Question 1

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

Accepted Answer

A) lower the discount rate and raise the reserve requirement ratio 
B) lower the discount rate and lower the reserve requirement ratio 
C) raise the discount rate and raise the reserve requirement ratio 
D) raise the discount rate and lower the reserve requirement ratio 
A) lower the discount rate and raise the reserve requirement ratio 
B) lower the discount rate and lower the reserve requirement ratio 
C) raise the discount rate and raise the reserve requirement ratio 
D) raise the discount rate and lower the reserve requirement ratio

Question 2

Which of the following would be most appropriate if the Federal Reserve wanted to increase the money supply in order to stimulate the economy?

Accepted Answer

A) buy U.S.securities 
B) force the Treasury to reduce the national debt 
C) raise the discount rate 
D) increase the reserve requirements 
A) buy U.S.securities 
B) force the Treasury to reduce the national debt 
C) raise the discount rate 
D) increase the reserve requirements

Question 3

Which of the following is not part of the M1 money supply?

Accepted Answer

A) paper bills (currency) 
B) travelers' checks 
C) savings deposits 
D) coins 
A) paper bills (currency) 
B) travelers' checks 
C) savings deposits 
D) coins

Question 4

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 
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 
D) M1 plus savings deposits,small-denomination time deposits,and money market mutual funds (retail)

Question 5

Assume the reserve requirement is 10 percent.First National Bank has vault cash and deposits with the Fed of $30 million,loans and securities of $60 million,and checking deposits of $300 million.First National is in a position to make

Accepted Answer

A) no additional loans. 
B) $5 million of additional loans. 
C) $10 million of additional loans. 
D) $15 million of additional loans. 
A) no additional loans. 
B) $5 million of additional loans. 
C) $10 million of additional loans. 
D) $15 million of additional loans.

Question 6

Economists who stress the store of value function of money generally

Accepted Answer

A) argue that M1 is the best measure of the money supply. 
B) prefer the M2 measure of the money supply to the M1 measure. 
C) argue that M1 is too broad a definition of the money supply. 
D) prefer the M1 measure of the money supply to the M2 measure. 
A) argue that M1 is the best measure of the money supply. 
B) prefer the M2 measure of the money supply to the M1 measure. 
C) argue that M1 is too broad a definition of the money supply. 
D) prefer the M1 measure of the money supply to the M2 measure.

Question 7

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Accepted Answer

A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply. 
A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply.

Question 8

Which one of the following is the largest component of the money supply (M1)in the United States?

Accepted Answer

A) demand and other checking deposits 
B) gold certificates 
C) credit cards and traveler's checks 
D) Federal Reserve notes 
A) demand and other checking deposits 
B) gold certificates 
C) credit cards and traveler's checks 
D) Federal Reserve notes

Question 9

Suppose a bank receives a new deposit of $500.The bank extends a new loan of $400 because it is required to hold the other $100 on reserve.What is the legal required reserve ratio?

Accepted Answer

A) 10 percent 
B) 15 percent 
C) 20 percent 
D) 25 percent 
A) 10 percent 
B) 15 percent 
C) 20 percent 
D) 25 percent

Question 10

The Federal Reserve System is owned by

Accepted Answer

A) federal government agencies such as the Treasury. 
B) the Congress of the United States. 
C) the banks that are members of the Federal Reserve System. 
D) anyone who buys stock over the counter. 
E) people who have deposits in member banks. 
A) federal government agencies such as the Treasury. 
B) the Congress of the United States. 
C) the banks that are members of the Federal Reserve System. 
D) anyone who buys stock over the counter. 
E) people who have deposits in member banks.

Question 11

A system that permits banks to hold less than 100 percent of their deposits as reserves is called a

Accepted Answer

A) federal reserve system. 
B) fractional reserve banking system. 
C) partially funded deposit insurance system. 
D) gold standard banking system. 
A) federal reserve system. 
B) fractional reserve banking system. 
C) partially funded deposit insurance system. 
D) gold standard banking system.

Question 12

Which of the following most clearly limits the ability of the commercial banking industry to expand the money supply?

Accepted Answer

A) the reserve requirements mandated by the Fed 
B) the number of commercial bank charters issued by the Fed 
C) the dollar value of the bonds issued by the U.S.Treasury 
D) the federal funds interest rate that commercial banks pay (and receive)for short-term loanable funds 
A) the reserve requirements mandated by the Fed 
B) the number of commercial bank charters issued by the Fed 
C) the dollar value of the bonds issued by the U.S.Treasury 
D) the federal funds interest rate that commercial banks pay (and receive)for short-term loanable funds

Question 13

As the Fed increased its asset holdings and the volume of loans to financial institutions during the latter half of 2008,the result was

Accepted Answer

A) a vast increase in the monetary base and in the excess reserves of the commercial banking system. 
B) a substantial increase in short term interest rates. 
C) a sharp decrease in the monetary base,as well as a depletion of the excess reserves of the commercial banking system. 
D) an increase in the volume of loans extended by commercial banks and a sharp increase in the inflation rate. 
A) a vast increase in the monetary base and in the excess reserves of the commercial banking system. 
B) a substantial increase in short term interest rates. 
C) a sharp decrease in the monetary base,as well as a depletion of the excess reserves of the commercial banking system. 
D) an increase in the volume of loans extended by commercial banks and a sharp increase in the inflation rate.

Question 14

The difference between the total reserves that a bank holds and the amount that is required by law are called

Accepted Answer

A) excess reserves. 
B) nonborrowed reserves. 
C) borrowed reserves. 
D) actual reserves. 
A) excess reserves. 
B) nonborrowed reserves. 
C) borrowed reserves. 
D) actual reserves.

Question 15

Second National Bank confronts a reserve requirement of 20 percent and currently holds millions of dollars in excess reserves.If a depositor withdraws $35,000,the excess reserves of the bank will

Accepted Answer

A) decline by $7,000. 
B) decline by $35,000. 
C) decline by $28,000. 
D) increase by $7,000. 
A) decline by $7,000. 
B) decline by $35,000. 
C) decline by $28,000. 
D) increase by $7,000.

Question 16

In the United States,the control of the money supply is the responsibility of the

Accepted Answer

A) Federal Reserve System (the Fed). 
B) the president. 
C) the U.S.Treasury. 
D) the U.S.Congress. 
A) Federal Reserve System (the Fed). 
B) the president. 
C) the U.S.Treasury. 
D) the U.S.Congress.

Question 17

Which of the following is the best definition of money?

Accepted Answer

A) anything generally accepted as payment for goods or repayment of debt 
B) anything that can be converted to a liquid asset 
C) a national currency that is backed by gold or other precious metals 
D) paper or coin currency that is produced by the Federal Reserve 
A) anything generally accepted as payment for goods or repayment of debt 
B) anything that can be converted to a liquid asset 
C) a national currency that is backed by gold or other precious metals 
D) paper or coin currency that is produced by the Federal Reserve

Question 18

Discuss the changes that have and will in the future affect the usefulness of the M1 and M2 money supply figures as indicators of monetary policy.

Accepted Answer

During the 1980s,the increasing populari

Question 19

A reserve requirement of 10 percent implies a potential money deposit expansion multiplier of

Accepted Answer

A) 5. 
B) 10. 
C) 20. 
D) 100. 
A) 5. 
B) 10. 
C) 20. 
D) 100.

Question 20

When the Fed lowers the discount rate,it makes it

Accepted Answer

A) cheaper for banks to borrow from each other. 
B) cheaper for banks to obtain additional reserves by borrowing from the Fed. 
C) more difficult for banks to accept deposits. 
D) more difficult for banks to extend loans. 
A) cheaper for banks to borrow from each other. 
B) cheaper for banks to obtain additional reserves by borrowing from the Fed. 
C) more difficult for banks to accept deposits. 
D) more difficult for banks to extend loans.

Exam 13: Amoney and the Banking System

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

Which of the following would be most appropriate if the Federal Reserve wanted to increase the money supply in order to stimulate the economy?

Which of the following is not part of the M1 money supply?

Which of the following compose the M2 money supply?

Assume the reserve requirement is 10 percent.First National Bank has vault cash and deposits with the Fed of $30 million,loans and securities of $60 million,and checking deposits of $300 million.First National is in a position to make

Economists who stress the store of value function of money generally

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Which one of the following is the largest component of the money supply (M1)in the United States?

Suppose a bank receives a new deposit of $500.The bank extends a new loan of $400 because it is required to hold the other $100 on reserve.What is the legal required reserve ratio?

The Federal Reserve System is owned by

A system that permits banks to hold less than 100 percent of their deposits as reserves is called a

Which of the following most clearly limits the ability of the commercial banking industry to expand the money supply?

As the Fed increased its asset holdings and the volume of loans to financial institutions during the latter half of 2008,the result was

The difference between the total reserves that a bank holds and the amount that is required by law are called

Second National Bank confronts a reserve requirement of 20 percent and currently holds millions of dollars in excess reserves.If a depositor withdraws $35,000,the excess reserves of the bank will

In the United States,the control of the money supply is the responsibility of the

Which of the following is the best definition of money?

Discuss the changes that have and will in the future affect the usefulness of the M1 and M2 money supply figures as indicators of monetary policy.

A reserve requirement of 10 percent implies a potential money deposit expansion multiplier of

When the Fed lowers the discount rate,it makes it

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

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Creating an Environment for Growth and Prosperity

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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

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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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