Question 1

If money were not used as a medium of exchange,

Accepted Answer

A) the gains from trade would be severely limited. 
B) our standard of living would probably improve. 
C) the transaction costs of exchange would be lower. 
D) economic efficiency would increase. 
A) the gains from trade would be severely limited. 
B) our standard of living would probably improve. 
C) the transaction costs of exchange would be lower. 
D) economic efficiency would increase.

Question 2

What is the length of the term of the members of the Board of Governors of the Federal Reserve System?

Accepted Answer

A) four years 
B) six years 
C) fourteen years 
D) life or until the member resigns 
A) four years 
B) six years 
C) fourteen years 
D) life or until the member resigns

Question 3

When reserve requirements are increased,the

Accepted Answer

A) excess reserves of commercial banks will decrease. 
B) excess reserves of commercial banks will increase. 
C) U.S.Treasury will have to borrow additional funds. 
D) money supply will rise. 
A) excess reserves of commercial banks will decrease. 
B) excess reserves of commercial banks will increase. 
C) U.S.Treasury will have to borrow additional funds. 
D) money supply will rise.

Question 4

Commercial banks can borrow reserves directly from the Fed at the

Accepted Answer

A) prime interest rate. 
B) federal funds rate. 
C) discount rate. 
D) real interest rate. 
A) prime interest rate. 
B) federal funds rate. 
C) discount rate. 
D) real interest rate.

Question 5

Which of the following lists two things that both increase 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 6

In the United States,the money supply (M1)consists of

Accepted Answer

A) paper currency,coins and traveler's checks. 
B) government bonds,currency,demand deposits,other checkable deposits,and traveler's checks. 
C) paper currency,coins,demand deposits,and savings deposits. 
D) coins,paper currency,demand deposits,other checkable deposits,and traveler's checks. 
A) paper currency,coins and traveler's checks. 
B) government bonds,currency,demand deposits,other checkable deposits,and traveler's checks. 
C) paper currency,coins,demand deposits,and savings deposits. 
D) coins,paper currency,demand deposits,other checkable deposits,and traveler's checks.

Question 7

Which of the following items are counted in M2?

Accepted Answer

A) stock mutual funds 
B) money-market mutual funds 
C) bond mutual funds 
D) all of the above 
A) stock mutual funds 
B) money-market mutual funds 
C) bond mutual funds 
D) all of the above

Question 8

If the Fed purchases government securities from the public,the

Accepted Answer

A) money supply will decrease. 
B) reserves of commercial banks will decrease. 
C) required reserves ratio will increase. 
D) monetary base will increase. 
A) money supply will decrease. 
B) reserves of commercial banks will decrease. 
C) required reserves ratio will increase. 
D) monetary base will increase.

Question 9

The Fed's use of the interest rate it pays banks on their excess reserves

Accepted Answer

A) is a tool the Fed has used effectively over the past several decades to control the money supply. 
B) is a tool that can be used to reduce the supply of money,but it cannot be used to expand it. 
C) is a monetary tool that the Fed introduced in 2008. 
D) is a tool that could be used to expand the money supply,but it could not be used to reduce it. 
A) is a tool the Fed has used effectively over the past several decades to control the money supply. 
B) is a tool that can be used to reduce the supply of money,but it cannot be used to expand it. 
C) is a monetary tool that the Fed introduced in 2008. 
D) is a tool that could be used to expand the money supply,but it could not be used to reduce it.

Question 10

Other things being equal,an increase in the rate of interest causes

Accepted Answer

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

Question 11

Which of the following will limit the money creation process to an amount less than the potential amount?

Accepted Answer

A) bank pursuit of profits 
B) increase in currency holdings by the public 
C) business demand for loans 
D) increased use of credit cards 
A) bank pursuit of profits 
B) increase in currency holdings by the public 
C) business demand for loans 
D) increased use of credit cards

Question 12

Are funds available on a credit card included in a definition of the money supply?

Accepted Answer

A) Yes,because these funds can be used to pay for goods and services. 
B) Yes,because these funds are included in M2. 
C) No,because these funds are hard to measure total credit card spending. 
D) No,because these funds are not a store of value. 
A) Yes,because these funds can be used to pay for goods and services. 
B) Yes,because these funds are included in M2. 
C) No,because these funds are hard to measure total credit card spending. 
D) No,because these funds are not a store of value.

Question 13

The legal requirement that commercial banks hold reserves equal to some fraction of their deposits

Accepted Answer

A) limits the ability of banks to expand the money supply by extending additional loans. 
B) prevents the Fed from controlling the money supply since commercial banks can always offset the actions of the Fed. 
C) prevents runs on banks by depositors who fear that banks have insufficient assets to meet the claims of their depositors. 
D) limits the ability of the Treasury to expand the national debt. 
A) limits the ability of banks to expand the money supply by extending additional loans. 
B) prevents the Fed from controlling the money supply since commercial banks can always offset the actions of the Fed. 
C) prevents runs on banks by depositors who fear that banks have insufficient assets to meet the claims of their depositors. 
D) limits the ability of the Treasury to expand the national debt.

Question 14

If a sizeable amount of U.S.currency is held outside of the United States,

Accepted Answer

A) the accuracy of the M2 money supply figures will be improved,but there will be no impact on M1. 
B) the accuracy of the M1 money supply figures will be improved,but there will be no impact on M2. 
C) the money supply figures,particularly those for M1,will be less reliable. 
D) the money supply figures of the U.S.will not be affected because the funds are held outside the U.S. 
A) the accuracy of the M2 money supply figures will be improved,but there will be no impact on M1. 
B) the accuracy of the M1 money supply figures will be improved,but there will be no impact on M2. 
C) the money supply figures,particularly those for M1,will be less reliable. 
D) the money supply figures of the U.S.will not be affected because the funds are held outside the U.S.

Question 15

Which of the following will cause the U.S.money supply to expand?

Accepted Answer

A) a commercial bank uses excess reserves to extend a loan to a customer 
B) a commercial bank purchases U.S.securities from the Fed as an investment 
C) an increase in reserve requirements 
D) an increase in the discount rate 
A) a commercial bank uses excess reserves to extend a loan to a customer 
B) a commercial bank purchases U.S.securities from the Fed as an investment 
C) an increase in reserve requirements 
D) an increase in the discount rate

Question 16

Ordinary commercial banks can expand the supply of money by

Accepted Answer

A) printing up currency when they need it. 
B) buying and selling government bonds to the general public. 
C) using a portion of their deposits to extend additional loans. 
D) reducing their vault cash and increasing their deposits with the Fed. 
A) printing up currency when they need it. 
B) buying and selling government bonds to the general public. 
C) using a portion of their deposits to extend additional loans. 
D) reducing their vault cash and increasing their deposits with the Fed.

Question 17

Which of the following is responsible for decision making regarding the purchase and sale of bonds by the Fed?

Accepted Answer

A) the chairman of the Board of Governors of the Federal Reserve System 
B) the Federal Open Market Operations Committee 
C) the U.S.Secretary of Treasury 
D) the president,with the advice and consent of the chairman of the Council of Economic Advisers. 
A) the chairman of the Board of Governors of the Federal Reserve System 
B) the Federal Open Market Operations Committee 
C) the U.S.Secretary of Treasury 
D) the president,with the advice and consent of the chairman of the Council of Economic Advisers.

Question 18

The foreign holdings of U.S.dollars

Accepted Answer

A) are hard to explain since the dollar is not legal tender outside the United States. 
B) have decreased substantially during the last decade. 
C) indicate that foreigners have confidence in the monetary policy and economy of the United States. 
D) are largely held in countries with a lengthy historical record of monetary and price stability. 
A) are hard to explain since the dollar is not legal tender outside the United States. 
B) have decreased substantially during the last decade. 
C) indicate that foreigners have confidence in the monetary policy and economy of the United States. 
D) are largely held in countries with a lengthy historical record of monetary and price stability.

Question 19

Why did the monetary base increase rapidly during the economic crisis of 2008?

Accepted Answer

A) The Fed purchased more assets and extended more loans. 
B) The Fed sold financial assets and extended fewer loans. 
C) The Fed purchased more assets,but extended fewer loans. 
D) The Fed sold financial assets,but extended more loans. 
A) The Fed purchased more assets and extended more loans. 
B) The Fed sold financial assets and extended fewer loans. 
C) The Fed purchased more assets,but extended fewer loans. 
D) The Fed sold financial assets,but extended more loans.

Question 20

Modern bankers

Accepted Answer

A) expand the money supply by printing currency when they need it. 
B) decrease the supply of money when they extend additional loans. 
C) hold only a fraction of their assets in the form of reserves against their deposits. 
D) can increase their profits by increasing their holdings of excess reserves. 
A) expand the money supply by printing currency when they need it. 
B) decrease the supply of money when they extend additional loans. 
C) hold only a fraction of their assets in the form of reserves against their deposits. 
D) can increase their profits by increasing their holdings of excess reserves.

Exam 13: Amoney and the Banking System

If money were not used as a medium of exchange,

What is the length of the term of the members of the Board of Governors of the Federal Reserve System?

When reserve requirements are increased,the

Commercial banks can borrow reserves directly from the Fed at the

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

In the United States,the money supply (M1)consists of

Which of the following items are counted in M2?

If the Fed purchases government securities from the public,the

The Fed's use of the interest rate it pays banks on their excess reserves

Other things being equal,an increase in the rate of interest causes

Which of the following will limit the money creation process to an amount less than the potential amount?

Are funds available on a credit card included in a definition of the money supply?

The legal requirement that commercial banks hold reserves equal to some fraction of their deposits

If a sizeable amount of U.S.currency is held outside of the United States,

Which of the following will cause the U.S.money supply to expand?

Ordinary commercial banks can expand the supply of money by

Which of the following is responsible for decision making regarding the purchase and sale of bonds by the Fed?

The foreign holdings of U.S.dollars

Why did the monetary base increase rapidly during the economic crisis of 2008?

Modern bankers

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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