Question 1

When the Federal Reserve sells government bonds to the public,it directly

Accepted Answer

A) increases the M1 money supply and increases the reserves of the commercial banking system. 
B) increases the M1 money supply,while reducing the reserves of the commercial banking system. 
C) reduces the M1 money supply,while increasing the reserves of the commercial banking system. 
D) reduces the M1 money supply and decreases the reserves of the commercial banking system. 
A) increases the M1 money supply and increases the reserves of the commercial banking system. 
B) increases the M1 money supply,while reducing the reserves of the commercial banking system. 
C) reduces the M1 money supply,while increasing the reserves of the commercial banking system. 
D) reduces the M1 money supply and decreases the reserves of the commercial banking system.

Question 2

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

Accepted Answer

A) make open market purchases and raise the reserve requirement ratio 
B) make open market purchases and lower the reserve requirement ratio 
C) make open market sales and raise the reserve requirement ratio 
D) make open market sales and lower the reserve requirement ratio 
A) make open market purchases and raise the reserve requirement ratio 
B) make open market purchases and lower the reserve requirement ratio 
C) make open market sales and raise the reserve requirement ratio 
D) make open market sales and lower the reserve requirement ratio

Question 3

The primary benefit of a monetary system of exchange compared to a barter system is the increased

Accepted Answer

A) ability to record transactions. 
B) time necessary to find trading partners. 
C) time devoted to shopping. 
D) efficiency in arranging transactions. 
A) ability to record transactions. 
B) time necessary to find trading partners. 
C) time devoted to shopping. 
D) efficiency in arranging transactions.

Question 4

When the monetary authorities expand the supply of money rapidly,

Accepted Answer

A) its purchasing power tends to increase. 
B) holding money is a poor method of storing value. 
C) the long-run sustainable real growth rate of the economy will tend to increase. 
D) the prices of goods and services will generally decline. 
A) its purchasing power tends to increase. 
B) holding money is a poor method of storing value. 
C) the long-run sustainable real growth rate of the economy will tend to increase. 
D) the prices of goods and services will generally decline.

Question 5

Mr.Brown deposits $1,000 of currency at First National Bank.Later that same day,Ms.Harris negotiates a loan for $800 at the same bank.As the result of these transactions,the money supply has

Accepted Answer

A) increased by $200 
B) increased by $800. 
C) increased by $1,000 
D) decreased by $800 
A) increased by $200 
B) increased by $800. 
C) increased by $1,000 
D) decreased by $800

Question 6

Other things constant,which of the following would cause the M1 money supply to decline?

Accepted Answer

A) an increase in the quantity of U.S.currency held overseas 
B) a shift of funds from interest-earning checking deposits to money market mutual funds 
C) a reduction in the general public's holdings of currency outside of banks because debit cards have become more popular and widely accepted 
D) a shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined 
A) an increase in the quantity of U.S.currency held overseas 
B) a shift of funds from interest-earning checking deposits to money market mutual funds 
C) a reduction in the general public's holdings of currency outside of banks because debit cards have become more popular and widely accepted 
D) a shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined

Question 7

If uncertainty causes commercial banks to increase their holdings of excess reserves,other things constant,this will

Accepted Answer

A) reduce the money supply during a period of inflation and increase it during a recession. 
B) reduce the size of the deposit expansion multiplier. 
C) increase the size of deposit expansion multiplier. 
D) reduce the size of the deposit expansion multiplier during a period of inflation and increase it during a recession. 
A) reduce the money supply during a period of inflation and increase it during a recession. 
B) reduce the size of the deposit expansion multiplier. 
C) increase the size of deposit expansion multiplier. 
D) reduce the size of the deposit expansion multiplier during a period of inflation and increase it during a recession.

Question 8

If the Fed raises the discount rate,what happens to reserves and the money supply?

Accepted Answer

A) Reserves increase and the money supply decreases. 
B) Both increase. 
C) Reserves decrease and the money supply increases. 
D) Both decrease. 
A) Reserves increase and the money supply decreases. 
B) Both increase. 
C) Reserves decrease and the money supply increases. 
D) Both decrease.

Question 9

If the Fed wanted to shift to a restrictive monetary policy and reduce the money supply,it could

Accepted Answer

A) decrease the reserve requirements imposed on commercial banks. 
B) purchase U.S.government securities and other financial assets in the open market. 
C) decrease the interest rate on loans extended to banks and other financial institutions. 
D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans. 
A) decrease the reserve requirements imposed on commercial banks. 
B) purchase U.S.government securities and other financial assets in the open market. 
C) decrease the interest rate on loans extended to banks and other financial institutions. 
D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.

Question 10

If the Fed wanted to expand the money supply as part of an antirecession strategy,it could

Accepted Answer

A) increase the reserve requirements. 
B) buy U.S.securities on the open market. 
C) raise the discount rate. 
D) sell U.S.securities on the open market. 
A) increase the reserve requirements. 
B) buy U.S.securities on the open market. 
C) raise the discount rate. 
D) sell U.S.securities on the open market.

Question 11

During the financial crisis of 2008,Fed policy

Accepted Answer

A) caused the monetary base to shrink significantly. 
B) approximately doubled the M1 money supply. 
C) approximately doubled the monetary base. 
D) maintained the monetary base at a constant level. 
A) caused the monetary base to shrink significantly. 
B) approximately doubled the M1 money supply. 
C) approximately doubled the monetary base. 
D) maintained the monetary base at a constant level.

Question 12

Which of the following is not a component of the M1 money supply?

Accepted Answer

A) demand deposits 
B) large-denomination (more than $100)bills 
C) interest-earning checking deposits 
D) outstanding balances on credit cards 
A) demand deposits 
B) large-denomination (more than $100)bills 
C) interest-earning checking deposits 
D) outstanding balances on credit cards

Question 13

Suppose the Fed sells $100 million of U.S.government securities (bonds)to the public.How will this affect the money supply and the national debt?

Accepted Answer

A) The money supply will increase;the national debt will decrease. 
B) The money supply will decrease;the national debt will increase. 
C) The money supply will increase;the national debt will be unaffected. 
D) The money supply will decrease;the national debt will be unaffected. 
A) The money supply will increase;the national debt will decrease. 
B) The money supply will decrease;the national debt will increase. 
C) The money supply will increase;the national debt will be unaffected. 
D) The money supply will decrease;the national debt will be unaffected.

Question 14

If you have a checking account at a local bank,your bank account there is

Accepted Answer

A) an asset to the bank and an asset to you. 
B) a liability of the bank and a liability of yours. 
C) a liability of the bank and an asset to you. 
D) an asset to the bank and a liability of yours. 
A) an asset to the bank and an asset to you. 
B) a liability of the bank and a liability of yours. 
C) a liability of the bank and an asset to you. 
D) an asset to the bank and a liability of yours.

Question 15

How do changes in open market operations alter the monetary base,and how do changes in the monetary base translate to changes in the money supply?

Accepted Answer

The monetary base is the sum of commerci

Question 16

Briefly explain the three functions of money.

Accepted Answer

Money serves as a medium of exchange,whi

Question 17

Open market operations is the

Accepted Answer

A) tool most often used by the Fed to alter the money supply. 
B) least effective tool the Fed has to alter the money supply. 
C) tool used by the Treasury to raise tax revenues. 
D) tool used by the Fed to regulate stock market activities. 
A) tool most often used by the Fed to alter the money supply. 
B) least effective tool the Fed has to alter the money supply. 
C) tool used by the Treasury to raise tax revenues. 
D) tool used by the Fed to regulate stock market activities.

Question 18

Suppose that during a period of inflation,the Fed reduced its holdings of U.S.securities from $600 billion to $580 billion.This indicates that the Fed was

Accepted Answer

A) seeking to reduce the money supply to decrease inflation. 
B) trying to force Congress to decrease taxes. 
C) expanding the money supply and stimulating employment. 
D) expanding the money supply,even though the existing inflation suggested a restrictive policy would be more appropriate. 
A) seeking to reduce the money supply to decrease inflation. 
B) trying to force Congress to decrease taxes. 
C) expanding the money supply and stimulating employment. 
D) expanding the money supply,even though the existing inflation suggested a restrictive policy would be more appropriate.

Question 19

Suppose the Fed purchases $40,000 of U.S.Treasury bonds from Donald Trump,who deposits the money with First National Bank.If the required reserve ratio is 20 percent,this transaction will increase the excess reserves of First National Bank by

Accepted Answer

A) $8,000. 
B) $32,000. 
C) $40,000. 
D) $200,000. 
A) $8,000. 
B) $32,000. 
C) $40,000. 
D) $200,000.

Question 20

Which of the following compose the reserves of a commercial bank?

Accepted Answer

A) demand deposits and time deposits 
B) vault cash and deposits of the bank with the Federal Reserve 
C) U.S.securities and stock equity 
D) cash and U.S.securities 
A) demand deposits and time deposits 
B) vault cash and deposits of the bank with the Federal Reserve 
C) U.S.securities and stock equity 
D) cash and U.S.securities

Exam 13: Amoney and the Banking System

When the Federal Reserve sells government bonds to the public,it directly

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

The primary benefit of a monetary system of exchange compared to a barter system is the increased

When the monetary authorities expand the supply of money rapidly,

Mr.Brown deposits $1,000 of currency at First National Bank.Later that same day,Ms.Harris negotiates a loan for $800 at the same bank.As the result of these transactions,the money supply has

Other things constant,which of the following would cause the M1 money supply to decline?

If uncertainty causes commercial banks to increase their holdings of excess reserves,other things constant,this will

If the Fed raises the discount rate,what happens to reserves and the money supply?

If the Fed wanted to shift to a restrictive monetary policy and reduce the money supply,it could

If the Fed wanted to expand the money supply as part of an antirecession strategy,it could

During the financial crisis of 2008,Fed policy

Which of the following is not a component of the M1 money supply?

Suppose the Fed sells $100 million of U.S.government securities (bonds)to the public.How will this affect the money supply and the national debt?

If you have a checking account at a local bank,your bank account there is

How do changes in open market operations alter the monetary base,and how do changes in the monetary base translate to changes in the money supply?

Briefly explain the three functions of money.

Open market operations is the

Suppose that during a period of inflation,the Fed reduced its holdings of U.S.securities from $600 billion to $580 billion.This indicates that the Fed was

Suppose the Fed purchases $40,000 of U.S.Treasury bonds from Donald Trump,who deposits the money with First National Bank.If the required reserve ratio is 20 percent,this transaction will increase the excess reserves of First National Bank by

Which of the following compose the reserves of a commercial bank?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

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

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

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

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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