepted Answer

A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply. 
A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply.

Question 5

Under a fractional reserve banking system,banks

Accepted Answer

A) hold more reserves than deposits. 
B) generally lend out a majority of the funds deposited. 
C) cause the money supply to fall by lending out reserves. 
D) All of the above are correct. 
A) hold more reserves than deposits. 
B) generally lend out a majority of the funds deposited. 
C) cause the money supply to fall by lending out reserves. 
D) All of the above are correct.

Question 6

Meditorian Banking Statistics
The monetary policy of Meditor is determined by the Meditorian Central Bank. The local currency is the medit. Meditorian banks collectively hold 100 million medits of required reserves, 25 million medits of excess reserves, 250 million medits of Meditorian Treasury Bonds, and their customers hold 1,000 million medits of deposits. Meditorians prefer to use only demand deposits and so all currency is on deposit at the bank.
-Refer to Meditorian Central Banking.Assume that banks desire to continue holding the same ratio of excess reserves to deposits.What is the required reserve ratio and what is the reserve ratio?

Accepted Answer

A) 2%, 8% 
B) 8%, 10% 
C) 10%, 12.5% 
D) None of the above is correct. 
A) 2%, 8% 
B) 8%, 10% 
C) 10%, 12.5% 
D) None of the above is correct.

Question 7

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.Assuming the only other thing Tazian banks have on their balance sheets is loans,what is the value of existing loans made by Tazian banks?

Accepted Answer

A) 6,900 million Tazes 
B) 7,125 million Tazes 
C) 7,350 million Tazes 
D) None of the above is correct. 
A) 6,900 million Tazes 
B) 7,125 million Tazes 
C) 7,350 million Tazes 
D) None of the above is correct.

Question 8

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

Accepted Answer

A) $5,500 of new money 
B) $5,000 of new money 
C) $4,000 of new money 
D) None of the above is correct. 
A) $5,500 of new money 
B) $5,000 of new money 
C) $4,000 of new money 
D) None of the above is correct.

Question 9

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 10

If the reserve ratio is 10 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million of government bonds,bank reserves

Accepted Answer

A) increase by $20 million and the money supply eventually increases by $200 million. 
B) decrease by $20 million and the money supply eventually increases by $200 million. 
C) increase by $20 million and the money supply eventually decreases by $200 million. 
D) decrease by $20 million and the money supply eventually decreases by $200 million. 
A) increase by $20 million and the money supply eventually increases by $200 million. 
B) decrease by $20 million and the money supply eventually increases by $200 million. 
C) increase by $20 million and the money supply eventually decreases by $200 million. 
D) decrease by $20 million and the money supply eventually decreases by $200 million.

Question 11

When the Fed decreases the discount rate,banks will

Accepted Answer

A) borrow more from the Fed and lend more to the public.The money supply increases. 
B) borrow more from the Fed and lend less to the public.The money supply decreases. 
C) borrow less from the Fed and lend more to the public.The money supply increases. 
D) borrow less from the Fed and lend less to the public.The money supply decreases. 
A) borrow more from the Fed and lend more to the public.The money supply increases. 
B) borrow more from the Fed and lend less to the public.The money supply decreases. 
C) borrow less from the Fed and lend more to the public.The money supply increases. 
D) borrow less from the Fed and lend less to the public.The money supply decreases.

Question 12

Economists use the word "money" to refer to

Accepted Answer

A) income generated by the production of goods and services. 
B) those assets regularly used to buy goods and services. 
C) the value of a person's assets. 
D) the value of stocks and bonds. 
A) income generated by the production of goods and services. 
B) those assets regularly used to buy goods and services. 
C) the value of a person's assets. 
D) the value of stocks and bonds.

Question 13

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 loaned the banks of Tazi 10 million Tazes.Suppose also that both the required reserve ratio and the percentage of deposits held as excess reserves stay the same.By how much would the money supply change?

Accepted Answer

A) 250 million Tazes 
B) 200 million Tazes 
C) 125 million Tazes 
D) None of the above is correct. 
A) 250 million Tazes 
B) 200 million Tazes 
C) 125 million Tazes 
D) None of the above is correct.

Question 14

Suppose a bank has $10,000 in deposits and $8,000 in loans.It has loaned out all it can.It has a reserve ratio of

Accepted Answer

A) 2 percent. 
B) 12.5 percent. 
C) 20 percent. 
D) 80 percent. 
A) 2 percent. 
B) 12.5 percent. 
C) 20 percent. 
D) 80 percent.

Question 15

An item that people can use to transfer purchasing power from the present to the future is called

Accepted Answer

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

Question 16

Which of the following is a function of money?

Accepted Answer

A) a unit of account 
B) a store of value 
C) medium of exchange 
D) All of the above is correct. 
A) a unit of account 
B) a store of value 
C) medium of exchange 
D) All of the above is correct.

Question 17

When we say that trade is roundabout we mean that

Accepted Answer

A) people sometimes trade goods for goods. 
B) trades require a double coincidence of wants 
C) currency is accepted primarily to make further trades. 
D) people must spend time searching for the products they wish to purchase. 
A) people sometimes trade goods for goods. 
B) trades require a double coincidence of wants 
C) currency is accepted primarily to make further trades. 
D) people must spend time searching for the products they wish to purchase.

Question 18

The discount rate is

Accepted Answer

A) the rate at which public banks lend to other public banks. 
B) the rate at which the Fed lends to banks. 
C) the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D) the percentage of deposits banks hold as excess reserves. 
A) the rate at which public banks lend to other public banks. 
B) the rate at which the Fed lends to banks. 
C) the percentage difference between the face value of a Treasury bond and what the Fed pays for it. 
D) the percentage of deposits banks hold as excess reserves.

Question 19

The money supply decreases if the Fed

Accepted Answer

A) sells Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
B) sells Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
C) buys Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
D) buys Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
A) sells Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
B) sells Treasury bonds.The smaller the reserve requirement, the larger the decrease will be. 
C) buys Treasury bonds.The larger the reserve requirement, the larger the decrease will be. 
D) buys Treasury bonds.The smaller the reserve requirement, the larger the decrease will be.

Question 20

During the Great Depression in the early 1930s,

Accepted Answer

A) bank runs closed many banks. 
B) the money supply rose sharply. 
C) the Fed decreased reserve requirements. 
D) both a and b are correct. 
A) bank runs closed many banks. 
B) the money supply rose sharply. 
C) the Fed decreased reserve requirements. 
D) both a and b are correct.

Exam 29: The Monetary System

Marc puts prices on surfboards and skateboards at his sporting goods store.He is using money as a unit of account.

What makes the New York Federal Reserve regional bank so important?

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

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Under a fractional reserve banking system,banks

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

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

If the reserve ratio is 10 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million of government bonds,bank reserves

When the Fed decreases the discount rate,banks will

Economists use the word "money" to refer to

Suppose a bank has $10,000 in deposits and $8,000 in loans.It has loaned out all it can.It has a reserve ratio of

An item that people can use to transfer purchasing power from the present to the future is called

Which of the following is a function of money?

When we say that trade is roundabout we mean that

The discount rate is

The money supply decreases if the Fed

During the Great Depression in the early 1930s,

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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