Question 1

When the Fed buys or sells securities, it is conducting ________ operation.

Accepted Answer

A) a government debt 
B) an open market 
C) a money multiplier 
D) a deposit 
E) a currency 
A) a government debt 
B) an open market 
C) a money multiplier 
D) a deposit 
E) a currency

Question 2

Credit cards are

Accepted Answer

A) a form of money used to make purchases. 
B) a special ID card that is not money. 
C) a special ID card that is the same as money. 
D) a form of money that is not generally accepted. 
E) included in the M1 measure of money. 
A) a form of money used to make purchases. 
B) a special ID card that is not money. 
C) a special ID card that is the same as money. 
D) a form of money that is not generally accepted. 
E) included in the M1 measure of money.

Question 3

When a bank receives $100,000 in new deposits, the amount of loans the bank can make is limited by

Accepted Answer

A) federal law. 
B) the annual federal budget. 
C) the Treasury Department. 
D) its desired reserve ratio. 
E) state law, with banks in different states being able to make different amounts of loans. 
A) federal law. 
B) the annual federal budget. 
C) the Treasury Department. 
D) its desired reserve ratio. 
E) state law, with banks in different states being able to make different amounts of loans.

Question 4

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

Accepted Answer

The statement is false. Credit cards are

Question 5

When part of a bank loan does not return to the banking system but rather remains outside the banking system as currency, then the money multiplier ________ in size and the amount of money created by an open market operation ________.

Accepted Answer

A) increases; decreases 
B) does not change; increases 
C) decreases; decreases 
D) increases; increases 
E) decreases; does not change 
A) increases; decreases 
B) does not change; increases 
C) decreases; decreases 
D) increases; increases 
E) decreases; does not change

Question 6

The Fed buys $25,000 of government securities. The desired reserve ratio is 20 percent and the currency drain ratio 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 7

As the central bank, the Federal Reserve System provides banking services to

Accepted Answer

A) individuals and controls the quantity of money. 
B) the government and the stock market. 
C) foreign corporations and determines the exchange rate. 
D) banks and regulates financial institutions and markets. 
E) banks and determines how much the U.S. government will borrow. 
A) individuals and controls the quantity of money. 
B) the government and the stock market. 
C) foreign corporations and determines the exchange rate. 
D) banks and regulates financial institutions and markets. 
E) banks and determines how much the U.S. government will borrow.

Question 8

Which of the following describe the "invention" of banking?

Accepted Answer

A) The British Empire created a banking system to fund its exploration of the New World. 
B) Members of the New York Stock Exchange founded the Bank of America in the 1700s. 
C) Goldsmiths in the sixteenth century issued gold receipts which entitled its owners to reclaim their gold on demand. 
D) Clergy in the Renaissance created the banking system to help further the growth of the church. 
E) The United States government founded the Federal Reserve in 1913. 
A) The British Empire created a banking system to fund its exploration of the New World. 
B) Members of the New York Stock Exchange founded the Bank of America in the 1700s. 
C) Goldsmiths in the sixteenth century issued gold receipts which entitled its owners to reclaim their gold on demand. 
D) Clergy in the Renaissance created the banking system to help further the growth of the church. 
E) The United States government founded the Federal Reserve in 1913.

Question 9

The desired reserve ratio is 10 percent. Joe deposits $1,000 in Bank A. Bank A keeps its minimum desired reserves and lends the excess to Fred. Fred spends his loan at J.C. Penney. J.C. Penney deposits the check it receives from Fred in Bank B. Bank B keeps its minimum desired reserves and lends the excess to Mary. How much can Bank B lend to Mary?

Accepted Answer

A) $900 
B) $90 
C) $810 
D) $100 
E) $1,000 
A) $900 
B) $90 
C) $810 
D) $100 
E) $1,000

Question 10

For a commodity or token to be money it must

Accepted Answer

A) be accepted in exchange for all other goods and services. 
B) have a double coincidence of wants. 
C) be backed by government precious metals, like gold. 
D) be paper. 
E) be issued by the government or a government agency. 
A) be accepted in exchange for all other goods and services. 
B) have a double coincidence of wants. 
C) be backed by government precious metals, like gold. 
D) be paper. 
E) be issued by the government or a government agency.

Question 11

What are the three types of financial institutions that accept deposits that are part of the U.S. money supply?
 Briefly describe each of the three types of financial institutions.

Accepted Answer

The three institutions are commercial ba

Question 12

When you join the local organic food market and then buy produce each month, money is used as

Accepted Answer

A) only a store of value. 
B) only a unit of account. 
C) a medium of exchange and a store of value. 
D) a medium of exchange and a unit of account. 
E) a store of value and a unit of account. 
A) only a store of value. 
B) only a unit of account. 
C) a medium of exchange and a store of value. 
D) a medium of exchange and a unit of account. 
E) a store of value and a unit of account.

Question 13

C/D is the currency drain ratio and R/D is the desired reserve ratio. The money multiplier equals

Accepted Answer

A)  $\frac { 1 + C / D } { R / D + C / D }$ 
B)  $\frac { 1 + R / D } { R / D + C / D }$ 
C)  $\frac { 1 + R / D } { 1 + C / D }$ 
D)  $\frac { R / D - C / D } { 1 + R / D }$ 
E)  $\frac { R / D + C / D } { 1 + C / D }$ 
A)  $\frac { 1 + C / D } { R / D + C / D }$ 
B)  $\frac { 1 + R / D } { R / D + C / D }$ 
C)  $\frac { 1 + R / D } { 1 + C / D }$ 
D)  $\frac { R / D - C / D } { 1 + R / D }$ 
E)  $\frac { R / D + C / D } { 1 + C / D }$

Question 14

Does an open market operation in which the Fed buys securities from the general public decrease or increase the banking system's reserves?

Accepted Answer

An open market purchase of gov

Question 15

Banks can make loans up to an amount equal to their

Accepted Answer

A) total deposits. 
B) total reserves. 
C) required reserves. 
D) excess reserves. 
E) total government securities. 
A) total deposits. 
B) total reserves. 
C) required reserves. 
D) excess reserves. 
E) total government securities.

Question 16

The Commerce Bank of Beverly Hills has total deposits of $1,000,000 and total reserves of $220,000. The desired reserve ratio is 10 percent. The bank's excess reserves are

Accepted Answer

A) $22,000. 
B) $120,000. 
C) $100,000. 
D) $80,000. 
E) $1,000,000. 
A) $22,000. 
B) $120,000. 
C) $100,000. 
D) $80,000. 
E) $1,000,000.

Question 17

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 18

If the Fed makes an open market purchase of $1 million of government securities, the monetary base

Accepted Answer

A) is decreased by $1 million. 
B) is unchanged in size, though its composition changes. 
C) is increased by $1 million. 
D) will decrease by a multiple of $1 million over time. 
E) will increase by a multiple of $1 million over time. 
A) is decreased by $1 million. 
B) is unchanged in size, though its composition changes. 
C) is increased by $1 million. 
D) will decrease by a multiple of $1 million over time. 
E) will increase by a multiple of $1 million over time.

Question 19

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 20

Which of the following are included in the M2 definition of money?

Accepted Answer

A) currency outside of banks and checkable deposits 
B) currency outside of banks and credit lines on credit cards 
C) time deposits and the value of prime grade bonds 
D) currency both inside and outside of banks 
E) currency inside of banks and banks' reserves 
A) currency outside of banks and checkable deposits 
B) currency outside of banks and credit lines on credit cards 
C) time deposits and the value of prime grade bonds 
D) currency both inside and outside of banks 
E) currency inside of banks and banks' reserves

When the Fed buys or sells securities, it is conducting ________ operation.

Credit cards are

When a bank receives $100,000 in new deposits, the amount of loans the bank can make is limited by

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

When part of a bank loan does not return to the banking system but rather remains outside the banking system as currency, then the money multiplier in size and the amount of money created by an open market operation .

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

As the central bank, the Federal Reserve System provides banking services to

Which of the following describe the "invention" of banking?

For a commodity or token to be money it must

What are the three types of financial institutions that accept deposits that are part of the U.S. money supply? Briefly describe each of the three types of financial institutions.

When you join the local organic food market and then buy produce each month, money is used as

C/D is the currency drain ratio and R/D is the desired reserve ratio. The money multiplier equals

Does an open market operation in which the Fed buys securities from the general public decrease or increase the banking system's reserves?

Banks can make loans up to an amount equal to their

The Commerce Bank of Beverly Hills has total deposits of $1,000,000 and total reserves of $220,000. The desired reserve ratio is 10 percent. The bank's excess reserves are

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

If the Fed makes an open market purchase of $1 million of government securities, the monetary base

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

Which of the following are included in the M2 definition of money?

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

When the Fed buys or sells securities, it is conducting ________ operation.

Credit cards are

When a bank receives $100,000 in new deposits, the amount of loans the bank can make is limited by

"Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?

When part of a bank loan does not return to the banking system but rather remains outside the banking system as currency, then the money multiplier ________ in size and the amount of money created by an open market operation ________.

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

As the central bank, the Federal Reserve System provides banking services to

Which of the following describe the "invention" of banking?

For a commodity or token to be money it must

What are the three types of financial institutions that accept deposits that are part of the U.S. money supply? Briefly describe each of the three types of financial institutions.

When you join the local organic food market and then buy produce each month, money is used as

C/D is the currency drain ratio and R/D is the desired reserve ratio. The money multiplier equals

Does an open market operation in which the Fed buys securities from the general public decrease or increase the banking system's reserves?

Banks can make loans up to an amount equal to their

The Commerce Bank of Beverly Hills has total deposits of $1,000,000 and total reserves of $220,000. The desired reserve ratio is 10 percent. The bank's excess reserves are

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

If the Fed makes an open market purchase of $1 million of government securities, the monetary base

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

Which of the following are included in the M2 definition of money?

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

When part of a bank loan does not return to the banking system but rather remains outside the banking system as currency, then the money multiplier in size and the amount of money created by an open market operation .

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