Question 1

A currency drain is cash ________ and has ________ effect on the money multiplier.

Accepted Answer

A) draining into the banks; no 
B) draining into the banks; an 
C) held outside the banks; an 
D) held at the Fed; an 
E) held as reserves; no 
A) draining into the banks; no 
B) draining into the banks; an 
C) held outside the banks; an 
D) held at the Fed; an 
E) held as reserves; no C

Question 2

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. C

Question 3

The four main policy tools the Federal Reserve System uses to influence the interest rate are setting

Accepted Answer

A) the prime rate, open market operations, extraordinary crisis management and setting the excess reserve ratio. 
B) quantitative easing, market interest rate and the discount rate, as well as open market operations. 
C) the discount rate, open market operations, extraordinary crisis measures and setting the required reserve ratio. 
D) credit easing, the discount rate, setting tax rates, and setting the required reserve ratio. 
E) quantitative easing, open market operations, setting tax rates, and setting the required reserve ratio. 
A) the prime rate, open market operations, extraordinary crisis management and setting the excess reserve ratio. 
B) quantitative easing, market interest rate and the discount rate, as well as open market operations. 
C) the discount rate, open market operations, extraordinary crisis measures and setting the required reserve ratio. 
D) credit easing, the discount rate, setting tax rates, and setting the required reserve ratio. 
E) quantitative easing, open market operations, setting tax rates, and setting the required reserve ratio. C

Question 4

Physical currency is ________ popular than e-cash, ________.

Accepted Answer

A) less; and both are portable and recognizable 
B) more; and both are portable and recognizable 
C) more; but only physical currency is portable and recognizable 
D) more; and both are portable, untraceable and anonymous 
E) less; but both are portable, untraceable and anonymous 
A) less; and both are portable and recognizable 
B) more; and both are portable and recognizable 
C) more; but only physical currency is portable and recognizable 
D) more; and both are portable, untraceable and anonymous 
E) less; but both are portable, untraceable and anonymous

Question 5

In 2008, the Fed created a new policy tool called

Accepted Answer

A) quantitative easing, which allowed the Fed to buy private securities as well as government securities. 
B) quantitative easing, which required the Fed to pay interest on required reserves. 
C) open market operations, which required the Fed to buy securities from only the federal government. 
D) federal funds zero-rate, which required the Fed to lower the rate to near zero percent. 
E) interest rate reductions, which allowed the Fed to lower interest rates paid to banks. 
A) quantitative easing, which allowed the Fed to buy private securities as well as government securities. 
B) quantitative easing, which required the Fed to pay interest on required reserves. 
C) open market operations, which required the Fed to buy securities from only the federal government. 
D) federal funds zero-rate, which required the Fed to lower the rate to near zero percent. 
E) interest rate reductions, which allowed the Fed to lower interest rates paid to banks.

Question 6

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 7

Required reserve ratios are the minimum amount of

Accepted Answer

A) deposits any one bank is allowed to accept as percentage of its capital. 
B) reserves any one bank must hold as a percentage of its loans. 
C) reserves any one bank must hold as a percentage of its deposits. 
D) deposits any one bank must hold as a percentage of its reserves. 
E) reserves any one bank must hold as a percentage of its total assets. 
A) deposits any one bank is allowed to accept as percentage of its capital. 
B) reserves any one bank must hold as a percentage of its loans. 
C) reserves any one bank must hold as a percentage of its deposits. 
D) deposits any one bank must hold as a percentage of its reserves. 
E) reserves any one bank must hold as a percentage of its total assets.

Question 8

The M2 multiplier in the United States is currently about

Accepted Answer

A) 1. 
B) 4. 
C) 16. 
D) 50. 
E) 23. 
A) 1. 
B) 4. 
C) 16. 
D) 50. 
E) 23.

Question 9

If the currency drain ratio is 0.2 and the desired reserve ratio is 0.03, the money multiplier is

Accepted Answer

A) 0.76. 
B) 6.67. 
C) 3.23. 
D) 4.46. 
E) 5.22. 
A) 0.76. 
B) 6.67. 
C) 3.23. 
D) 4.46. 
E) 5.22.

Question 10

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

Accepted Answer

The Federal Reserve does not c

Question 11

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 12

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 13

Whenever somebody deposits a check from bank A into a checkable deposit at bank B, bank A's reserves ________ and bank B's reserves ________.

Accepted Answer

A) increase; decrease 
B) increase; increase 
C) decrease; decrease 
D) decrease; increase 
E) do not change; do not change 
A) increase; decrease 
B) increase; increase 
C) decrease; decrease 
D) decrease; increase 
E) do not change; do not change

Question 14

"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

Accepted Answer

The statement is incorrect. Ba

Question 15

The Fed sells $300 million U.S. government securities to commercial banks. This action leads to ________ in Fed assets and ________ in Fed liabilities.

Accepted Answer

A) a $300 million increase; a $300 million increase 
B) a $300 million increase; a $300 million decrease 
C) no change in Fed assets; no change in Fed liabilities 
D) a $300 million decrease; a $300 million decrease in 
E) a $300 million decrease; a $300 million increase 
A) a $300 million increase; a $300 million increase 
B) a $300 million increase; a $300 million decrease 
C) no change in Fed assets; no change in Fed liabilities 
D) a $300 million decrease; a $300 million decrease in 
E) a $300 million decrease; a $300 million increase

Question 16

When the Fed buys $100 million of securities from a commercial bank the

Accepted Answer

A) monetary base increases. 
B) money supply decreases. 
C) bank's reserves decrease. 
D) required reserve ratio decreases. 
E) bank is risking its depositors' money. 
A) monetary base increases. 
B) money supply decreases. 
C) bank's reserves decrease. 
D) required reserve ratio decreases. 
E) bank is risking its depositors' money.

Question 17

An increase in the currency drain ratio

Accepted Answer

A) decreases the monetary base. 
B) increases the quantity of money. 
C) increases bank reserves. 
D) does not change the amount of the monetary base. 
E) does not change the quantity of money. 
A) decreases the monetary base. 
B) increases the quantity of money. 
C) increases bank reserves. 
D) does not change the amount of the monetary base. 
E) does not change the quantity of money.

Question 18

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 19

When you see a mansion and think to yourself that it must be worth a million dollars, you are using money to perform which function?

Accepted Answer

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

Question 20

Suppose the desired reserve ratio is 10 percent. If Urban Bank has total deposits of $1000 and total assets of $10,000, the amount of desired reserves is

Accepted Answer

A) $100. 
B) $900. 
C) $1,000. 
D) $9,000. 
E) $1,100. 
A) $100. 
B) $900. 
C) $1,000. 
D) $9,000. 
E) $1,100.

A currency drain is cash and has effect on the money multiplier.

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

The four main policy tools the Federal Reserve System uses to influence the interest rate are setting

Physical currency is popular than e-cash, .

In 2008, the Fed created a new policy tool called

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

Required reserve ratios are the minimum amount of

The M2 multiplier in the United States is currently about

If the currency drain ratio is 0.2 and the desired reserve ratio is 0.03, the money multiplier is

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

A currency drain occurs when the

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

Whenever somebody deposits a check from bank A into a checkable deposit at bank B, bank A's reserves and bank B's reserves .

"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

The Fed sells $300 million U.S. government securities to commercial banks. This action leads to in Fed assets and in Fed liabilities.

When the Fed buys $100 million of securities from a commercial bank the

An increase in the currency drain ratio

The monetary base is the

When you see a mansion and think to yourself that it must be worth a million dollars, you are using money to perform which function?

Suppose the desired reserve ratio is 10 percent. If Urban Bank has total deposits of $1000 and total assets of $10,000, the amount of desired reserves is

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 18: Money and the Monetary System

A currency drain is cash ________ and has ________ effect on the money multiplier.

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

The four main policy tools the Federal Reserve System uses to influence the interest rate are setting

Physical currency is ________ popular than e-cash, ________.

In 2008, the Fed created a new policy tool called

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

Required reserve ratios are the minimum amount of

The M2 multiplier in the United States is currently about

If the currency drain ratio is 0.2 and the desired reserve ratio is 0.03, the money multiplier is

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

A currency drain occurs when the

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

Whenever somebody deposits a check from bank A into a checkable deposit at bank B, bank A's reserves ________ and bank B's reserves ________.

"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?

The Fed sells $300 million U.S. government securities to commercial banks. This action leads to ________ in Fed assets and ________ in Fed liabilities.

When the Fed buys $100 million of securities from a commercial bank the

An increase in the currency drain ratio

The monetary base is the

When you see a mansion and think to yourself that it must be worth a million dollars, you are using money to perform which function?

Suppose the desired reserve ratio is 10 percent. If Urban Bank has total deposits of $1000 and total assets of $10,000, the amount of desired reserves is

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

A currency drain is cash and has effect on the money multiplier.

Physical currency is popular than e-cash, .

Whenever somebody deposits a check from bank A into a checkable deposit at bank B, bank A's reserves and bank B's reserves .

The Fed sells $300 million U.S. government securities to commercial banks. This action leads to in Fed assets and in Fed liabilities.