Question 1

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Accepted Answer

The Federal Reserve, or Fed, is the U.S.

Question 2

Explain what is meant by the phrase a bank's "balancing act."

Accepted Answer

Banks accept deposits and make loans wit

Question 3

The Board of Governors of the Federal Reserve is

Accepted Answer

A)  the collection of the 12 presidents of the Federal Reserve banks. 
B)  a seven-member board, each one serving a 14-year term. 
C)  a 14-member board, each one serving a seven-year term. 
D)  the main policy-making body of the Fed. 
E)  a seven-member board, each one serving a one-year term. 
A)  the collection of the 12 presidents of the Federal Reserve banks. 
B)  a seven-member board, each one serving a 14-year term. 
C)  a 14-member board, each one serving a seven-year term. 
D)  the main policy-making body of the Fed. 
E)  a seven-member board, each one serving a one-year term.

Question 4

The Fed purchases $1 million of U.S.government securities from First Bank.The desired reserve ratio is 10 percent, the currency drain is zero, and banks loan all excess reserves.The Fed's purchase increases First Bank's excess reserves by how much?

Accepted Answer

A)  $900,000 
B)  $1,000,000 
C)  $1,100,000 
D)  $10,000,000 
E)  $100,000 
A)  $900,000 
B)  $1,000,000 
C)  $1,100,000 
D)  $10,000,000 
E)  $100,000

Question 5

Fiat money means

Accepted Answer

A)  Italian currency. 
B)  money's value does not change. 
C)  the government has decreed that something is money. 
D)  the money can be converted into gold. 
E)  only currency counts as money. 
A)  Italian currency. 
B)  money's value does not change. 
C)  the government has decreed that something is money. 
D)  the money can be converted into gold. 
E)  only currency counts as money.

Question 6

In the United States between 2007 and 2009,

Accepted Answer

A)  the M1 money multiplier steadily increased. 
B)  the M2 money multiplier stayed fairly constant and then fell sharply. 
C)  the M2 money multiplier steadily decreased. 
D)  changes in the currency drain and required reserve ratio did not affect the money multiplier. 
E)  the M2 money multiplier decreased throughout 2007 and then increased. 
A)  the M1 money multiplier steadily increased. 
B)  the M2 money multiplier stayed fairly constant and then fell sharply. 
C)  the M2 money multiplier steadily decreased. 
D)  changes in the currency drain and required reserve ratio did not affect the money multiplier. 
E)  the M2 money multiplier decreased throughout 2007 and then increased.

Question 7

In response to the financial crisis in 2008, the Fed created which of the following policy tools?

Accepted Answer

A)  Quantitative easing. 
B)  The required reserve ratio. 
C)  The discount rate. 
D)  The federal funds rate. 
E)  Open market operations. 
A)  Quantitative easing. 
B)  The required reserve ratio. 
C)  The discount rate. 
D)  The federal funds rate. 
E)  Open market operations.

Question 8

The largest category of commercial banks' assets is

Accepted Answer

A)  loans. 
B)  reserves. 
C)  currency. 
D)  securities. 
E)  checkable deposits. 
A)  loans. 
B)  reserves. 
C)  currency. 
D)  securities. 
E)  checkable deposits.

Question 9

Suppose you use your debit card to buy soda from a soda machine. Which of the following is true regarding the transaction?

Accepted Answer

A)  The debit card is not money; it's only an instruction to make a loan. 
B)  The debit card is money; your use reflects the exchange of a good. 
C)  The debit card is not money; its use is only a tool to cause money to move from your account. 
D)  Your use makes the debit card money as funds are transferred between your and the machine owner. 
E)  Using the debit card is like using a check and is therefore, money. 
A)  The debit card is not money; it's only an instruction to make a loan. 
B)  The debit card is money; your use reflects the exchange of a good. 
C)  The debit card is not money; its use is only a tool to cause money to move from your account. 
D)  Your use makes the debit card money as funds are transferred between your and the machine owner. 
E)  Using the debit card is like using a check and is therefore, money.

Question 10

Banks can make loans as long as they have

Accepted Answer

A)  deposits. 
B)  reserves. 
C)  required reserves. 
D)  excess reserves. 
E)  excess government securities. 
A)  deposits. 
B)  reserves. 
C)  required reserves. 
D)  excess reserves. 
E)  excess government securities.

Question 11

Suppose the currency drain is 25 percent and the desired reserve ratio is 20 percent.The money multiplier equals

Accepted Answer

A)  4.00. 
B)  3.00. 
C)  2.78. 
D)  2.00. 
E)  5.42. 
A)  4.00. 
B)  3.00. 
C)  2.78. 
D)  2.00. 
E)  5.42.

Question 12

If Joe deposits $2,000 in his bank and the desired reserve ratio is 10 percent, what is the amount of new loans that the bank can make?

Accepted Answer

A)  $2,000 
B)  $200 
C)  $1,800 
D)  $1,900 
E)  $2,200 
A)  $2,000 
B)  $200 
C)  $1,800 
D)  $1,900 
E)  $2,200

Question 13

The Board of Governors has

Accepted Answer

A)  seven members appointed to 14-year terms. 
B)  14 members appointed to 10-year terms. 
C)  four members appointed to seven-year terms. 
D)  14 members appointed to four-year terms. 
E)  seven members appointed for life. 
A)  seven members appointed to 14-year terms. 
B)  14 members appointed to 10-year terms. 
C)  four members appointed to seven-year terms. 
D)  14 members appointed to four-year terms. 
E)  seven members appointed for life.

Question 14

Which of the following describe the "invention" of banking?

Accepted Answer

A)  The British Empire created a banking system to fund its exploration of the New World. 
B)  Members of the New York Stock Exchange founded the Bank of America in the 1700s. 
C)  Goldsmiths in the sixteenth century issued gold receipts which entitled its owners to reclaim their gold on demand. 
D)  Clergy in the Renaissance created the banking system to help further the growth of the church. 
E)  The United States government founded the Federal Reserve in 1913. 
A)  The British Empire created a banking system to fund its exploration of the New World. 
B)  Members of the New York Stock Exchange founded the Bank of America in the 1700s. 
C)  Goldsmiths in the sixteenth century issued gold receipts which entitled its owners to reclaim their gold on demand. 
D)  Clergy in the Renaissance created the banking system to help further the growth of the church. 
E)  The United States government founded the Federal Reserve in 1913.

Question 15

If a single bank has $25,000 in excess reserves and the desired reserve ratio is 20 percent, what is the maximum this bank can loan?

Accepted Answer

A)  $5,000 
B)  $20,000 
C)  $25,000 
D)  $125,000 
E)  $30,000 
A)  $5,000 
B)  $20,000 
C)  $25,000 
D)  $125,000 
E)  $30,000

Question 16

Credit cards, debit cards, and e-checks are

Accepted Answer

A)  always counted as money. 
B)  not money. 
C)  sometimes counted as money, depending on how they are used. 
D)  sometimes counted as money, depending on what is purchased. 
E)  sometimes counted as money, depending on what measure of money is being used. 
A)  always counted as money. 
B)  not money. 
C)  sometimes counted as money, depending on how they are used. 
D)  sometimes counted as money, depending on what is purchased. 
E)  sometimes counted as money, depending on what measure of money is being used.

Question 17

In order for any given commodity to be considered money, it has to

Accepted Answer

A)  have some intrinsic value. 
B)  be generally acceptable as a means of payment. 
C)  be issued and controlled by some governmental institution. 
D)  be convertible into gold or silver. 
E)  be used in barter transactions. 
A)  have some intrinsic value. 
B)  be generally acceptable as a means of payment. 
C)  be issued and controlled by some governmental institution. 
D)  be convertible into gold or silver. 
E)  be used in barter transactions.

Question 18

Conducting the nation's monetary policy is the duty of the

Accepted Answer

A)  Department of Commerce. 
B)  U.S.Treasury department. 
C)  Federal Reserve System. 
D)  Federation of Banks. 
E)  Federal Bank Supervisor. 
A)  Department of Commerce. 
B)  U.S.Treasury department. 
C)  Federal Reserve System. 
D)  Federation of Banks. 
E)  Federal Bank Supervisor.

Question 19

In December 2009, currency was $400 billion, traveler's checks were $5 billion; checkable deposits owned by individuals and businesses were $600 billion, saving deposits were $2,00 billion, time deposits were $1,500 billion; and money market funds were $1,200 billion.What was the M1 in December 2009?

Accepted Answer

A)  M1 = $405 billion 
B)  M1 = $1,005 billion 
C)  M1 = $3,005 billion 
D)  M1 = $3500 billion 
E)  M1 = $3505 billion 
A)  M1 = $405 billion 
B)  M1 = $1,005 billion 
C)  M1 = $3,005 billion 
D)  M1 = $3500 billion 
E)  M1 = $3505 billion

Question 20

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

Accepted Answer

A)  commercial bank. 
B)  thrift institution. 
C)  central bank. 
D)  money market fund. 
E)  mint. 
A)  commercial bank. 
B)  thrift institution. 
C)  central bank. 
D)  money market fund. 
E)  mint.

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Explain what is meant by the phrase a bank's "balancing act."

The Board of Governors of the Federal Reserve is

The Fed purchases $1 million of U.S.government securities from First Bank.The desired reserve ratio is 10 percent, the currency drain is zero, and banks loan all excess reserves.The Fed's purchase increases First Bank's excess reserves by how much?

Fiat money means

In the United States between 2007 and 2009,

In response to the financial crisis in 2008, the Fed created which of the following policy tools?

The largest category of commercial banks' assets is

Suppose you use your debit card to buy soda from a soda machine. Which of the following is true regarding the transaction?

Banks can make loans as long as they have

Suppose the currency drain is 25 percent and the desired reserve ratio is 20 percent.The money multiplier equals

If Joe deposits $2,000 in his bank and the desired reserve ratio is 10 percent, what is the amount of new loans that the bank can make?

The Board of Governors has

Which of the following describe the "invention" of banking?

If a single bank has $25,000 in excess reserves and the desired reserve ratio is 20 percent, what is the maximum this bank can loan?

Credit cards, debit cards, and e-checks are

In order for any given commodity to be considered money, it has to

Conducting the nation's monetary policy is the duty of the

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

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

Briefly describe the Federal Reserve System, how it is governed, and its roles in the economy.

Explain what is meant by the phrase a bank's "balancing act."

The Board of Governors of the Federal Reserve is

The Fed purchases $1 million of U.S.government securities from First Bank.The desired reserve ratio is 10 percent, the currency drain is zero, and banks loan all excess reserves.The Fed's purchase increases First Bank's excess reserves by how much?

Fiat money means

In the United States between 2007 and 2009,

In response to the financial crisis in 2008, the Fed created which of the following policy tools?

The largest category of commercial banks' assets is

Suppose you use your debit card to buy soda from a soda machine. Which of the following is true regarding the transaction?

Banks can make loans as long as they have

Suppose the currency drain is 25 percent and the desired reserve ratio is 20 percent.The money multiplier equals

If Joe deposits $2,000 in his bank and the desired reserve ratio is 10 percent, what is the amount of new loans that the bank can make?

The Board of Governors has

Which of the following describe the "invention" of banking?

If a single bank has $25,000 in excess reserves and the desired reserve ratio is 20 percent, what is the maximum this bank can loan?

Credit cards, debit cards, and e-checks are

In order for any given commodity to be considered money, it has to

Conducting the nation's monetary policy is the duty of the

A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a

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