Question 1

Which of the following information about fiat money is false? Fiat money

Accepted Answer

A) is backed by gold. 
B) serves as a medium of exchange. 
C) has little to no value except as money. 
D) is authorized by a central bank or governmental body. 
A) is backed by gold. 
B) serves as a medium of exchange. 
C) has little to no value except as money. 
D) is authorized by a central bank or governmental body. A

Question 2

Money will fail to serve as a medium of exchange if it ceases to be a store of value.

Accepted Answer

A) True 
 B)False  True

Question 3

Your checking account balance is included in your bank's assets.

Accepted Answer

A) True 
 B)False  False

Question 4

M1 includes

Accepted Answer

A) currency in circulation, checking account deposits in banks, and holdings of traveler's checks. 
B) currency in circulation, savings account balances, and checking account deposits in banks. 
C) currency in circulation, savings account balances, checking account deposits in banks, and holdings of traveler's checks. 
D) coins, savings account balances, traveler's checks. 
A) currency in circulation, checking account deposits in banks, and holdings of traveler's checks. 
B) currency in circulation, savings account balances, and checking account deposits in banks. 
C) currency in circulation, savings account balances, checking account deposits in banks, and holdings of traveler's checks. 
D) coins, savings account balances, traveler's checks.

Question 5

Fiat money is generally issued by

Accepted Answer

A) private banks. 
B) central banks. 
C) brokerage firms. 
D) major multinational corporations. 
A) private banks. 
B) central banks. 
C) brokerage firms. 
D) major multinational corporations.

Question 6

Consider the following T-account for National City Bank:
$$\begin{array} { | l | l | l | } 
\hline  { \text { Assets } } & { \text { Liabilities } } \
\hline \text { Reserves } \quad \$ 10,000 & \text { Deposits } \$ 100,000 \
\hline \text { Loans } \quad \$ 90,000 & \
\hline
\end{array}$$
If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

Accepted Answer

A) $10,000 
B) $8,000 
C) $2,000 
D) $0 
A) $10,000 
B) $8,000 
C) $2,000 
D) $0

Question 7

If the required reserve ratio is 100 percent,could the Federal Reserve still change the money supply with open market operations? Explain whether they could or could not.

Accepted Answer

The Federal Reserve could still change t

Question 8

If households and firms decide to hold less of their money in checking account deposits and more in currency,then the money supply

Accepted Answer

A) will not change. 
B) will increase. 
C) will decrease. 
D) may increase or decrease. 
A) will not change. 
B) will increase. 
C) will decrease. 
D) may increase or decrease.

Question 9

A car dealer sells you a car today in exchange for money in the future.This illustrates which function of money?

Accepted Answer

A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment 
A) medium of exchange 
B) unit of account 
C) store of value 
D) standard of deferred payment

Question 10

If the bank of Waterloo receives a $10,000 deposit,and the reserve requirement is 10 percent,how much can the bank loan out? (Assume that before the deposit this bank is just meeting its legal reserve requirement.)

Accepted Answer

A) $1,000 
B) $9,000 
C) $10,000 
D) $11,000 
A) $1,000 
B) $9,000 
C) $10,000 
D) $11,000

Question 11

The main tool that the Federal Reserve uses to conduct monetary policy is

Accepted Answer

A) open market operations. 
B) discount policy. 
C) setting reserve requirements. 
D) acting as the lender of last resort. 
E) check clearing. 
A) open market operations. 
B) discount policy. 
C) setting reserve requirements. 
D) acting as the lender of last resort. 
E) check clearing.

Question 12

According to the U.S.Treasury

Accepted Answer

A) the government will not accept cash in payment of taxes. 
B) creditors do not have to accept cash in payment of debts. 
C) firms do not have to accept cash as payment for goods and services. 
D) U)S.dollars must be accepted as payment for any good or service sold in the United States. 
A) the government will not accept cash in payment of taxes. 
B) creditors do not have to accept cash in payment of debts. 
C) firms do not have to accept cash as payment for goods and services. 
D) U)S.dollars must be accepted as payment for any good or service sold in the United States.

Question 13

Scenario 16-1
 $$\begin{array} { l r } 
\text { Currency } & \$ 1,000 \
\text { Checking Account Balances } & 2,000 \
\text { Savings Account Balances } & 5,000 \
\text { Small-Denomination Time Deposits } & 6,000 \
\text { Noninstitutional Money Market Fund Shares } & 7,000
\end{array}$$ 
Consider the information above for a simple economy. Assume there are no traveler's checks.
-Refer to Scenario 16-1.M1 in this simple economy equals

Accepted Answer

A) $1,000. 
B) $2,000. 
C) $3,000. 
D) $8,000. 
A) $1,000. 
B) $2,000. 
C) $3,000. 
D) $8,000.

Question 14

Table 16-1
 $$\begin{array} { | c | c | } 
\hline \text { Assets } &{ \text { Liabilities } } \
\hline \text { Reserves } & \
+ \$ 4,000 & \text { Deposits } + \$ 4,000 \
\hline
\end{array}$$
-Refer to Table 16-1.Suppose a transaction changes a bank's balance sheet as indicated in the T-account,and the required reserve ratio is 10 percent.As a result of the transaction,the bank has excess reserves of

Accepted Answer

A) $0. 
B) $400. 
C) $3,600. 
D) $4,000. 
A) $0. 
B) $400. 
C) $3,600. 
D) $4,000.

Question 15

To decrease the money supply,the Federal Reserve could

Accepted Answer

A) lower the discount rate. 
B) raise income taxes. 
C) lower the required reserve ratio. 
D) conduct an open market sale of Treasury securities. 
E)  raise transfer payments. 
A) lower the discount rate. 
B) raise income taxes. 
C) lower the required reserve ratio. 
D) conduct an open market sale of Treasury securities. 
E)  raise transfer payments.

Question 16

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?

Accepted Answer

Banks create money to make a profit.Bank

Question 17

Describe the structure of the Fed's Open Market Committee (FOMC).What is this committee's primary responsibility?

Accepted Answer

The FOMC is comprised of the seven membe

Question 18

Which is not one of the criteria necessary for a commodity to make a suitable medium of exchange?

Accepted Answer

A) It should be durable. 
B) It should be of standardized quality. 
C) It should be valuable relative to its weight. 
D) It should have intrinsic value. 
A) It should be durable. 
B) It should be of standardized quality. 
C) It should be valuable relative to its weight. 
D) It should have intrinsic value.

Question 19

Suppose that you decide that you no longer want to hold currency,and deposit all of your currency holdings to your checking account.What is the immediate or initial impact of this transaction on M1 and M2?

Accepted Answer

Neither M1 nor M2 will change (at least

Question 20

The primary tool the Federal Reserve uses to increase the money supply is

Accepted Answer

A) printing more money. 
B) lowering the required reserve ratio. 
C) buying Treasury securities. 
D) lowering the discount rate. 
A) printing more money. 
B) lowering the required reserve ratio. 
C) buying Treasury securities. 
D) lowering the discount rate.

Which of the following information about fiat money is false? Fiat money

Money will fail to serve as a medium of exchange if it ceases to be a store of value.

Your checking account balance is included in your bank's assets.

M1 includes

Fiat money is generally issued by

Consider the following T-account for National City Bank: Assets Liabilities Reserves \ 10,000 Deposits \ 100,000 Loans \ 90,000 If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

If the required reserve ratio is 100 percent,could the Federal Reserve still change the money supply with open market operations? Explain whether they could or could not.

If households and firms decide to hold less of their money in checking account deposits and more in currency,then the money supply

A car dealer sells you a car today in exchange for money in the future.This illustrates which function of money?

If the bank of Waterloo receives a $10,000 deposit,and the reserve requirement is 10 percent,how much can the bank loan out? (Assume that before the deposit this bank is just meeting its legal reserve requirement.)

The main tool that the Federal Reserve uses to conduct monetary policy is

According to the U.S.Treasury

Table 16-1 Assets Liabilities Reserves +\ 4,000 Deposits +\ 4,000 -Refer to Table 16-1.Suppose a transaction changes a bank's balance sheet as indicated in the T-account,and the required reserve ratio is 10 percent.As a result of the transaction,the bank has excess reserves of

To decrease the money supply,the Federal Reserve could

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?

Describe the structure of the Fed's Open Market Committee (FOMC).What is this committee's primary responsibility?

Which is not one of the criteria necessary for a commodity to make a suitable medium of exchange?

Suppose that you decide that you no longer want to hold currency,and deposit all of your currency holdings to your checking account.What is the immediate or initial impact of this transaction on M1 and M2?

The primary tool the Federal Reserve uses to increase the money supply is

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 16: Money, banks, and the Federal Reserve System

Which of the following information about fiat money is false? Fiat money

Money will fail to serve as a medium of exchange if it ceases to be a store of value.

Your checking account balance is included in your bank's assets.

M1 includes

Fiat money is generally issued by

Consider the following T-account for National City Bank: Assets Liabilities Reserves \ 10,000 Deposits \ 100,000 Loans \ 90,000 If the required reserve ratio is lowered to 8 percent,how much can National City loan out?

If the required reserve ratio is 100 percent,could the Federal Reserve still change the money supply with open market operations? Explain whether they could or could not.

If households and firms decide to hold less of their money in checking account deposits and more in currency,then the money supply

A car dealer sells you a car today in exchange for money in the future.This illustrates which function of money?

If the bank of Waterloo receives a $10,000 deposit,and the reserve requirement is 10 percent,how much can the bank loan out? (Assume that before the deposit this bank is just meeting its legal reserve requirement.)

The main tool that the Federal Reserve uses to conduct monetary policy is

According to the U.S.Treasury

Table 16-1 Assets Liabilities Reserves +\ 4,000 Deposits +\ 4,000 -Refer to Table 16-1.Suppose a transaction changes a bank's balance sheet as indicated in the T-account,and the required reserve ratio is 10 percent.As a result of the transaction,the bank has excess reserves of

To decrease the money supply,the Federal Reserve could

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?

Describe the structure of the Fed's Open Market Committee (FOMC).What is this committee's primary responsibility?

Which is not one of the criteria necessary for a commodity to make a suitable medium of exchange?

Suppose that you decide that you no longer want to hold currency,and deposit all of your currency holdings to your checking account.What is the immediate or initial impact of this transaction on M1 and M2?

The primary tool the Federal Reserve uses to increase the money supply is

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters