Question 1

Which of the following is not always a voting member of the FOMC?

Accepted Answer

A) the president of the New York Federal Reserve District Bank 
B) the Chairman of the Board of Governors 
C) a member of the Board of Governors other than the chair 
D) the president of the Boston Federal Reserve District Bank 
A) the president of the New York Federal Reserve District Bank 
B) the Chairman of the Board of Governors 
C) a member of the Board of Governors other than the chair 
D) the president of the Boston Federal Reserve District Bank

Question 2

Table 29-5
  
-Refer to Figure 29-5.Assume that all other banks hold only the required 4 percent of deposits as reserves and that people hold only deposits and no currency.If the Bank of Springfield decides to hold reserves of 4 percent,by how much would the economy's money supply increase?

Accepted Answer

A) $50,200 
B) $60,000 
C) $65,400 
D) $72,000 
A) $50,200 
B) $60,000 
C) $65,400 
D) $72,000

Question 3

There is a

Accepted Answer

A) short-run tradeoff between inflation and unemployment. 
B) short-run tradeoff between an increase in the money supply and inflation. 
C) long-run tradeoff between inflation and unemployment. 
D) long-run tradeoff between an increase in the money supply and inflation. 
A) short-run tradeoff between inflation and unemployment. 
B) short-run tradeoff between an increase in the money supply and inflation. 
C) long-run tradeoff between inflation and unemployment. 
D) long-run tradeoff between an increase in the money supply and inflation.

Question 4

Demand deposits are a type of

Accepted Answer

A) checking account. 
B) time deposit. 
C) money market mutual fund. 
D) savings deposit. 
A) checking account. 
B) time deposit. 
C) money market mutual fund. 
D) savings deposit.

Question 5

Consider the following traders who meet.
  
-Which if any pairs have a double coincidence of wants?

Accepted Answer

A) Bob with Alice 
B) Ted with Alice 
C) Bob with Mary, Ted with Bob, and Ted with Alice 
D) None of the pairs above have a coincidence of wants with each other 
A) Bob with Alice 
B) Ted with Alice 
C) Bob with Mary, Ted with Bob, and Ted with Alice 
D) None of the pairs above have a coincidence of wants with each other

Question 6

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 7

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent,this action by itself initially makes the money supply

Accepted Answer

A) and wealth increase by $100. 
B) and wealth decrease by $100. 
C) increase by $100 while wealth does not change. 
D) decrease by $100 while wealth decreases by $100. 
A) and wealth increase by $100. 
B) and wealth decrease by $100. 
C) increase by $100 while wealth does not change. 
D) decrease by $100 while wealth decreases by $100.

Question 8

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 changes the reserve requirement ratio to 3%.Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement ratio?

Accepted Answer

A) 9,375 million Tazes 
B) 10,000 million Tazes 
C) 12,500 million Tazes 
D) None of the above is correct to the nearest million medits. 
A) 9,375 million Tazes 
B) 10,000 million Tazes 
C) 12,500 million Tazes 
D) None of the above is correct to the nearest million medits.

Question 9

If the public decides to hold more currency and fewer 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

Reserve requirements are regulations concerning

Accepted Answer

A) the amount banks are allowed to borrow from the Fed. 
B) the amount of reserves banks must hold against deposits. 
C) reserves banks must hold based on the number and type of loans they make. 
D) the interest rate at which banks can borrow from the Fed. 
A) the amount banks are allowed to borrow from the Fed. 
B) the amount of reserves banks must hold against deposits. 
C) reserves banks must hold based on the number and type of loans they make. 
D) the interest rate at which banks can borrow from the Fed.

Question 11

In an economy that relies on barter,trade requires a double-coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 12

The Federal Open Market Committee is made up of

Accepted Answer

A) 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
B) 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
C) 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
D) 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
A) 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
B) 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
C) 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
D) 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.

Question 13

Credit card limits 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.

Question 14

The banking system currently has $10 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10%.If the Fed raises the reserve requirement ratio to 20% and at the same time buys $1 billion dollars of bonds,then by how much does the money supply change?

Accepted Answer

A) It falls by $45 billion. 
B) It falls by $52 billion. 
C) It falls by $55 billion. 
D) None of the above is correct. 
A) It falls by $45 billion. 
B) It falls by $52 billion. 
C) It falls by $55 billion. 
D) None of the above is correct.

Question 15

The Federal Reserve primarily uses open market operations to change the money supply.

Accepted Answer

A) True 
 B)False

Question 16

When the Fed conducts open market purchases,bank reserves

Accepted Answer

A) increase and banks can increase lending. 
B) increase and banks must decrease lending. 
C) decrease and banks can increase lending. 
D) decrease and banks must decrease lending. 
A) increase and banks can increase lending. 
B) increase and banks must decrease lending. 
C) decrease and banks can increase lending. 
D) decrease and banks must decrease lending.

Question 17

Which of the following executes open-market operations?

Accepted Answer

A) Board of Governors 
B) New York Federal Reserve Bank 
C) The FOMC 
D) None of the above is correct. 
A) Board of Governors 
B) New York Federal Reserve Bank 
C) The FOMC 
D) None of the above is correct.

Question 18

Suppose banks desire to hold no excess reserves.If the reserve ratio is 10 percent and a bank receives a new deposit of $10.Then this bank

Accepted Answer

A) must increase required reserves by $1. 
B) will initially see its total reserves increase by $1. 
C) will be able to make new loans up to a maximum of $1. 
D) All of the above are correct. 
A) must increase required reserves by $1. 
B) will initially see its total reserves increase by $1. 
C) will be able to make new loans up to a maximum of $1. 
D) All of the above are correct.

Question 19

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha

Question 20

If the reserve ratio is 4 percent,the money multiplier is

Accepted Answer

A) 25 
B) 20 
C) 4 
D) 2 
A) 25 
B) 20 
C) 4 
D) 2

Exam 29: The Monetary System

Which of the following is not always a voting member of the FOMC?

Table 29-5 -Refer to Figure 29-5.Assume that all other banks hold only the required 4 percent of deposits as reserves and that people hold only deposits and no currency.If the Bank of Springfield decides to hold reserves of 4 percent,by how much would the economy's money supply increase?

There is a

Demand deposits are a type of

Consider the following traders who meet. -Which if any pairs have a double coincidence of wants?

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent,this action by itself initially makes the money supply

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

Reserve requirements are regulations concerning

In an economy that relies on barter,trade requires a double-coincidence of wants.

The Federal Open Market Committee is made up of

Credit card limits are included in

The Federal Reserve primarily uses open market operations to change the money supply.

When the Fed conducts open market purchases,bank reserves

Which of the following executes open-market operations?

Suppose banks desire to hold no excess reserves.If the reserve ratio is 10 percent and a bank receives a new deposit of $10.Then this bank

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

If the reserve ratio is 4 percent,the money multiplier is

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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