Question 1

When we put a price tag on goods and services, we are using money as a

Accepted Answer

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

Question 2

The main policymaking committee of the Federal Reserve System is the

Accepted Answer

A)  Federal Open Market Committee. 
B)  Federal Monetary Policy Committee. 
C)  Board of Governors. 
D)  Committee on Money and Banking. 
E)  Federal Committee on Monetary Conditions. 
A)  Federal Open Market Committee. 
B)  Federal Monetary Policy Committee. 
C)  Board of Governors. 
D)  Committee on Money and Banking. 
E)  Federal Committee on Monetary Conditions.

Question 3

________ increases the size of the money multiplier.

Accepted Answer

A)  An increase in the currency drain 
B)  An open market purchase of government securities by the Fed 
C)  A reduction in the desired reserve ratio 
D)  An open market sale of government securities by the Fed 
E)  An increase in the size of open market operations 
A)  An increase in the currency drain 
B)  An open market purchase of government securities by the Fed 
C)  A reduction in the desired reserve ratio 
D)  An open market sale of government securities by the Fed 
E)  An increase in the size of open market operations

Question 4

Money is best defined as

Accepted Answer

A)  anything that has value. 
B)  anything accepted as a means of payment. 
C)  anything that can be sold to pay for something. 
D)  currency. 
E)  anything that is backed by gold. 
A)  anything that has value. 
B)  anything accepted as a means of payment. 
C)  anything that can be sold to pay for something. 
D)  currency. 
E)  anything that is backed by gold.

Question 5

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank.The desired reserve ratio is 25 percent.What is the change in Commerce Bank's total reserves and its excess reserves?

Accepted Answer

When the Fed buys $50,000 of government

Question 6

A bank has $250 in checking deposits, $1,000 in savings deposits, $1,200 in time deposits, $1,000 in loans to businesses, $400 in outstanding credit card balances, $800 in government securities, $25 in currency in its vault, and $25 in deposits at the Fed.Of these, ________ are part of M2.

Accepted Answer

A)  $3,450 
B)  $2,450 
C)  $2,850 
D)  $2,200 
E)  $2,600 
A)  $3,450 
B)  $2,450 
C)  $2,850 
D)  $2,200 
E)  $2,600

Question 7

The money multiplier is the

Accepted Answer

A)  fraction of the monetary base that is kept in currency. 
B)  factor by which a change in the monetary base is multiplied to give the change in the quantity of money. 
C)  factor by which a change in the deposits base is multiplied to give the change in the monetary base. 
D)  proportion by which a change in the quantity of money changes the monetary base. 
E)  number of times that the Fed conducts open market operations in a month. 
A)  fraction of the monetary base that is kept in currency. 
B)  factor by which a change in the monetary base is multiplied to give the change in the quantity of money. 
C)  factor by which a change in the deposits base is multiplied to give the change in the monetary base. 
D)  proportion by which a change in the quantity of money changes the monetary base. 
E)  number of times that the Fed conducts open market operations in a month.

Question 8

The Federal Reserve System is organized into

Accepted Answer

A)  one large district covering the entire United States. 
B)  three districts, one for each of the countries in North America. 
C)  12 districts, dividing up the United States. 
D)  12 districts, dividing up the countries in North America. 
E)  50 districts, one per state. 
A)  one large district covering the entire United States. 
B)  three districts, one for each of the countries in North America. 
C)  12 districts, dividing up the United States. 
D)  12 districts, dividing up the countries in North America. 
E)  50 districts, one per state.

Question 9

To increase the quantity of money in the economy, the Federal Reserve can

Accepted Answer

A)  print more money and give it to the banks. 
B)  increase the required reserve ratio. 
C)  buy government bonds in an open market operation. 
D)  sell government bonds in an open market operation. 
E)  cut taxes. 
A)  print more money and give it to the banks. 
B)  increase the required reserve ratio. 
C)  buy government bonds in an open market operation. 
D)  sell government bonds in an open market operation. 
E)  cut taxes.

Question 10

What is the FOMC?
 Who are the members of the FOMC?
 What policy does the FOMC decide?

Accepted Answer

The FOMC is the Federal Open Market Comm

Question 11

M1 is defined as a measure of money including, in part,

Accepted Answer

A)  checkable deposits and currency. 
B)  time deposits and currency. 
C)  currency and savings deposits. 
D)  time deposits and money market fund deposits. 
E)  the lines of credit on credit cards and currency. 
A)  checkable deposits and currency. 
B)  time deposits and currency. 
C)  currency and savings deposits. 
D)  time deposits and money market fund deposits. 
E)  the lines of credit on credit cards and currency.

Question 12

Checkable deposits are money because

Accepted Answer

A)  they are protected by the Federal Reserve. 
B)  they are guaranteed by banks. 
C)  checks bounce when there are not enough funds to cash them. 
D)  they can be converted into currency on demand and are used directly as a means of payment. 
E)  only banks and other financial institutions can offer them. 
A)  they are protected by the Federal Reserve. 
B)  they are guaranteed by banks. 
C)  checks bounce when there are not enough funds to cash them. 
D)  they can be converted into currency on demand and are used directly as a means of payment. 
E)  only banks and other financial institutions can offer them.

Question 13

A bank reports reserves of $100,000, government securities of $250,000, loans of $750,000, checkable deposits of $900,000, and owners' equity of $200,000.The desired reserve ratio is 10 percent and the bank wants to hold as reserves only the amount it is required to hold.What is the amount of excess reserves for this bank?
 Show your work.

Accepted Answer

Excess reserves equal the actual reserve

Question 14

When the Fed ________ securities in an open market operation, banks' reserves ________ and therefore lending ________.

Accepted Answer

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

Question 15

A bank has $200 of reserves and $4,000 of deposits.It is just meeting its desired reserves and has no excess reserves.Thus the desired reserve ratio is

Accepted Answer

A)  10 percent. 
B)  20 percent. 
C)  25 percent. 
D)  5 percent. 
E)  $200. 
A)  10 percent. 
B)  20 percent. 
C)  25 percent. 
D)  5 percent. 
E)  $200.

Question 16

The Fed's policy is determined by the

Accepted Answer

A)  Federal Open Market Committee. 
B)  Executive Council to the Governor. 
C)  Regional Federal Reserve Banks. 
D)  Board of Governors. 
E)  Federal Monetary Policy Committee. 
A)  Federal Open Market Committee. 
B)  Executive Council to the Governor. 
C)  Regional Federal Reserve Banks. 
D)  Board of Governors. 
E)  Federal Monetary Policy Committee.

Question 17

If the desired reserve ratio increases, then

Accepted Answer

A)  banks' desired reserves increase and their excess reserves decrease. 
B)  bank customers become more willing to make deposits in banks. 
C)  banks are able to make more loans. 
D)  banks can buy more government securities. 
E)  the Fed has supplied banks with more reserves. 
A)  banks' desired reserves increase and their excess reserves decrease. 
B)  bank customers become more willing to make deposits in banks. 
C)  banks are able to make more loans. 
D)  banks can buy more government securities. 
E)  the Fed has supplied banks with more reserves.

Question 18

If the Fed buys government securities, then.

Accepted Answer

A)  the quantity of money is not changed, just its composition. 
B)  new bank reserves are created. 
C)  the quantity of money decreases. 
D)  bank reserves are destroyed. 
E)  banks' excess reserves decrease. 
A)  the quantity of money is not changed, just its composition. 
B)  new bank reserves are created. 
C)  the quantity of money decreases. 
D)  bank reserves are destroyed. 
E)  banks' excess reserves decrease.

Question 19

"Banks hold about 50 percent of their assets as reserves." Is the previous statement correct or not?

Accepted Answer

The statement is inc

Question 20

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

Accepted Answer

The Federal Reserve System divides the n

When we put a price tag on goods and services, we are using money as a

The main policymaking committee of the Federal Reserve System is the

________ increases the size of the money multiplier.

Money is best defined as

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank.The desired reserve ratio is 25 percent.What is the change in Commerce Bank's total reserves and its excess reserves?

A bank has $250 in checking deposits, $1,000 in savings deposits, $1,200 in time deposits, $1,000 in loans to businesses, $400 in outstanding credit card balances, $800 in government securities, $25 in currency in its vault, and $25 in deposits at the Fed.Of these, ________ are part of M2.

The money multiplier is the

The Federal Reserve System is organized into

To increase the quantity of money in the economy, the Federal Reserve can

What is the FOMC? Who are the members of the FOMC? What policy does the FOMC decide?

M1 is defined as a measure of money including, in part,

Checkable deposits are money because

When the Fed securities in an open market operation, banks' reserves and therefore lending .

A bank has $200 of reserves and $4,000 of deposits.It is just meeting its desired reserves and has no excess reserves.Thus the desired reserve ratio is

The Fed's policy is determined by the

If the desired reserve ratio increases, then

If the Fed buys government securities, then.

"Banks hold about 50 percent of their assets as reserves." Is the previous statement correct or not?

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

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

When we put a price tag on goods and services, we are using money as a

The main policymaking committee of the Federal Reserve System is the

________ increases the size of the money multiplier.

Money is best defined as

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank.The desired reserve ratio is 25 percent.What is the change in Commerce Bank's total reserves and its excess reserves?

A bank has $250 in checking deposits, $1,000 in savings deposits, $1,200 in time deposits, $1,000 in loans to businesses, $400 in outstanding credit card balances, $800 in government securities, $25 in currency in its vault, and $25 in deposits at the Fed.Of these, ________ are part of M2.

The money multiplier is the

The Federal Reserve System is organized into

To increase the quantity of money in the economy, the Federal Reserve can

What is the FOMC? Who are the members of the FOMC? What policy does the FOMC decide?

M1 is defined as a measure of money including, in part,

Checkable deposits are money because

When the Fed ________ securities in an open market operation, banks' reserves ________ and therefore lending ________.

A bank has $200 of reserves and $4,000 of deposits.It is just meeting its desired reserves and has no excess reserves.Thus the desired reserve ratio is

The Fed's policy is determined by the

If the desired reserve ratio increases, then

If the Fed buys government securities, then.

"Banks hold about 50 percent of their assets as reserves." Is the previous statement correct or not?

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

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 securities in an open market operation, banks' reserves and therefore lending .