Question 1

Which of the following would cause the money supply in the United States to decrease?

Accepted Answer

A) an increase in reserve requirements 
B) a decrease in the discount rate 
C) a purchase of bonds by the Federal Reserve 
D) an increase in the world supply of gold 
A) an increase in reserve requirements 
B) a decrease in the discount rate 
C) a purchase of bonds by the Federal Reserve 
D) an increase in the world supply of gold

Question 2

Which of the following would lead to a rapid growth of the money supply in the future?

Accepted Answer

A) the use of large excess reserves by banks to extend additional loans 
B) a reduction in government expenditures to reduce the size of the federal deficit 
C) an increase in government expenditures financed by taxes 
D) an increase in the interest rate the Fed pays banks holding excess reserves 
A) the use of large excess reserves by banks to extend additional loans 
B) a reduction in government expenditures to reduce the size of the federal deficit 
C) an increase in government expenditures financed by taxes 
D) an increase in the interest rate the Fed pays banks holding excess reserves

Question 3

The three basic functions of money are

Accepted Answer

A) fiat,seigniorage,and debt. 
B) a medium of exchange,a store of value,and a unit of account. 
C) a standard of pay,a coincidence of wants,and a measure of the value of time. 
D) demand deposits,other checkable deposits,and time deposits. 
A) fiat,seigniorage,and debt. 
B) a medium of exchange,a store of value,and a unit of account. 
C) a standard of pay,a coincidence of wants,and a measure of the value of time. 
D) demand deposits,other checkable deposits,and time deposits.

Question 4

Best National Bank is subject to a 10 percent required-reserve ratio.If this bank received a new checkable deposit of $1,000,it could make new loans of

Accepted Answer

A) $100. 
B) $900. 
C) $1,000. 
D) $10,000. 
A) $100. 
B) $900. 
C) $1,000. 
D) $10,000.

Question 5

Which of the following compose the M2 money supply?

Accepted Answer

A) currency only 
B) currency,demand deposits,other checkable deposits,and traveler's checks 
C) M1 plus large denomination time deposits and Eurodollar deposits 
D) M1 plus savings deposits,small-denomination time deposits,and money market mutual funds (retail) 
A) currency only 
B) currency,demand deposits,other checkable deposits,and traveler's checks 
C) M1 plus large denomination time deposits and Eurodollar deposits 
D) M1 plus savings deposits,small-denomination time deposits,and money market mutual funds (retail)

Question 6

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

Accepted Answer

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

Question 7

Open-market purchases by the Fed make the money supply

Accepted Answer

A) increase,which tends to increase the value of money. 
B) increase,which tends to decrease the value of money. 
C) decrease,which tends to decrease the value of money. 
D) decrease,which tends to increase the value of money. 
A) increase,which tends to increase the value of money. 
B) increase,which tends to decrease the value of money. 
C) decrease,which tends to decrease the value of money. 
D) decrease,which tends to increase the value of money.

Question 8

What advantages does a money economy have over a barter economy?

Accepted Answer

The existence of money substantially red

Question 9

Which of the following lists two things that both decrease 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 10

Suppose the Fed purchases $100 million of U.S.government securities from 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 decline. 
B) The money supply will decline;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 decline. 
B) The money supply will decline;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 11

How did the Fed's conduct of open market operations change during the economic crisis of 2008?

Accepted Answer

A) Open market operations are no longer the most common tool that the Fed utilizes. 
B) The Fed now buys and sells a broader range of assets than only government securities. 
C) The Federal Open Market Committee cannot act without the approval of the Treasury. 
D) The Fed now must have adequate funds available before purchasing government securities. 
A) Open market operations are no longer the most common tool that the Fed utilizes. 
B) The Fed now buys and sells a broader range of assets than only government securities. 
C) The Federal Open Market Committee cannot act without the approval of the Treasury. 
D) The Fed now must have adequate funds available before purchasing government securities.

Question 12

Though many assets can be used as a store of value,money is a particularly attractive method to store value because

Accepted Answer

A) it increases in value as prices rise. 
B) its purchasing power does not decline when prices rise. 
C) it is the most liquid of all assets. 
D) it is backed by gold. 
A) it increases in value as prices rise. 
B) its purchasing power does not decline when prices rise. 
C) it is the most liquid of all assets. 
D) it is backed by gold.

Question 13

If the Federal Reserve is engaging in open market operations designed to expand the money supply,it is probably

Accepted Answer

A) selling government securities to banks. 
B) selling government securities to the public. 
C) buying government securities from the public. 
D) encouraging banks to exchange their Fed deposits for currency. 
A) selling government securities to banks. 
B) selling government securities to the public. 
C) buying government securities from the public. 
D) encouraging banks to exchange their Fed deposits for currency.

Question 14

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 15

Which of the following was true of the actions of the Federal Reserve in response to the recession of 2008?

Accepted Answer

A) The Fed shifted toward a highly restrictive monetary policy in 2008,which was a major cause of the recession. 
B) The Fed continued to focus only on price stability and therefore it expanded the money supply at a slow and steady rate throughout the recession. 
C) The Fed introduced several new procedures for the conduct of monetary policy and it increased the monetary base rapidly as the recession worsened. 
D) The Fed continued to purchase and sell only U.S.Treasury bonds when conducting open market operations to control the money supply. 
A) The Fed shifted toward a highly restrictive monetary policy in 2008,which was a major cause of the recession. 
B) The Fed continued to focus only on price stability and therefore it expanded the money supply at a slow and steady rate throughout the recession. 
C) The Fed introduced several new procedures for the conduct of monetary policy and it increased the monetary base rapidly as the recession worsened. 
D) The Fed continued to purchase and sell only U.S.Treasury bonds when conducting open market operations to control the money supply.

Question 16

When the actual reserves held by a bank exceed the legal requirement,the bank

Accepted Answer

A) will have to borrow from the Fed. 
B) has excess reserves,which can be used to extend additional loans. 
C) cannot extend additional loans. 
D) will have to reduce its outstanding loans. 
A) will have to borrow from the Fed. 
B) has excess reserves,which can be used to extend additional loans. 
C) cannot extend additional loans. 
D) will have to reduce its outstanding loans.

Question 17

During the financial crisis of 2008-2010,the Fed increased its purchases of securities and extended more loans,which caused the monetary base to

Accepted Answer

A) increase rapidly,but the M1 money supply declined because the banks loaned out most of the additional reserves to businesses. 
B) fall,but the M1 money supply still expanded rapidly because the banks increased their loans to businesses. 
C) increase rapidly,but the M1 money supply expanded at a much slower rate because the banks enlarged their excess reserves. 
D) fall,and this led to a sharp decline in the M1 money supply. 
A) increase rapidly,but the M1 money supply declined because the banks loaned out most of the additional reserves to businesses. 
B) fall,but the M1 money supply still expanded rapidly because the banks increased their loans to businesses. 
C) increase rapidly,but the M1 money supply expanded at a much slower rate because the banks enlarged their excess reserves. 
D) fall,and this led to a sharp decline in the M1 money supply.

Question 18

If the public decides to hold less currency and more 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 19

Suppose Simona deposits $10,000 of cash into a checking account at a commercial bank.The immediate effect is

Accepted Answer

A) a $10,000 decrease in the M1 money supply. 
B) no change in the M1 money supply,but in the future,the M1 money supply will tend to decrease because the bank now has excess reserves. 
C) no change in the M1 money supply,but in the future,the M1 money supply will tend to expand because the bank now has excess reserves. 
D) a $10,000 increase in the M1 money supply. 
A) a $10,000 decrease in the M1 money supply. 
B) no change in the M1 money supply,but in the future,the M1 money supply will tend to decrease because the bank now has excess reserves. 
C) no change in the M1 money supply,but in the future,the M1 money supply will tend to expand because the bank now has excess reserves. 
D) a $10,000 increase in the M1 money supply.

Question 20

If the required reserve ratio were decreased,

Accepted Answer

A) the money supply would tend to decrease,but the outstanding loans of banks would tend to increase. 
B) both the money supply and the outstanding loans of banks would tend to decrease. 
C) the money supply would tend to increase,but the outstanding loans of banks would tend to decrease. 
D) both the money supply and the outstanding loans of banks would tend to increase. 
A) the money supply would tend to decrease,but the outstanding loans of banks would tend to increase. 
B) both the money supply and the outstanding loans of banks would tend to decrease. 
C) the money supply would tend to increase,but the outstanding loans of banks would tend to decrease. 
D) both the money supply and the outstanding loans of banks would tend to increase.

Exam 13: Amoney and the Banking System

Which of the following would cause the money supply in the United States to decrease?

Which of the following would lead to a rapid growth of the money supply in the future?

The three basic functions of money are

Best National Bank is subject to a 10 percent required-reserve ratio.If this bank received a new checkable deposit of $1,000,it could make new loans of

Which of the following compose the M2 money supply?

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

Open-market purchases by the Fed make the money supply

What advantages does a money economy have over a barter economy?

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

Suppose the Fed purchases $100 million of U.S.government securities from the public.How will this affect the money supply and the national debt?

How did the Fed's conduct of open market operations change during the economic crisis of 2008?

Though many assets can be used as a store of value,money is a particularly attractive method to store value because

If the Federal Reserve is engaging in open market operations designed to expand the money supply,it is probably

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

Which of the following was true of the actions of the Federal Reserve in response to the recession of 2008?

When the actual reserves held by a bank exceed the legal requirement,the bank

During the financial crisis of 2008-2010,the Fed increased its purchases of securities and extended more loans,which caused the monetary base to

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

Suppose Simona deposits $10,000 of cash into a checking account at a commercial bank.The immediate effect is

If the required reserve ratio were decreased,

The Economic Approach

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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

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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

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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