Question 1

All of the following are elements in the structure of the Fed EXCEPT the

Accepted Answer

A)  Federal Open Market Committee. 
B)  Executive Council to the Governor. 
C)  12 Federal Reserve banks. 
D)  Board of Governors. 
E)  presidents of the 12 Federal Reserve banks. 
A)  Federal Open Market Committee. 
B)  Executive Council to the Governor. 
C)  12 Federal Reserve banks. 
D)  Board of Governors. 
E)  presidents of the 12 Federal Reserve banks.

Question 2

If the required reserve ratio is 15 percent, there is no currency drain, and banks loan all of their excess reserves, an increase in the monetary base of $20,000 leads to a total increase in the quantity of money of

Accepted Answer

A)  $3,000. 
B)  $20,000. 
C)  $133,333. 
D)  $200,000. 
E)  $300,000. 
A)  $3,000. 
B)  $20,000. 
C)  $133,333. 
D)  $200,000. 
E)  $300,000.

Question 3

The discount rate is the

Accepted Answer

A)  banks' real interest rate. 
B)  interest rate at which the Fed will loan reserves to commercial banks. 
C)  interest rate banks charge the Fed when the Fed borrows from the banks. 
D)  name of the interest rate banks charge their most credit-worthy borrowers. 
E)  the interest rate paid on U.S.government securities. 
A)  banks' real interest rate. 
B)  interest rate at which the Fed will loan reserves to commercial banks. 
C)  interest rate banks charge the Fed when the Fed borrows from the banks. 
D)  name of the interest rate banks charge their most credit-worthy borrowers. 
E)  the interest rate paid on U.S.government securities.

Question 4

What makes up M1?
 Is M1 larger or smaller than real GDP?

Accepted Answer

M1 is the sum of currency held by indivi

Question 5

The currency drain reduces the amount of

Accepted Answer

A)  reserves available to banks to make loans. 
B)  currency the Fed has outstanding in the economy. 
C)  currency available for banks to borrow from the Fed. 
D)  the monetary base. 
E)  open market operations the Fed can make. 
A)  reserves available to banks to make loans. 
B)  currency the Fed has outstanding in the economy. 
C)  currency available for banks to borrow from the Fed. 
D)  the monetary base. 
E)  open market operations the Fed can make.

Question 6

When the First Bank of Townsville makes a loan, it

Accepted Answer

A)  prints money. 
B)  borrows the money from the Fed. 
C)  creates a checkable deposit. 
D)  decreases the quantity of money. 
E)  increases its reserves. 
A)  prints money. 
B)  borrows the money from the Fed. 
C)  creates a checkable deposit. 
D)  decreases the quantity of money. 
E)  increases its reserves.

Question 7

If the currency drain is 0.2 and the desired reserve ratio is 0.03, the money multiplier is

Accepted Answer

A)  0.76. 
B)  6.67. 
C)  3.23. 
D)  4.46. 
E)  5.22. 
A)  0.76. 
B)  6.67. 
C)  3.23. 
D)  4.46. 
E)  5.22.

Question 8

The Federal Open Market Committee consists of

Accepted Answer

A)  12 members, all of whom are the presidents of Federal Reserve banks. 
B)  12 members, seven of whom are the members of the Board of Governors, four of whom are presidents of Federal Reserve banks, and the president of the United States. 
C)  12 members, seven of whom are the members of the Board of Governors and five of whom are presidents of Federal Reserve banks. 
D)  12 committees, all serving on the Board of Governors. 
E)  12 members, split evenly so that six of whom are members of the Board of Governors and six of whom are presidents of Federal Reserve banks. 
A)  12 members, all of whom are the presidents of Federal Reserve banks. 
B)  12 members, seven of whom are the members of the Board of Governors, four of whom are presidents of Federal Reserve banks, and the president of the United States. 
C)  12 members, seven of whom are the members of the Board of Governors and five of whom are presidents of Federal Reserve banks. 
D)  12 committees, all serving on the Board of Governors. 
E)  12 members, split evenly so that six of whom are members of the Board of Governors and six of whom are presidents of Federal Reserve banks.

Question 9

Which of the following are included in the M2 definition of money?

Accepted Answer

A)  currency outside of banks and checkable deposits 
B)  currency outside of banks and credit lines on credit cards 
C)  time deposits and the value of prime grade bonds 
D)  currency both inside and outside of banks 
E)  currency inside of banks and banks' reserves 
A)  currency outside of banks and checkable deposits 
B)  currency outside of banks and credit lines on credit cards 
C)  time deposits and the value of prime grade bonds 
D)  currency both inside and outside of banks 
E)  currency inside of banks and banks' reserves

Question 10

A currency drain is cash ________ and has ________ effect on the money multiplier.

Accepted Answer

A)  draining into the banks; no 
B)  draining into the banks; an 
C)  held outside the banks; an 
D)  held at the Fed; an 
E)  held as reserves; no 
A)  draining into the banks; no 
B)  draining into the banks; an 
C)  held outside the banks; an 
D)  held at the Fed; an 
E)  held as reserves; no

Question 11

Suppose the desired reserve ratio is 10 percent.If Urban Bank has total deposits of $1000 and total assets of $10,000, the amount of desired reserves is

Accepted Answer

A)  $100. 
B)  $900. 
C)  $1,000. 
D)  $9,000. 
E)  $1,100. 
A)  $100. 
B)  $900. 
C)  $1,000. 
D)  $9,000. 
E)  $1,100.

Question 12

Money market mutual funds

Accepted Answer

A)  are included in M2 but not M1. 
B)  are included in M1 but not M2. 
C)  are included in M1 and M2. 
D)  are the largest part of the monetary base. 
E)  None of the above are correct. 
A)  are included in M2 but not M1. 
B)  are included in M1 but not M2. 
C)  are included in M1 and M2. 
D)  are the largest part of the monetary base. 
E)  None of the above are correct.

Question 13

A barter system of payment is

Accepted Answer

A)  similar to a money system of payment because both require a double coincidence of wants. 
B)  similar to a money system of payment because both use one asset as a unit of account. 
C)  different from a money system of payment because the barter system is a better unit of account. 
D)  different from a money system of payment because money does not require a double coincidence of wants. 
E)  similar to a money system of payment because both are used as stores of value and units of account. 
A)  similar to a money system of payment because both require a double coincidence of wants. 
B)  similar to a money system of payment because both use one asset as a unit of account. 
C)  different from a money system of payment because the barter system is a better unit of account. 
D)  different from a money system of payment because money does not require a double coincidence of wants. 
E)  similar to a money system of payment because both are used as stores of value and units of account.

Question 14

Suppose the Fed conducts an open market operation in which it buys government securities from a commercial bank.Why is there a multiplier effect on the quantity of money?

Accepted Answer

When the Fed buys government securities

Question 15

Are the members of the Board of Governors of the Federal Reserve System elected officials?

Accepted Answer

No, the members are not electe

Question 16

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

Accepted Answer

A)  the M2 money multiplier fell from 9 to 5. 
B)  the M2 money multiplier more than doubled. 
C)  the monetary base decreased by 50 percent. 
D)  the ratio of currency to M2 deposits more than doubled. 
E)  the reserve requirement ratio increased. 
A)  the M2 money multiplier fell from 9 to 5. 
B)  the M2 money multiplier more than doubled. 
C)  the monetary base decreased by 50 percent. 
D)  the ratio of currency to M2 deposits more than doubled. 
E)  the reserve requirement ratio increased.

Question 17

The part of a commercial bank's reserves that are larger than desired are called

Accepted Answer

A)  additional reserves. 
B)  required reserves. 
C)  excess reserves. 
D)  nonrequired reserves. 
E)  unnecessary reserves. 
A)  additional reserves. 
B)  required reserves. 
C)  excess reserves. 
D)  nonrequired reserves. 
E)  unnecessary reserves.

Question 18

The amount of loans that a bank can create is limited by

Accepted Answer

A)  a law enacted by Congress. 
B)  the bank's excess reserves. 
C)  a directive from the Federal Reserve System, which takes into account the bank's financial stability. 
D)  the real interest rate. 
E)  the bank's government securities. 
A)  a law enacted by Congress. 
B)  the bank's excess reserves. 
C)  a directive from the Federal Reserve System, which takes into account the bank's financial stability. 
D)  the real interest rate. 
E)  the bank's government securities.

Question 19

Which of the following is the best example of money?

Accepted Answer

A)  phone card 
B)  checkable deposit 
C)  credit card 
D)  gold 
E)  share of Intel stock 
A)  phone card 
B)  checkable deposit 
C)  credit card 
D)  gold 
E)  share of Intel stock

Question 20

"By definition, all parts of M2 are money." Is the previous statement correct or not?
 Explain your answer.

Accepted Answer

The statement is incorrect.Many of the a

All of the following are elements in the structure of the Fed EXCEPT the

If the required reserve ratio is 15 percent, there is no currency drain, and banks loan all of their excess reserves, an increase in the monetary base of $20,000 leads to a total increase in the quantity of money of

The discount rate is the

What makes up M1? Is M1 larger or smaller than real GDP?

The currency drain reduces the amount of

When the First Bank of Townsville makes a loan, it

If the currency drain is 0.2 and the desired reserve ratio is 0.03, the money multiplier is

The Federal Open Market Committee consists of

Which of the following are included in the M2 definition of money?

A currency drain is cash and has effect on the money multiplier.

Suppose the desired reserve ratio is 10 percent.If Urban Bank has total deposits of $1000 and total assets of $10,000, the amount of desired reserves is

Money market mutual funds

A barter system of payment is

Suppose the Fed conducts an open market operation in which it buys government securities from a commercial bank.Why is there a multiplier effect on the quantity of money?

Are the members of the Board of Governors of the Federal Reserve System elected officials?

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

The part of a commercial bank's reserves that are larger than desired are called

The amount of loans that a bank can create is limited by

Which of the following is the best example of money?

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

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

All of the following are elements in the structure of the Fed EXCEPT the

If the required reserve ratio is 15 percent, there is no currency drain, and banks loan all of their excess reserves, an increase in the monetary base of $20,000 leads to a total increase in the quantity of money of

The discount rate is the

What makes up M1? Is M1 larger or smaller than real GDP?

The currency drain reduces the amount of

When the First Bank of Townsville makes a loan, it

If the currency drain is 0.2 and the desired reserve ratio is 0.03, the money multiplier is

The Federal Open Market Committee consists of

Which of the following are included in the M2 definition of money?

A currency drain is cash ________ and has ________ effect on the money multiplier.

Suppose the desired reserve ratio is 10 percent.If Urban Bank has total deposits of $1000 and total assets of $10,000, the amount of desired reserves is

Money market mutual funds

A barter system of payment is

Suppose the Fed conducts an open market operation in which it buys government securities from a commercial bank.Why is there a multiplier effect on the quantity of money?

Are the members of the Board of Governors of the Federal Reserve System elected officials?

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

The part of a commercial bank's reserves that are larger than desired are called

The amount of loans that a bank can create is limited by

Which of the following is the best example of money?

"By definition, all parts of M2 are money." Is the previous statement correct or not? Explain your answer.

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

A currency drain is cash and has effect on the money multiplier.