Question 1

Which of the following are considered money?
i. electronic checks
ii. paper checks
iii. the deposit transferred using an e-check

Accepted Answer

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

Question 2

The required reserve ratio is the minimum percentage of ________ that banks are required to hold by regulation.

Accepted Answer

A)  reserves as total assets 
B)  deposits as total assets 
C)  reserves as deposits 
D)  deposits as reserves 
E)  reserves as total liabilities 
A)  reserves as total assets 
B)  deposits as total assets 
C)  reserves as deposits 
D)  deposits as reserves 
E)  reserves as total liabilities

Question 3

If the desired reserve ratio is 7 percent and a bank has $10,000 of deposits, then its desired reserves are

Accepted Answer

A)  $7. 
B)  $700. 
C)  $9,300 
D)  $930. 
E)  $7,000. 
A)  $7. 
B)  $700. 
C)  $9,300 
D)  $930. 
E)  $7,000.

Question 4

Money is any commodity or token that is

Accepted Answer

A)  backed by gold. 
B)  generally accepted as a means of measurement. 
C)  generally accepted as a means of payment. 
D)  issued by the government. 
E)  a store of value. 
A)  backed by gold. 
B)  generally accepted as a means of measurement. 
C)  generally accepted as a means of payment. 
D)  issued by the government. 
E)  a store of value.

Question 5

The Fed buys $50,000 of government securities.The desired reserve ratio is 10 percent and the currency drain is zero.What will be the change in the quantity of money?

Accepted Answer

A)  $5,000 
B)  $50,000 
C)  $500,000 
D)  $5,000,000 
E)  $0 
A)  $5,000 
B)  $50,000 
C)  $500,000 
D)  $5,000,000 
E)  $0

Question 6

If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the

Accepted Answer

A)  assets of First Union Bank decrease by $100,000. 
B)  assets of the Fed decrease by $100,000. 
C)  assets of First Union Bank change in composition but not in the amount. 
D)  liabilities of the Fed change in composition but not in amount. 
E)  liabilities of First Union decrease by $100,000. 
A)  assets of First Union Bank decrease by $100,000. 
B)  assets of the Fed decrease by $100,000. 
C)  assets of First Union Bank change in composition but not in the amount. 
D)  liabilities of the Fed change in composition but not in amount. 
E)  liabilities of First Union decrease by $100,000.

Question 7

In the United States, most deposits at banks are ________ deposits

Accepted Answer

A)  checking 
B)  reserve 
C)  saving and time 
D)  money market 
E)  loan 
A)  checking 
B)  reserve 
C)  saving and time 
D)  money market 
E)  loan

Question 8

The monetary base is equal to the sum of coins,

Accepted Answer

A)  currency and banks' reserves at the Federal Reserve. 
B)  currency and checkable deposits at banks. 
C)  currency, banks' reserves at the Federal Reserve and checkable deposits at banks. 
D)  and checkable deposits at banks. 
E)  U.S.government securities owned by the Federal Reserve and Federal Reserve notes. 
A)  currency and banks' reserves at the Federal Reserve. 
B)  currency and checkable deposits at banks. 
C)  currency, banks' reserves at the Federal Reserve and checkable deposits at banks. 
D)  and checkable deposits at banks. 
E)  U.S.government securities owned by the Federal Reserve and Federal Reserve notes.

Question 9

What is a "currency drain?
" How and why does it affect the money multiplier?

Accepted Answer

An increase in currency held outside the

Question 10

The quantity of money decreases if

Accepted Answer

A)  the currency drain increases. 
B)  the desired reserve ratio decreases. 
C)  banks loan all excess reserves. 
D)  the Treasury Department issues fewer government securities. 
E)  the Fed buys U.S.government securities. 
A)  the currency drain increases. 
B)  the desired reserve ratio decreases. 
C)  banks loan all excess reserves. 
D)  the Treasury Department issues fewer government securities. 
E)  the Fed buys U.S.government securities.

Question 11

The required reserve ratio is 10 percent and Charlie deposits $3,000 in her checking account.The bank must

Accepted Answer

A)  increase reserves by $3,000. 
B)  increase reserves by $300. 
C)  decrease reserves by $3,000. 
D)  decrease reserves by $300. 
E)  not change its reserves until Charlie decides to withdraw her funds. 
A)  increase reserves by $3,000. 
B)  increase reserves by $300. 
C)  decrease reserves by $3,000. 
D)  decrease reserves by $300. 
E)  not change its reserves until Charlie decides to withdraw her funds.

Question 12

The Fed's policy tools include

Accepted Answer

A)  required reserve ratios, the discount rate, open market operations, and extraordinary crisis measures. 
B)  holding deposits for the U.S.government, reserve requirements, and the discount rate. 
C)  setting regulations for lending standards and extraordinary crisis measures. 
D)  supervision of the banking system and buying and selling commercial banks. 
E)  required reserve ratios, income tax rates, and open market operations. 
A)  required reserve ratios, the discount rate, open market operations, and extraordinary crisis measures. 
B)  holding deposits for the U.S.government, reserve requirements, and the discount rate. 
C)  setting regulations for lending standards and extraordinary crisis measures. 
D)  supervision of the banking system and buying and selling commercial banks. 
E)  required reserve ratios, income tax rates, and open market operations.

Question 13

The Fed influences the interest rate by using which of the following tools?
i. open market operations
ii. taxes on bank accounts
iii. changes in required reserve ratios

Accepted Answer

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

Question 14

$$\begin{array} { l c } 
& \begin{array} { c } 
\text { Amount } \
\text { (dollars) }
\end{array} \
\hline \text { Checking deposits } & 600 \
\text { Savings deposits } & 1000 \
\text { Time deposits } & 1,500 \
\text { Loans } & 1,200 \
\text { Government securities } & 2,000 \
\text { Outstanding credit card balances } & 400 \
\text { Currency in vault } & 10 \
\text { Deposits in reserve account at the Fed } & 20
\end{array}$$
-The above table gives assets and deposits for a (small) bank.The bank's deposits that are part of M2 are equal to

Accepted Answer

A)  $600. 
B)  $1600. 
C)  $3,100. 
D)  $30. 
E)  $5,100. 
A)  $600. 
B)  $1600. 
C)  $3,100. 
D)  $30. 
E)  $5,100.

Question 15

An increase in the currency drain

Accepted Answer

A)  decreases the quantity of money. 
B)  decreases the monetary base. 
C)  increases banks' reserves. 
D)  increases banks' deposits. 
E)  has no effect on the amount of the monetary base or the quantity of money. 
A)  decreases the quantity of money. 
B)  decreases the monetary base. 
C)  increases banks' reserves. 
D)  increases banks' deposits. 
E)  has no effect on the amount of the monetary base or the quantity of money.

Question 16

Looking at the Fed's actions during the 2008 financial crisis, we can see that the Fed

Accepted Answer

A)  decrease the monetary base to reduce risky lending. 
B)  doubled the monetary base. 
C)  doubled the money multiplier. 
D)  caused banks to increase the reserve requirement ratio. 
E)  increased the monetary base by 10 percent. 
A)  decrease the monetary base to reduce risky lending. 
B)  doubled the monetary base. 
C)  doubled the money multiplier. 
D)  caused banks to increase the reserve requirement ratio. 
E)  increased the monetary base by 10 percent.

Question 17

A currency drain occurs when the

Accepted Answer

A)  Fed increases the required reserve ratio. 
B)  Fed sells U.S.government securities. 
C)  non-bank public increases its holdings of currency outside the banking system. 
D)  banks reduce the number of loans they create with their excess reserves. 
E)  Fed buys U.S.government securities. 
A)  Fed increases the required reserve ratio. 
B)  Fed sells U.S.government securities. 
C)  non-bank public increases its holdings of currency outside the banking system. 
D)  banks reduce the number of loans they create with their excess reserves. 
E)  Fed buys U.S.government securities.

Question 18

What are the institutions that make up the nation's banking system?

Accepted Answer

Part of the nation's banking system is t

Question 19

The monetary base is the

Accepted Answer

A)  minimum reserve banks must hold to cover any losses from unpaid loans. 
B)  sum of coins, Federal Reserve notes, and banks' reserves at the Fed. 
C)  sum of gold and foreign exchange held by the Fed. 
D)  sum of government securities and loans to banks held by the Fed. 
E)  sum of coins, required reserves, and banks' loans. 
A)  minimum reserve banks must hold to cover any losses from unpaid loans. 
B)  sum of coins, Federal Reserve notes, and banks' reserves at the Fed. 
C)  sum of gold and foreign exchange held by the Fed. 
D)  sum of government securities and loans to banks held by the Fed. 
E)  sum of coins, required reserves, and banks' loans.

Question 20

Because the Federal Reserve System is a central bank, it provides banking services to

Accepted Answer

A)  businesses only. 
B)  consumers and business. 
C)  commercial banks. 
D)  no one. 
E)  the government only. 
A)  businesses only. 
B)  consumers and business. 
C)  commercial banks. 
D)  no one. 
E)  the government only.

Which of the following are considered money? i. electronic checks ii. paper checks iii. the deposit transferred using an e-check

The required reserve ratio is the minimum percentage of ________ that banks are required to hold by regulation.

If the desired reserve ratio is 7 percent and a bank has $10,000 of deposits, then its desired reserves are

Money is any commodity or token that is

The Fed buys $50,000 of government securities.The desired reserve ratio is 10 percent and the currency drain is zero.What will be the change in the quantity of money?

If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the

In the United States, most deposits at banks are ________ deposits

The monetary base is equal to the sum of coins,

What is a "currency drain? " How and why does it affect the money multiplier?

The quantity of money decreases if

The required reserve ratio is 10 percent and Charlie deposits $3,000 in her checking account.The bank must

The Fed's policy tools include

The Fed influences the interest rate by using which of the following tools? i. open market operations ii. taxes on bank accounts iii. changes in required reserve ratios

An increase in the currency drain

Looking at the Fed's actions during the 2008 financial crisis, we can see that the Fed

A currency drain occurs when the

What are the institutions that make up the nation's banking system?

The monetary base is the

Because the Federal Reserve System is a central bank, it provides banking services to

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 are considered money? i. electronic checks ii. paper checks iii. the deposit transferred using an e-check

The required reserve ratio is the minimum percentage of ________ that banks are required to hold by regulation.

If the desired reserve ratio is 7 percent and a bank has $10,000 of deposits, then its desired reserves are

Money is any commodity or token that is

The Fed buys $50,000 of government securities.The desired reserve ratio is 10 percent and the currency drain is zero.What will be the change in the quantity of money?

If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the

In the United States, most deposits at banks are ________ deposits

The monetary base is equal to the sum of coins,

What is a "currency drain? " How and why does it affect the money multiplier?

The quantity of money decreases if

The required reserve ratio is 10 percent and Charlie deposits $3,000 in her checking account.The bank must

The Fed's policy tools include

The Fed influences the interest rate by using which of the following tools? i. open market operations ii. taxes on bank accounts iii. changes in required reserve ratios

An increase in the currency drain

Looking at the Fed's actions during the 2008 financial crisis, we can see that the Fed

A currency drain occurs when the

What are the institutions that make up the nation's banking system?

The monetary base is the

Because the Federal Reserve System is a central bank, it provides banking services to

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