Question 1

When individuals shift funds from money market mutual funds to no-load stock and bond mutual funds,

Accepted Answer

A) the growth rate of M1 will decline but the growth of M2 will be unaffected. 
B) the growth rate of M2 will decline but the growth of M1 will be unaffected. 
C) the growth rate of both M1 and M2 will decline. 
D) the growth rate of both M1 and M2 will increase. 
A) the growth rate of M1 will decline but the growth of M2 will be unaffected. 
B) the growth rate of M2 will decline but the growth of M1 will be unaffected. 
C) the growth rate of both M1 and M2 will decline. 
D) the growth rate of both M1 and M2 will increase. B

Question 2

Stores need not accept your check but must accept currency because

Accepted Answer

A) currency is backed by gold. 
B) checks are not money but currency is. 
C) currency is legal tender;checks are not. 
D) currency is easier to handle. 
E) currency is a medium of exchange;checks are not. 
A) currency is backed by gold. 
B) checks are not money but currency is. 
C) currency is legal tender;checks are not. 
D) currency is easier to handle. 
E) currency is a medium of exchange;checks are not. C

Question 3

Assuming a 20 percent legal reserve requirement,a new deposit of $10,000 in a commercial bank will place that bank in a position to lend out an additional

Accepted Answer

A) $2,000. 
B) $8,000. 
C) $10,000. 
D) $50,000. 
A) $2,000. 
B) $8,000. 
C) $10,000. 
D) $50,000. B

Question 4

When a customer deposits $100 into a checking account,the effect is to

Accepted Answer

A) increase the bank's liabilities. 
B) decrease the bank's liabilities. 
C) increase the bank's assets. 
D) decrease the bank's assets. 
E) increase both the bank's liabilities and its assets. 
A) increase the bank's liabilities. 
B) decrease the bank's liabilities. 
C) increase the bank's assets. 
D) decrease the bank's assets. 
E) increase both the bank's liabilities and its assets.

Question 5

Are outstanding credit card balances counted as part of the money supply?

Accepted Answer

A) no;credit card balances reflect funds that have been borrowed.Unlike money,they cannot be used as a means of payment. 
B) yes;they are used to purchase things and therefore they are included in the money supply figures. 
C) they are included in the M1 money supply,but not the M2 figures. 
D) they are included in the M2 money supply,but not the M1 figures. 
A) no;credit card balances reflect funds that have been borrowed.Unlike money,they cannot be used as a means of payment. 
B) yes;they are used to purchase things and therefore they are included in the money supply figures. 
C) they are included in the M1 money supply,but not the M2 figures. 
D) they are included in the M2 money supply,but not the M1 figures.

Question 6

As the number of goods and services increases,barter becomes

Accepted Answer

A) easier because the chance of there being a double coincidence of wants increases. 
B) harder because the chance of there being a double coincidence of wants increases. 
C) easier because the chance of there being a double coincidence of wants decreases. 
D) harder because the chance of there being a double coincidence of wants decreases. 
E) easier because people have more choice. 
A) easier because the chance of there being a double coincidence of wants increases. 
B) harder because the chance of there being a double coincidence of wants increases. 
C) easier because the chance of there being a double coincidence of wants decreases. 
D) harder because the chance of there being a double coincidence of wants decreases. 
E) easier because people have more choice.

Question 7

The major overall purpose of the Federal Reserve System is to

Accepted Answer

A) keep the discount rate flexible. 
B) insure the deposits of persons holding funds with banking institutions. 
C) regulate the money supply and,thereby,provide a monetary climate that is in the best interest of the economy. 
D) regulate the levels of excess reserves held by member banking institutions. 
A) keep the discount rate flexible. 
B) insure the deposits of persons holding funds with banking institutions. 
C) regulate the money supply and,thereby,provide a monetary climate that is in the best interest of the economy. 
D) regulate the levels of excess reserves held by member banking institutions.

Question 8

Demand deposits are

Accepted Answer

A) deposits held by individuals at one of the twelve Federal Reserve District Banks. 
B) interest-earning savings deposits held by individuals at a banking institution. 
C) deposits of commercial banks at one of the twelve Federal Reserve District Banks. 
D) deposits of individuals that can either be withdrawn or made payable on demand to a third party by a check. 
A) deposits held by individuals at one of the twelve Federal Reserve District Banks. 
B) interest-earning savings deposits held by individuals at a banking institution. 
C) deposits of commercial banks at one of the twelve Federal Reserve District Banks. 
D) deposits of individuals that can either be withdrawn or made payable on demand to a third party by a check.

Question 9

Decisions to buy or sell securities at the Fed are made by

Accepted Answer

A) Congress. 
B) the Federal Open Market Committee. 
C) the Federal Deposit Insurance Corporation. 
D) the President's Council of Economic Advisors. 
A) Congress. 
B) the Federal Open Market Committee. 
C) the Federal Deposit Insurance Corporation. 
D) the President's Council of Economic Advisors.

Question 10

If the banking system has $50 billion in excess reserves,and the required reserve ratio is 25 percent,what is the maximum amount by which the money supply can be increased?

Accepted Answer

A) $250 billion 
B) $200 billion 
C) $50 billion 
D) $25 billion 
A) $250 billion 
B) $200 billion 
C) $50 billion 
D) $25 billion

Question 11

The value (purchasing power)of each unit of money

Accepted Answer

A) does not depend on the amount of money in circulation. 
B) tends to increase as the money supply expands. 
C) increases as prices rise. 
D) is inversely related to prices (in other words,money's value falls as prices rise and vice versa). 
A) does not depend on the amount of money in circulation. 
B) tends to increase as the money supply expands. 
C) increases as prices rise. 
D) is inversely related to prices (in other words,money's value falls as prices rise and vice versa).

Question 12

An increase in the discount rate impacts the money supply because it

Accepted Answer

A) makes it more attractive for commercial banks to borrow from the Federal Reserve. 
B) decreases the interest yield on new issues of U.S.securities. 
C) reduces the incentive of commercial banks to borrow from the Federal Reserve. 
D) increases the Federal Reserve's earnings and,thereby,expands the money supply. 
A) makes it more attractive for commercial banks to borrow from the Federal Reserve. 
B) decreases the interest yield on new issues of U.S.securities. 
C) reduces the incentive of commercial banks to borrow from the Federal Reserve. 
D) increases the Federal Reserve's earnings and,thereby,expands the money supply.

Question 13

Does the Federal Reserve operate like an ordinary commercial bank? What is the Fed's job?

Accepted Answer

Since the Fed is an independent branch o

Question 14

Which of the following is correct?

Accepted Answer

A) The Federal Reserve is responsible for conducting monetary policy. 
B) The U.S.Treasury controls the money supply through its buying and selling of U.S.securities. 
C) The Treasury is a monetary agency with responsibilities very similar to those of the Fed. 
D) The Federal Reserve System issues U.S.securities. 
A) The Federal Reserve is responsible for conducting monetary policy. 
B) The U.S.Treasury controls the money supply through its buying and selling of U.S.securities. 
C) The Treasury is a monetary agency with responsibilities very similar to those of the Fed. 
D) The Federal Reserve System issues U.S.securities.

Question 15

The discount rate is the interest rate

Accepted Answer

A) commercial banks charge their low-risk customers for a loan. 
B) savings and loan associations pay for using savings deposit funds. 
C) the U.S.Treasury pays individuals who buy Treasury bonds in denominations of $10,000 or more. 
D) the Federal Reserve charges banking institutions for borrowing its funds. 
A) commercial banks charge their low-risk customers for a loan. 
B) savings and loan associations pay for using savings deposit funds. 
C) the U.S.Treasury pays individuals who buy Treasury bonds in denominations of $10,000 or more. 
D) the Federal Reserve charges banking institutions for borrowing its funds.

Question 16

Who owns the Fed?

Accepted Answer

A) the federal government 
B) the states 
C) he District Federal Reserve Banks 
D) all banks 
E) member banks 
A) the federal government 
B) the states 
C) he District Federal Reserve Banks 
D) all banks 
E) member banks

Question 17

Rather than using the purchase and sale of only government bonds in the conduct of open market operations,in 2008 the Fed also began buying and selling

Accepted Answer

A) stock options so it would be able to gain from the expected rebound in the stock market. 
B) real estate in the Washington D.C.area. 
C) corporate bonds,commercial paper,and mortgage-backed securities from commercial banks and other financial institutions. 
D) future contracts for goods like grains,metals,and crude oil,which could be expected to increase in price substantially if the inflation rate rose rapidly in the future. 
A) stock options so it would be able to gain from the expected rebound in the stock market. 
B) real estate in the Washington D.C.area. 
C) corporate bonds,commercial paper,and mortgage-backed securities from commercial banks and other financial institutions. 
D) future contracts for goods like grains,metals,and crude oil,which could be expected to increase in price substantially if the inflation rate rose rapidly in the future.

Question 18

A decrease in the interest rate,other things being equal,causes

Accepted Answer

A) an upward movement along the demand curve for money. 
B) a downward movement along the demand curve for money. 
C) a rightward shift of the demand curve for money. 
D) a leftward shift of the demand curve for money. 
A) an upward movement along the demand curve for money. 
B) a downward movement along the demand curve for money. 
C) a rightward shift of the demand curve for money. 
D) a leftward shift of the demand curve for money.

Question 19

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

Accepted Answer

A) raise the discount rate and make open market purchases 
B) raise the discount rate and make open market sales 
C) lower the discount rate and make open market purchases 
D) lower the discount rate and make open market sales 
A) raise the discount rate and make open market purchases 
B) raise the discount rate and make open market sales 
C) lower the discount rate and make open market purchases 
D) lower the discount rate and make open market sales

Question 20

Banks are considered a safer place to deposit money now than they were prior to 1933 because

Accepted Answer

A) gold reserves have increased. 
B) reserve requirements are higher. 
C) the creation of the FDIC reduced the likelihood of bank runs. 
D) the commercial banks are no longer permitted to extend loans to the Federal Government. 
A) gold reserves have increased. 
B) reserve requirements are higher. 
C) the creation of the FDIC reduced the likelihood of bank runs. 
D) the commercial banks are no longer permitted to extend loans to the Federal Government.

Exam 13: Amoney and the Banking System

When individuals shift funds from money market mutual funds to no-load stock and bond mutual funds,

Stores need not accept your check but must accept currency because

Assuming a 20 percent legal reserve requirement,a new deposit of $10,000 in a commercial bank will place that bank in a position to lend out an additional

When a customer deposits $100 into a checking account,the effect is to

Are outstanding credit card balances counted as part of the money supply?

As the number of goods and services increases,barter becomes

The major overall purpose of the Federal Reserve System is to

Demand deposits are

Decisions to buy or sell securities at the Fed are made by

If the banking system has $50 billion in excess reserves,and the required reserve ratio is 25 percent,what is the maximum amount by which the money supply can be increased?

The value (purchasing power)of each unit of money

An increase in the discount rate impacts the money supply because it

Does the Federal Reserve operate like an ordinary commercial bank? What is the Fed's job?

Which of the following is correct?

The discount rate is the interest rate

Who owns the Fed?

Rather than using the purchase and sale of only government bonds in the conduct of open market operations,in 2008 the Fed also began buying and selling

A decrease in the interest rate,other things being equal,causes

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

Banks are considered a safer place to deposit money now than they were prior to 1933 because

The Economic Approach

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Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

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Price-Searcher Markets With Low Entry Barriers

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The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

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Difficult Environmental Cases and the Role of Government

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