Question 1

When a bank receives deposits,

Accepted Answer

A)  it must hold the entire amount as reserves in case of withdrawal. 
B)  the Fed requires it to hold only a small percentage as reserves. 
C)  it and it alone decides how much it will hold as reserves. 
D)  its liabilities increase in amount but its assets do not change. 
E)  its assets increase in amount but its liabilities do not change. 
A)  it must hold the entire amount as reserves in case of withdrawal. 
B)  the Fed requires it to hold only a small percentage as reserves. 
C)  it and it alone decides how much it will hold as reserves. 
D)  its liabilities increase in amount but its assets do not change. 
E)  its assets increase in amount but its liabilities do not change.

Question 2

Banks generally earn the highest interest rate

Accepted Answer

A)  on service charges on individual's checking accounts. 
B)  by making loans to business firms. 
C)  by making mortgage loans to individuals. 
D)  by making credit card loans. 
E)  by buying government securities. 
A)  on service charges on individual's checking accounts. 
B)  by making loans to business firms. 
C)  by making mortgage loans to individuals. 
D)  by making credit card loans. 
E)  by buying government securities.

Question 3

Banks create money by

Accepted Answer

A)  printing currency. 
B)  asking the Fed to print more currency. 
C)  lending to the Fed. 
D)  making loans. 
E)  buying government securities. 
A)  printing currency. 
B)  asking the Fed to print more currency. 
C)  lending to the Fed. 
D)  making loans. 
E)  buying government securities.

Question 4

The Fed conducts an open market operation and increases a bank's excess reserves by $2,000.Explain the first five rounds of the money creation process if the desired reserve ratio is 25 percent and if people keep no currency outside of the banking system.

Accepted Answer

In round one, the bank gains $2,000 of r

Question 5

The medium of exchange is defined as

Accepted Answer

A)  barter. 
B)  the exchange of goods and services directly for goods and services. 
C)  an object that is accepted in return for goods and services. 
D)  credit cards. 
E)  an item that can be stored and hold its value over time. 
A)  barter. 
B)  the exchange of goods and services directly for goods and services. 
C)  an object that is accepted in return for goods and services. 
D)  credit cards. 
E)  an item that can be stored and hold its value over time.

Question 6

The "double coincidence of wants" is

Accepted Answer

A)  what is needed to use money. 
B)  eliminated with the use of money. 
C)  eliminated when we barter instead of using money. 
D)  how value is stored when we transact with money. 
E)  money's role as a unit of account. 
A)  what is needed to use money. 
B)  eliminated with the use of money. 
C)  eliminated when we barter instead of using money. 
D)  how value is stored when we transact with money. 
E)  money's role as a unit of account.

Question 7

Are credit cards or debit cards money?
 Explain your answer.

Accepted Answer

Neither credit cards nor debit cards are

Question 8

When the Fed ________, the quantity of banks' reserves decreases.

Accepted Answer

A)  hikes taxes 
B)  buys government securities 
C)  sells government securities 
D)  lowers the required reserve ratio 
E)  raises the required reserve ratio 
A)  hikes taxes 
B)  buys government securities 
C)  sells government securities 
D)  lowers the required reserve ratio 
E)  raises the required reserve ratio

Question 9

When you use currency to buy lunch, money is performing which function?

Accepted Answer

A)  Medium of exchange. 
B)  Unit of purchase. 
C)  Store of value. 
D)  Barter token. 
E)  Unit of currency. 
A)  Medium of exchange. 
B)  Unit of purchase. 
C)  Store of value. 
D)  Barter token. 
E)  Unit of currency.

Question 10

Which of the following is money?

Accepted Answer

A)  debit cards 
B)  e-checks 
C)  credit cards 
D)  checkable deposits 
E)  checks 
A)  debit cards 
B)  e-checks 
C)  credit cards 
D)  checkable deposits 
E)  checks

Question 11

A commercial bank's reserves are equal to the amount of

Accepted Answer

A)  the bank's deposits. 
B)  the bank's government securities. 
C)  the bank's loans. 
D)  currency in the bank's vault plus its reserve account at a Federal Reserve Bank. 
E)  only its currency in its vault. 
A)  the bank's deposits. 
B)  the bank's government securities. 
C)  the bank's loans. 
D)  currency in the bank's vault plus its reserve account at a Federal Reserve Bank. 
E)  only its currency in its vault.

Question 12

The Fed buys $25,000 of government securities.The desired reserve ratio is 20 percent and the currency drain is zero.What will be the change in the quantity of money?

Accepted Answer

A)  $5,000 
B)  $20,000 
C)  $25,000 
D)  $125,000 
E)  $50,000 
A)  $5,000 
B)  $20,000 
C)  $25,000 
D)  $125,000 
E)  $50,000

Question 13

If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

Accepted Answer

You have $200.75 of M1, compri

Question 14

The discount rate is the

Accepted Answer

A)  interest rate paid when a bank borrows reserves from another bank. 
B)  interest rate paid when a commercial bank borrows reserves from the Fed. 
C)  reduction in the interest rate given to the bank's best customers. 
D)  another name for the long-term interest rate. 
E)  interest rate the Fed pays banks for the reserves the banks keep at the Fed. 
A)  interest rate paid when a bank borrows reserves from another bank. 
B)  interest rate paid when a commercial bank borrows reserves from the Fed. 
C)  reduction in the interest rate given to the bank's best customers. 
D)  another name for the long-term interest rate. 
E)  interest rate the Fed pays banks for the reserves the banks keep at the Fed.

Question 15

A bank has deposits of $100,000, reserves of $20,000, and loans of $80,000.If the desired reserve ratio is 10 percent, then its excess reserves are

Accepted Answer

A)  0. 
B)  $8,000. 
C)  $10,000. 
D)  $2,000. 
E)  $12,000. 
A)  0. 
B)  $8,000. 
C)  $10,000. 
D)  $2,000. 
E)  $12,000.

Question 16

Which statement most accurately captures the state of money today?

Accepted Answer

A)  Money today includes currency, bank deposits and checks. 
B)  Money today includes currency and checks but not bank deposits. 
C)  Money today includes bank deposits and currency but not checks. 
D)  Money today includes bank deposits and checks but not currency. 
E)  Money today includes checks and credit cards. 
A)  Money today includes currency, bank deposits and checks. 
B)  Money today includes currency and checks but not bank deposits. 
C)  Money today includes bank deposits and currency but not checks. 
D)  Money today includes bank deposits and checks but not currency. 
E)  Money today includes checks and credit cards.

Question 17

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault.What is the amount of these assets and liabilities that is in M1?

Accepted Answer

The only deposit that is in M1

Question 18

The policy tool of "credit easing" refers to the ________ during the 2008 financial crisis.

Accepted Answer

A)  Fed's purchase of private securities to stimulate banks' lending 
B)  Fed's requirement that the federal government must lend to directly to home buyers 
C)  federal government's requirement that the Fed must lend directly to home buyers 
D)  Fed's lowering of the federal funds rate to zero 
E)  Treasury's issuance of federal debt to finance home buying 
A)  Fed's purchase of private securities to stimulate banks' lending 
B)  Fed's requirement that the federal government must lend to directly to home buyers 
C)  federal government's requirement that the Fed must lend directly to home buyers 
D)  Fed's lowering of the federal funds rate to zero 
E)  Treasury's issuance of federal debt to finance home buying

Question 19

Describe how actual reserves are calculated.Explain the difference between required reserves and excess reserves.How do reserves affect the amount of loans a bank can make?

Accepted Answer

Actual reserves are equal to the bank's

Question 20

Riley deposits $4,000 cash in her checkable deposit at Fershur Bank.If the desired reserve ratio is 5 percent, Fershur Bank's

Accepted Answer

A)  desired reserves increase by $4,000. 
B)  assets and its liabilities change in opposite directions. 
C)  desired reserves increase by $200 and its excess reserves increase by $3,800. 
D)  excess reserves increase by $4,000. 
E)  liabilities do not change but its assets increase. 
A)  desired reserves increase by $4,000. 
B)  assets and its liabilities change in opposite directions. 
C)  desired reserves increase by $200 and its excess reserves increase by $3,800. 
D)  excess reserves increase by $4,000. 
E)  liabilities do not change but its assets increase.

When a bank receives deposits,

Banks generally earn the highest interest rate

Banks create money by

The Fed conducts an open market operation and increases a bank's excess reserves by $2,000.Explain the first five rounds of the money creation process if the desired reserve ratio is 25 percent and if people keep no currency outside of the banking system.

The medium of exchange is defined as

The "double coincidence of wants" is

Are credit cards or debit cards money? Explain your answer.

When the Fed ________, the quantity of banks' reserves decreases.

When you use currency to buy lunch, money is performing which function?

Which of the following is money?

A commercial bank's reserves are equal to the amount of

The Fed buys $25,000 of government securities.The desired reserve ratio is 20 percent and the currency drain is zero.What will be the change in the quantity of money?

If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

The discount rate is the

A bank has deposits of $100,000, reserves of $20,000, and loans of $80,000.If the desired reserve ratio is 10 percent, then its excess reserves are

Which statement most accurately captures the state of money today?

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault.What is the amount of these assets and liabilities that is in M1?

The policy tool of "credit easing" refers to the ________ during the 2008 financial crisis.

Describe how actual reserves are calculated.Explain the difference between required reserves and excess reserves.How do reserves affect the amount of loans a bank can make?

Riley deposits $4,000 cash in her checkable deposit at Fershur Bank.If the desired reserve ratio is 5 percent, Fershur Bank's

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

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Exam 11: The Monetary System

When a bank receives deposits,

Banks generally earn the highest interest rate

Banks create money by

The Fed conducts an open market operation and increases a bank's excess reserves by $2,000.Explain the first five rounds of the money creation process if the desired reserve ratio is 25 percent and if people keep no currency outside of the banking system.

The medium of exchange is defined as

The "double coincidence of wants" is

Are credit cards or debit cards money? Explain your answer.

When the Fed ________, the quantity of banks' reserves decreases.

When you use currency to buy lunch, money is performing which function?

Which of the following is money?

A commercial bank's reserves are equal to the amount of

The Fed buys $25,000 of government securities.The desired reserve ratio is 20 percent and the currency drain is zero.What will be the change in the quantity of money?

If you have assets that include $50 in cash, a checking account with $135, a savings account with $500, and a jar of coins for laundry of $15.75, how much M1 do you have?

The discount rate is the

A bank has deposits of $100,000, reserves of $20,000, and loans of $80,000.If the desired reserve ratio is 10 percent, then its excess reserves are

Which statement most accurately captures the state of money today?

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault.What is the amount of these assets and liabilities that is in M1?

The policy tool of "credit easing" refers to the ________ during the 2008 financial crisis.

Describe how actual reserves are calculated.Explain the difference between required reserves and excess reserves.How do reserves affect the amount of loans a bank can make?

Riley deposits $4,000 cash in her checkable deposit at Fershur Bank.If the desired reserve ratio is 5 percent, Fershur Bank's

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