Question 1

Which of the following financial institutions does NOT have to meet minimum reserve ratios?
i. the Fed
ii. commercial banks
iii. credit unions

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii

Question 2

Open market operations are when the Fed buys or sells

Accepted Answer

A)  government securities from the government. 
B)  corporate securities from banks or some other business. 
C)  government securities from banks or some other business. 
D)  corporate securities from the government. 
E)  gold. 
A)  government securities from the government. 
B)  corporate securities from banks or some other business. 
C)  government securities from banks or some other business. 
D)  corporate securities from the government. 
E)  gold.

Question 3

A bank has checking deposits of $400, saving deposits of $900, time deposits of $900, loans of $950, government securities of $900, outstanding credit card balances of $400, currency in its vault of $40, and deposits in its reserve account at the Fed of $40.
a. What is the amount of this bank's deposits that are in M1?
b. What is the amount of this bank's deposits that are in M2?
c. What is the amount of this bank's reserves?

Accepted Answer

a. The only deposit that is in M1 is the

Question 4

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30.Assume the desired reserve ratio is 20 percent.
a. What are the bank's assets and what are its liabilities?
b. How much does the bank have in excess reserves?
c. What can the bank do with its excess reserves that will affect the quantity of money?

Accepted Answer

a. Assets are reserves, loans, and secur

Question 5

If currency outside of banks is $800 billion; traveler's checks are $10 billion; checkable deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market funds and other deposits are $800 billion, then M1 equals ________ billion.

Accepted Answer

A)  $7,310 
B)  $5,800 
C)  $2,510 
D)  $1,510 
E)  $710 
A)  $7,310 
B)  $5,800 
C)  $2,510 
D)  $1,510 
E)  $710

Question 6

Money is any commodity or token that

Accepted Answer

A)  is generally accepted as a means of payment. 
B)  is backed up and controlled by the government. 
C)  is naturally accepted by households to accumulate wealth. 
D)  does not change in value over time. 
E)  is backed by gold. 
A)  is generally accepted as a means of payment. 
B)  is backed up and controlled by the government. 
C)  is naturally accepted by households to accumulate wealth. 
D)  does not change in value over time. 
E)  is backed by gold.

Question 7

Credit cards are

Accepted Answer

A)  a form of money used to make purchases. 
B)  a special ID card that is not money. 
C)  a special ID card that is the same as money. 
D)  a form of money that is not generally accepted. 
E)  included in the M1 measure of money. 
A)  a form of money used to make purchases. 
B)  a special ID card that is not money. 
C)  a special ID card that is the same as money. 
D)  a form of money that is not generally accepted. 
E)  included in the M1 measure of money.

Question 8

Which of the following counts as part of M1?

Accepted Answer

A)  $5,000 worth of gold 
B)  $5,000 worth of government bonds 
C)  $5,000 in a checking account 
D)  $5,000 credit line on a credit card 
E)  $5,000 of real estate 
A)  $5,000 worth of gold 
B)  $5,000 worth of government bonds 
C)  $5,000 in a checking account 
D)  $5,000 credit line on a credit card 
E)  $5,000 of real estate

Question 9

If the Federal Reserve ________ the required reserve ratio, the interest rate ________.

Accepted Answer

A)  lowers; rises 
B)  lowers; falls 
C)  raises; does not change 
D)  raises; falls 
E)  Not enough information is given because the effect depends also on the size of the monetary base. 
A)  lowers; rises 
B)  lowers; falls 
C)  raises; does not change 
D)  raises; falls 
E)  Not enough information is given because the effect depends also on the size of the monetary base.

Question 10

If the Fed increases the discount rate,

Accepted Answer

A)  banks pay a higher interest rate if they borrow from the Fed. 
B)  banks pay a lower interest rate if they borrow from the Fed. 
C)  banks' assets increase. 
D)  banks find it more profitable to increase their loans to businesses. 
E)  banks increase their lending to the Fed. 
A)  banks pay a higher interest rate if they borrow from the Fed. 
B)  banks pay a lower interest rate if they borrow from the Fed. 
C)  banks' assets increase. 
D)  banks find it more profitable to increase their loans to businesses. 
E)  banks increase their lending to the Fed.

Question 11

If Bulge Bank has a desired reserve ratio of 10 percent, loans of $25,000, deposits of $100,000, vault cash of $10,000, and reserves at the Fed of $65,000, then the bank

Accepted Answer

A)  has no remaining capacity to make loans. 
B)  does not have enough reserves to meet its requirement. 
C)  has excess reserves of $65,000. 
D)  has excess reserves of $55,000. 
E)  has excess reserves of $75,000. 
A)  has no remaining capacity to make loans. 
B)  does not have enough reserves to meet its requirement. 
C)  has excess reserves of $65,000. 
D)  has excess reserves of $55,000. 
E)  has excess reserves of $75,000.

Question 12

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 20 percent and the currency drain is 5 percent, the bank can loan a maximum of

Accepted Answer

A)  $75,000. 
B)  $80,000. 
C)  $100,000. 
D)  $95,000. 
E)  $85,000. 
A)  $75,000. 
B)  $80,000. 
C)  $100,000. 
D)  $95,000. 
E)  $85,000.

Question 13

Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero.If the Fed sells $100 million of U.S.government securities to Boise Bank, the monetary base increases by

Accepted Answer

A)  $1 million. 
B)  $10 million. 
C)  $100 million. 
D)  $1,000 million. 
E)  $90 million. 
A)  $1 million. 
B)  $10 million. 
C)  $100 million. 
D)  $1,000 million. 
E)  $90 million.

Question 14

A commercial bank is defined as

Accepted Answer

A)  any institution that accepts deposits. 
B)  a firm that is chartered to accept deposits and make loans. 
C)  the institution that sets regulations for commercial activities. 
D)  a firm that obtains funds by selling shares and then buys U.S.Treasury bills. 
E)  any institution that makes loans. 
A)  any institution that accepts deposits. 
B)  a firm that is chartered to accept deposits and make loans. 
C)  the institution that sets regulations for commercial activities. 
D)  a firm that obtains funds by selling shares and then buys U.S.Treasury bills. 
E)  any institution that makes loans.

Question 15

What is a problem with barter that makes it so difficult to use?

Accepted Answer

A)  Individuals have to produce something to trade with. 
B)  Barter requires a double coincidence of wants. 
C)  Barter is very efficient but illegal because it avoids taxation. 
D)  Barter requires use of only fiat money. 
E)  Barter omits the store of value role for money. 
A)  Individuals have to produce something to trade with. 
B)  Barter requires a double coincidence of wants. 
C)  Barter is very efficient but illegal because it avoids taxation. 
D)  Barter requires use of only fiat money. 
E)  Barter omits the store of value role for money.

Question 16

When we use money to purchase goods and services, we are using money as a

Accepted Answer

A)  unit of account. 
B)  reserve of wealth. 
C)  medium of exchange. 
D)  store of value. 
E)  bartering tool. 
A)  unit of account. 
B)  reserve of wealth. 
C)  medium of exchange. 
D)  store of value. 
E)  bartering tool.

Question 17

The Federal Reserve is the nation's central bank.Therefore, does it provide banking services to individual citizens?

Accepted Answer

No, because it is the nation's

Question 18

When we keep part of our wealth in a bank checking account, we are using money as a

Accepted Answer

A)  store of value. 
B)  medium of exchange. 
C)  barter token. 
D)  unit of account. 
E)  unit of currency. 
A)  store of value. 
B)  medium of exchange. 
C)  barter token. 
D)  unit of account. 
E)  unit of currency.

Question 19

Barter is

Accepted Answer

A)  the exchange of goods and services for money. 
B)  the pricing of goods and services with one agreed upon standard. 
C)  the exchange of goods and services directly for other goods and services. 
D)  a generally accepted means of payment. 
E)  storing money for use at a later date. 
A)  the exchange of goods and services for money. 
B)  the pricing of goods and services with one agreed upon standard. 
C)  the exchange of goods and services directly for other goods and services. 
D)  a generally accepted means of payment. 
E)  storing money for use at a later date.

Question 20

If the monetary base does not change and the desired reserve ratio increases, the money multiplier ________ and the quantity of money ________.

Accepted Answer

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

Which of the following financial institutions does NOT have to meet minimum reserve ratios? i. the Fed ii. commercial banks iii. credit unions

Open market operations are when the Fed buys or sells

Money is any commodity or token that

Credit cards are

Which of the following counts as part of M1?

If the Federal Reserve the required reserve ratio, the interest rate .

If the Fed increases the discount rate,

If Bulge Bank has a desired reserve ratio of 10 percent, loans of $25,000, deposits of $100,000, vault cash of $10,000, and reserves at the Fed of $65,000, then the bank

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 20 percent and the currency drain is 5 percent, the bank can loan a maximum of

Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero.If the Fed sells $100 million of U.S.government securities to Boise Bank, the monetary base increases by

A commercial bank is defined as

What is a problem with barter that makes it so difficult to use?

When we use money to purchase goods and services, we are using money as a

The Federal Reserve is the nation's central bank.Therefore, does it provide banking services to individual citizens?

When we keep part of our wealth in a bank checking account, we are using money as a

Barter is

If the monetary base does not change and the desired reserve ratio increases, the money multiplier and the quantity of money .

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

Which of the following financial institutions does NOT have to meet minimum reserve ratios? i. the Fed ii. commercial banks iii. credit unions

Open market operations are when the Fed buys or sells

Money is any commodity or token that

Credit cards are

Which of the following counts as part of M1?

If the Federal Reserve ________ the required reserve ratio, the interest rate ________.

If the Fed increases the discount rate,

If Bulge Bank has a desired reserve ratio of 10 percent, loans of $25,000, deposits of $100,000, vault cash of $10,000, and reserves at the Fed of $65,000, then the bank

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 20 percent and the currency drain is 5 percent, the bank can loan a maximum of

Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero.If the Fed sells $100 million of U.S.government securities to Boise Bank, the monetary base increases by

A commercial bank is defined as

What is a problem with barter that makes it so difficult to use?

When we use money to purchase goods and services, we are using money as a

The Federal Reserve is the nation's central bank.Therefore, does it provide banking services to individual citizens?

When we keep part of our wealth in a bank checking account, we are using money as a

Barter is

If the monetary base does not change and the desired reserve ratio increases, the money multiplier ________ and the quantity of money ________.

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

If the Federal Reserve the required reserve ratio, the interest rate .

If the monetary base does not change and the desired reserve ratio increases, the money multiplier and the quantity of money .