Question 1

The monetary multiplier is 3 and the change in the monetary base is $100,000. How much will the quantity of money increase?

Accepted Answer

A) $300,000 
B) $200,000 
C) $100,000 
D) $70,000 
E) $33,333 
A) $300,000 
B) $200,000 
C) $100,000 
D) $70,000 
E) $33,333

Question 2

If the Fed engages in quantitative easing, it has likely

Accepted Answer

A) decreased the federal funds rate to almost zero by buying large sums of securities. 
B) increased the discount rate to prevent inflation. 
C) decreased the discount rate by selling its own securities. 
D) increased the federal funds rate by selling private securities. 
E) started paying interest on required reserves. 
A) decreased the federal funds rate to almost zero by buying large sums of securities. 
B) increased the discount rate to prevent inflation. 
C) decreased the discount rate by selling its own securities. 
D) increased the federal funds rate by selling private securities. 
E) started paying interest on required reserves.

Question 3

M2 equals

Accepted Answer

A) M1 and is just another name for currency outside of banks. 
B) M1 plus savings deposits, small time deposits, and money market fund deposits. 
C) M1 minus traveler's checks because they are not really money. 
D) currency plus savings deposits, all time deposits, and money market funds and other deposits. 
E) M1 plus savings deposits and small time deposits minus money market fund deposits. 
A) M1 and is just another name for currency outside of banks. 
B) M1 plus savings deposits, small time deposits, and money market fund deposits. 
C) M1 minus traveler's checks because they are not really money. 
D) currency plus savings deposits, all time deposits, and money market funds and other deposits. 
E) M1 plus savings deposits and small time deposits minus money market fund deposits.

Question 4

Excess reserves are the

Accepted Answer

A) same as the required reserves. 
B) amount of reserves the Fed requires banks to hold. 
C) amount of reserves held over what is desired. 
D) amount of reserves a bank holds at the Fed. 
E) amount of reserves banks keep in their vaults. 
A) same as the required reserves. 
B) amount of reserves the Fed requires banks to hold. 
C) amount of reserves held over what is desired. 
D) amount of reserves a bank holds at the Fed. 
E) amount of reserves banks keep in their vaults.

Question 5

Regulating the amount of money in the United States is one of the most important responsibilities of the

Accepted Answer

A) State Department. 
B) state governments. 
C) Treasury Department. 
D) Federal Reserve. 
E) U.S. Mint. 
A) State Department. 
B) state governments. 
C) Treasury Department. 
D) Federal Reserve. 
E) U.S. Mint.

Question 6

If the Fed buys government securities from the non-bank public, then

Accepted Answer

A) reserves at banks decrease. 
B) loans at banks decrease. 
C) deposits at banks increase and banks' reserves decrease. 
D) deposits at banks increase and banks' reserves increase. 
E) deposits at banks decrease and banks' reserves increase. 
A) reserves at banks decrease. 
B) loans at banks decrease. 
C) deposits at banks increase and banks' reserves decrease. 
D) deposits at banks increase and banks' reserves increase. 
E) deposits at banks decrease and banks' reserves increase.

Question 7

In performing which of its primary functions does money solve the problem of the double coincidence of wants?

Accepted Answer

A) medium of exchange 
B) unit of account 
C) store of value 
D) barter system 
E) money supply 
A) medium of exchange 
B) unit of account 
C) store of value 
D) barter system 
E) money supply

Question 8

M2 consists of

Accepted Answer

A) M1 plus traveler's checks. 
B) M1 plus saving deposits, small time deposits, and money market funds. 
C) M1 plus checkable deposits. 
D) M1 plus currency at the banks. 
E) M1 plus Federal Reserve notes. 
A) M1 plus traveler's checks. 
B) M1 plus saving deposits, small time deposits, and money market funds. 
C) M1 plus checkable deposits. 
D) M1 plus currency at the banks. 
E) M1 plus Federal Reserve notes.

Question 9

________ in the currency drain ratio and ________ in the desired reserve ratio ________ the money multiplier.

Accepted Answer

A) An increase; an increase; increase 
B) An increase; a decrease; decrease 
C) A decrease; an increase; decrease 
D) A decrease; a decrease; increase 
E) An increase; a decrease; increase 
A) An increase; an increase; increase 
B) An increase; a decrease; decrease 
C) A decrease; an increase; decrease 
D) A decrease; a decrease; increase 
E) An increase; a decrease; increase

Question 10

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.The bank's reserves are equal to

Accepted Answer

A) $25. 
B) $275. 
C) $2,225 
D) $50. 
E) $350. 
A) $25. 
B) $275. 
C) $2,225 
D) $50. 
E) $350.

Question 11

A commercial bank's reserves are

Accepted Answer

A) bonds issued by the U.S. government that are very safe. 
B) the provision of funds to businesses and individuals. 
C) currency in its vault plus the balance on its reserve account at a Federal Reserve Bank. 
D) savings and time deposits. 
E) its loans. 
A) bonds issued by the U.S. government that are very safe. 
B) the provision of funds to businesses and individuals. 
C) currency in its vault plus the balance on its reserve account at a Federal Reserve Bank. 
D) savings and time deposits. 
E) its loans.

Question 12

Checks are not money because they

Accepted Answer

A) are just instruments to transfer money between banks. 
B) are not guaranteed by banks. 
C) can bounce when there are not enough funds to cash them. 
D) are not issued by the government. 
E) are not always accepted when trying to purchase goods or services. 
A) are just instruments to transfer money between banks. 
B) are not guaranteed by banks. 
C) can bounce when there are not enough funds to cash them. 
D) are not issued by the government. 
E) are not always accepted when trying to purchase goods or services.

Question 13

Which of the following is a thrift institution?

Accepted Answer

A) a savings and loan association 
B) a money market fund 
C) a commercial bank 
D) a loan institution 
E) the Federal Reserve 
A) a savings and loan association 
B) a money market fund 
C) a commercial bank 
D) a loan institution 
E) the Federal Reserve

Question 14

The required reserve ratio is the

Accepted Answer

A) amount of excess reserves the bank holds just in case. 
B) total amount of reserves the bank holds in its vaults. 
C) total amount of reserves the bank holds at the Fed. 
D) amount of reserves banks are required by the Fed to be held as a percentage of the bank's deposits. 
E) amount of reserves banks are required by the Fed to be held as a percentage of the bank's loans. 
A) amount of excess reserves the bank holds just in case. 
B) total amount of reserves the bank holds in its vaults. 
C) total amount of reserves the bank holds at the Fed. 
D) amount of reserves banks are required by the Fed to be held as a percentage of the bank's deposits. 
E) amount of reserves banks are required by the Fed to be held as a percentage of the bank's loans.

Question 15

The Fed purchases $1 million of U.S. government securities from First Bank. The desired reserve ratio is 10 percent, the currency drain ratio 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 16

The ________ the desired reserve ratio, the ________ the ________ in the quantity of money created from an initial increase of $100,000 in the monetary base.

Accepted Answer

A) larger; larger; decrease 
B) larger; larger; increase 
C) larger; smaller; decrease 
D) smaller; larger; decrease 
E) smaller; larger; increase 
A) larger; larger; decrease 
B) larger; larger; increase 
C) larger; smaller; decrease 
D) smaller; larger; decrease 
E) smaller; larger; increase

Question 17

A bank has $400 in checkable deposits, $800 in savings deposits, $700 in time deposits, $900 in loans to businesses, $300 in outstanding credit card balances, $500 in government securities, $10 in currency in its vault, and $20 in deposits at the Fed. The bank's deposits that are part of M1 are equal to

Accepted Answer

A) $1,900. 
B) $400. 
C) $1,210. 
D) $530. 
E) $410. 
A) $1,900. 
B) $400. 
C) $1,210. 
D) $530. 
E) $410.

Question 18

The desired reserve ratio is 10 percent and banks have no excess reserves. Juliet deposits $300 in her bank. What is the maximum that Juliet's bank can now loan?

Accepted Answer

A) $3,000 
B) $270 
C) $30 
D) $330 
E) $300 
A) $3,000 
B) $270 
C) $30 
D) $330 
E) $300

Question 19

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 20

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.

The monetary multiplier is 3 and the change in the monetary base is $100,000. How much will the quantity of money increase?

If the Fed engages in quantitative easing, it has likely

M2 equals

Excess reserves are the

Regulating the amount of money in the United States is one of the most important responsibilities of the

If the Fed buys government securities from the non-bank public, then

In performing which of its primary functions does money solve the problem of the double coincidence of wants?

M2 consists of

in the currency drain ratio and in the desired reserve ratio the money multiplier.

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.The bank's reserves are equal to

A commercial bank's reserves are

Checks are not money because they

Which of the following is a thrift institution?

The required reserve ratio is the

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

The the desired reserve ratio, the the in the quantity of money created from an initial increase of $100,000 in the monetary base.

The desired reserve ratio is 10 percent and banks have no excess reserves. Juliet deposits $300 in her bank. What is the maximum that Juliet's bank can now loan?

If the Fed buys government securities, then

The Board of Governors of the Federal Reserve 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

The monetary multiplier is 3 and the change in the monetary base is $100,000. How much will the quantity of money increase?

If the Fed engages in quantitative easing, it has likely

M2 equals

Excess reserves are the

Regulating the amount of money in the United States is one of the most important responsibilities of the

If the Fed buys government securities from the non-bank public, then

In performing which of its primary functions does money solve the problem of the double coincidence of wants?

M2 consists of

________ in the currency drain ratio and ________ in the desired reserve ratio ________ the money multiplier.

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.The bank's reserves are equal to

A commercial bank's reserves are

Checks are not money because they

Which of the following is a thrift institution?

The required reserve ratio is the

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

The ________ the desired reserve ratio, the ________ the ________ in the quantity of money created from an initial increase of $100,000 in the monetary base.

The desired reserve ratio is 10 percent and banks have no excess reserves. Juliet deposits $300 in her bank. What is the maximum that Juliet's bank can now loan?

If the Fed buys government securities, then

The Board of Governors of the Federal Reserve 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

in the currency drain ratio and in the desired reserve ratio the money multiplier.

The the desired reserve ratio, the the in the quantity of money created from an initial increase of $100,000 in the monetary base.