Question 1

The process of money creation by the banking system is limited, in part, by the

Accepted Answer

A)  number of banks. 
B)  desired reserve ratio. 
C)  number of depositors. 
D)  Comptroller of the Currency. 
E)  laws passed each year by the U.S.Congress. 
A)  number of banks. 
B)  desired reserve ratio. 
C)  number of depositors. 
D)  Comptroller of the Currency. 
E)  laws passed each year by the U.S.Congress.

Question 2

Suppose the currency drain is 20 percent and the desired reserve ratio is 10 percent.
a. What does the money multiplier equal?
b. If the Fed purchases $10 million of U.S.government securities, by how much will the quantity of money increase or decrease?

Accepted Answer

a. The money multiplier is 4.00.The mone

Question 3

Suppose the currency drain is 33.33 percent and the desired reserve ratio is 10 percent.The money multiplier equals

Accepted Answer

A)  4.27. 
B)  3.00. 
C)  3.08. 
D)  2.50. 
E)  6.67. 
A)  4.27. 
B)  3.00. 
C)  3.08. 
D)  2.50. 
E)  6.67.

Question 4

Excess reserves are the

Accepted Answer

A)  same as the required reserves. 
B)  amount of reserves the Fed requires banks to hold. 
C)  amount of reserves held over what is desired. 
D)  amount of reserves a bank holds at the Fed. 
E)  amount of reserves banks keep in their vaults. 
A)  same as the required reserves. 
B)  amount of reserves the Fed requires banks to hold. 
C)  amount of reserves held over what is desired. 
D)  amount of reserves a bank holds at the Fed. 
E)  amount of reserves banks keep in their vaults.

Question 5

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________.

Accepted Answer

A)  decreases; decreases; decrease 
B)  increases; do not change; increase 
C)  decreases; increases; does not change 
D)  do not change; increases; increase 
E)  increase; increase; increases 
A)  decreases; decreases; decrease 
B)  increases; do not change; increase 
C)  decreases; increases; does not change 
D)  do not change; increases; increase 
E)  increase; increase; increases

Question 6

An increase in the currency drain ________.

Accepted Answer

A)  increases the size of the money multiplier 
B)  decreases the size of the money multiplier 
C)  increases the deposits in all banks 
D)  decreases the size of the monetary base 
E)  increases the size of the monetary base 
A)  increases the size of the money multiplier 
B)  decreases the size of the money multiplier 
C)  increases the deposits in all banks 
D)  decreases the size of the monetary base 
E)  increases the size of the monetary base

Question 7

$$\begin{array} { l c } 
& \begin{array} { c } 
\text { Amount } \
\text { (dollars) }
\end{array} \
\hline \text { Checking deposits } & 600 \
\text { Savings deposits } & 1000 \
\text { Time deposits } & 1,500 \
\text { Loans } & 1,200 \
\text { Government securities } & 2,000 \
\text { Outstanding credit card balances } & 400 \
\text { Currency in vault } & 10 \
\text { Deposits in reserve account at the Fed } & 20
\end{array}$$
-The above table gives assets and deposits for a (small) bank.The bank's deposits that are part of M1 are equal to

Accepted Answer

A)  $1,600. 
B)  $600. 
C)  $3,100. 
D)  $3,130. 
E)  $30. 
A)  $1,600. 
B)  $600. 
C)  $3,100. 
D)  $3,130. 
E)  $30.

Question 8

The main policy making body of the Federal Reserve System is the

Accepted Answer

A)  Board of Governors of the Federal Reserve System. 
B)  Board of Presidents of the Federal Reserve banks. 
C)  Federal Open Market Committee. 
D)  Board of Advisors. 
E)  Federal Monetary Conditions Board. 
A)  Board of Governors of the Federal Reserve System. 
B)  Board of Presidents of the Federal Reserve banks. 
C)  Federal Open Market Committee. 
D)  Board of Advisors. 
E)  Federal Monetary Conditions Board.

Question 9

When the Fed purchases government securities,

Accepted Answer

A)  excess reserves in the banking system increase, leading to more loans being made. 
B)  required reserves in the banking system increase, leading to more loans being made. 
C)  excess reserves in the banking system decrease, leading to fewer loans being made. 
D)  required reserves in the banking system decrease, leading to fewer loans being made. 
E)  the monetary base does not change. 
A)  excess reserves in the banking system increase, leading to more loans being made. 
B)  required reserves in the banking system increase, leading to more loans being made. 
C)  excess reserves in the banking system decrease, leading to fewer loans being made. 
D)  required reserves in the banking system decrease, leading to fewer loans being made. 
E)  the monetary base does not change.

Question 10

A common trait of money through history and across cultures is that money

Accepted Answer

A)  always had mystical properties. 
B)  was always issued by the local government. 
C)  was always based on gold or some other precious commodity. 
D)  was always generally accepted as a means of payment. 
E)  was always fiat money. 
A)  always had mystical properties. 
B)  was always issued by the local government. 
C)  was always based on gold or some other precious commodity. 
D)  was always generally accepted as a means of payment. 
E)  was always fiat money.

Question 11

The required reserve ratio is the

Accepted Answer

A)  amount of excess reserves the bank holds just in case. 
B)  total amount of reserves the bank holds in its vaults. 
C)  total amount of reserves the bank holds at the Fed. 
D)  amount of reserves banks are required by the Fed to be held as a percentage of the bank's deposits. 
E)  amount of reserves banks are required by the Fed to be held as a percentage of the bank's loans. 
A)  amount of excess reserves the bank holds just in case. 
B)  total amount of reserves the bank holds in its vaults. 
C)  total amount of reserves the bank holds at the Fed. 
D)  amount of reserves banks are required by the Fed to be held as a percentage of the bank's deposits. 
E)  amount of reserves banks are required by the Fed to be held as a percentage of the bank's loans.

Question 12

"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

Accepted Answer

The statement is incorrect.Ban

Question 13

The president of which Federal Reserve bank is always a voting member of the FOMC?
 Why?

Accepted Answer

The president of the New York Federal Re

Question 14

Which statement is most correct about the types of deposits a commercial bank can accept?

Accepted Answer

A)  A commercial bank accepts checking, savings and time deposits. 
B)  A commercial bank can only accept checking deposits from commercial enterprises. 
C)  A commercial bank accepts savings and time deposits, but not checking deposits. 
D)  A commercial bank does not accept deposits but sells shares. 
E)  A commercial bank can accept loan deposits, reserve deposits, and checkable deposits. 
A)  A commercial bank accepts checking, savings and time deposits. 
B)  A commercial bank can only accept checking deposits from commercial enterprises. 
C)  A commercial bank accepts savings and time deposits, but not checking deposits. 
D)  A commercial bank does not accept deposits but sells shares. 
E)  A commercial bank can accept loan deposits, reserve deposits, and checkable deposits.

Question 15

Explain what is included in M1 and M2.Is all of M1 money?
 Is all of M2 money?

Accepted Answer

M1 is equal to the sum of currency held

Question 16

The Fed purchases $100,000 of U.S.government securities from One Bank.Assuming the desired reserve ratio is 10 percent, banks loan all excess reserves, and the currency drain is 20 percent, how much does the quantity of money increase?

Accepted Answer

The quantity of money increases by (mone

Question 17

When a commercial bank receives a deposit, it must keep part of the deposit as cash reserves to satisfy its

Accepted Answer

A)  securities and loans. 
B)  required reserves. 
C)  excess reserves. 
D)  interbank loans. 
E)  loan requirements. 
A)  securities and loans. 
B)  required reserves. 
C)  excess reserves. 
D)  interbank loans. 
E)  loan requirements.

Question 18

Which of the following reduces the money multiplier?

Accepted Answer

A)  banks loan all their excess reserves 
B)  bank customers hold some of the loan proceeds as currency outside the banking system 
C)  the Fed reduces the required reserve ratio 
D)  banks impose a currency drain on bank customers 
E)  the Fed sells U.S.government securities 
A)  banks loan all their excess reserves 
B)  bank customers hold some of the loan proceeds as currency outside the banking system 
C)  the Fed reduces the required reserve ratio 
D)  banks impose a currency drain on bank customers 
E)  the Fed sells U.S.government securities

Question 19

Who regulates the quantity of money circulating in the economy?

Accepted Answer

A)  the Federal Reserve 
B)  the banking system 
C)  the U.S.Congress 
D)  the President of the United States 
E)  the U.S.Congress and the President share the control 
A)  the Federal Reserve 
B)  the banking system 
C)  the U.S.Congress 
D)  the President of the United States 
E)  the U.S.Congress and the President share the control

Question 20

If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

Accepted Answer

All of the assets me

The process of money creation by the banking system is limited, in part, by the

Suppose the currency drain is 20 percent and the desired reserve ratio is 10 percent. a. What does the money multiplier equal? b. If the Fed purchases $10 million of U.S.government securities, by how much will the quantity of money increase or decrease?

Suppose the currency drain is 33.33 percent and the desired reserve ratio is 10 percent.The money multiplier equals

Excess reserves are the

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves , bank deposits , and the quantity of money .

An increase in the currency drain ________.

The main policy making body of the Federal Reserve System is the

When the Fed purchases government securities,

A common trait of money through history and across cultures is that money

The required reserve ratio is the

"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

The president of which Federal Reserve bank is always a voting member of the FOMC? Why?

Which statement is most correct about the types of deposits a commercial bank can accept?

Explain what is included in M1 and M2.Is all of M1 money? Is all of M2 money?

The Fed purchases $100,000 of U.S.government securities from One Bank.Assuming the desired reserve ratio is 10 percent, banks loan all excess reserves, and the currency drain is 20 percent, how much does the quantity of money increase?

When a commercial bank receives a deposit, it must keep part of the deposit as cash reserves to satisfy its

Which of the following reduces the money multiplier?

Who regulates the quantity of money circulating in the economy?

If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 11: The Monetary System

The process of money creation by the banking system is limited, in part, by the

Suppose the currency drain is 20 percent and the desired reserve ratio is 10 percent. a. What does the money multiplier equal? b. If the Fed purchases $10 million of U.S.government securities, by how much will the quantity of money increase or decrease?

Suppose the currency drain is 33.33 percent and the desired reserve ratio is 10 percent.The money multiplier equals

Excess reserves are the

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________.

An increase in the currency drain ________.

The main policy making body of the Federal Reserve System is the

When the Fed purchases government securities,

A common trait of money through history and across cultures is that money

The required reserve ratio is the

"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

The president of which Federal Reserve bank is always a voting member of the FOMC? Why?

Which statement is most correct about the types of deposits a commercial bank can accept?

Explain what is included in M1 and M2.Is all of M1 money? Is all of M2 money?

The Fed purchases $100,000 of U.S.government securities from One Bank.Assuming the desired reserve ratio is 10 percent, banks loan all excess reserves, and the currency drain is 20 percent, how much does the quantity of money increase?

When a commercial bank receives a deposit, it must keep part of the deposit as cash reserves to satisfy its

Which of the following reduces the money multiplier?

Who regulates the quantity of money circulating in the economy?

If you hold $25 in cash, have $150 in a checking account, and have $250 in a savings account, how much of M2 do you have?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves , bank deposits , and the quantity of money .