Question 1

At any point in time, a single bank can loan an amount equal to

Accepted Answer

A) its excess reserves. 
B) its required reserves. 
C) its government securities. 
D) the amount of loans the bank made in the past. 
E) its total reserves. 
A) its excess reserves. 
B) its required reserves. 
C) its government securities. 
D) the amount of loans the bank made in the past. 
E) its total reserves.

Question 2

The quantity of money decreases if

Accepted Answer

A) the currency drain ratio 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 ratio 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 3

If currency outside of banks is $800 billion; traveler's checks are $10 billion; checkable deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market funds and other deposits are $800 billion, then M2 equals ________ billion.

Accepted Answer

A) $7,310 
B) $5,800 
C) $2,510 
D) $1,510 
E) $710 
A) $7,310 
B) $5,800 
C) $2,510 
D) $1,510 
E) $710

Question 4

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank. As a result, the monetary base ________, and the quantity of money will ________ $50 million due to the ________.

Accepted Answer

A)  increases; increase by more than; money multiplier 
B)  decreases; decrease by more than; money multiplier 
C)  increases; increase by more than; expenditure multiplier 
D) decreases; decrease by less than; expenditure multiplier 
E) increases; decrease by; currency drain 
A)  increases; increase by more than; money multiplier 
B)  decreases; decrease by more than; money multiplier 
C)  increases; increase by more than; expenditure multiplier 
D) decreases; decrease by less than; expenditure multiplier 
E) increases; decrease by; currency drain

Question 5

The unit of account is defined as

Accepted Answer

A) the exchange of goods and services directly for other goods and services. 
B) barter. 
C) an object that is accepted in return for goods and services. 
D) an agreed upon measure for stating prices of goods and services. 
E) the medium of exchange. 
A) the exchange of goods and services directly for other goods and services. 
B) barter. 
C) an object that is accepted in return for goods and services. 
D) an agreed upon measure for stating prices of goods and services. 
E) the medium of exchange.

Question 6

Money is used as a ________ when you visit the local farmers' market and compare prices across different vendors.

Accepted Answer

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

Question 7

Which of the following is NOT held as an asset by banks?

Accepted Answer

A) reserves 
B) loans 
C) securities 
D) currency in the banks' vaults 
E) checkable deposits 
A) reserves 
B) loans 
C) securities 
D) currency in the banks' vaults 
E) checkable deposits

Question 8

Money market mutual funds

Accepted Answer

A) are included in M2 but not M1. 
B) are included in M1 but not M2. 
C) are included in M1 and M2. 
D) are the largest part of the monetary base. 
E) None of the above are correct. 
A) are included in M2 but not M1. 
B) are included in M1 but not M2. 
C) are included in M1 and M2. 
D) are the largest part of the monetary base. 
E) None of the above are correct.

Question 9

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

Accepted Answer

Reserves include the bank's de

Question 10

An increase in the currency drain ratio

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 11

The Citizens First Bank sells $100,000 of government securities to the Fed. This sale immediately

Accepted Answer

A) decreases the quantity of money. 
B) decreases the bank's checkable deposits. 
C) increases the bank's reserves. 
D) decreases the bank's assets. 
E) increases the bank's required reserves. 
A) decreases the quantity of money. 
B) decreases the bank's checkable deposits. 
C) increases the bank's reserves. 
D) decreases the bank's assets. 
E) increases the bank's required reserves.

Question 12

Open market operations are when the Fed buys or sells

Accepted Answer

A) government securities from the government. 
B) corporate securities from banks or some other business. 
C) government securities from banks or some other business. 
D) corporate securities from the government. 
E) gold. 
A) government securities from the government. 
B) corporate securities from banks or some other business. 
C) government securities from banks or some other business. 
D) corporate securities from the government. 
E) gold.

Question 13

Open market operations are the

Accepted Answer

A) purchase or sale of government securities by the Fed. 
B) lending of reserves to the banking system by the Fed. 
C) borrowing of reserves by the Fed from the banking system. 
D) minimum percentage of loans that banks must retain as reserves in the open market. 
E) purchase or sale of gold by the Fed. 
A) purchase or sale of government securities by the Fed. 
B) lending of reserves to the banking system by the Fed. 
C) borrowing of reserves by the Fed from the banking system. 
D) minimum percentage of loans that banks must retain as reserves in the open market. 
E) purchase or sale of gold by the Fed.

Question 14

The Board of Governors has

Accepted Answer

A) seven members appointed to 14-year terms. 
B) 14 members appointed to 10-year terms. 
C) four members appointed to seven-year terms. 
D) 14 members appointed to four-year terms. 
E) seven members appointed for life. 
A) seven members appointed to 14-year terms. 
B) 14 members appointed to 10-year terms. 
C) four members appointed to seven-year terms. 
D) 14 members appointed to four-year terms. 
E) seven members appointed for life.

Question 15

In December 2009, currency was $400 billion, traveler's checks were $5 billion; checkable deposits owned by individuals and businesses were $600 billion, saving deposits were $2,00 billion, time deposits were $1,500 billion; and money market funds were $1,200 billion. What was the M1 in December 2009?

Accepted Answer

A) M1 = $405 billion 
B) M1 = $1,005 billion 
C) M1 = $3,005 billion 
D) M1 = $3500 billion 
E) M1 = $3505 billion 
A) M1 = $405 billion 
B) M1 = $1,005 billion 
C) M1 = $3,005 billion 
D) M1 = $3500 billion 
E) M1 = $3505 billion

Question 16

When money is used to compare the relative price of a burrito and a taco, money is being used as a

Accepted Answer

A) medium of exchange. 
B) store of value. 
C) measurement of inflation. 
D) unit of account. 
E) token of bartering. 
A) medium of exchange. 
B) store of value. 
C) measurement of inflation. 
D) unit of account. 
E) token of bartering.

Question 17

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 18

Which of the following is a policy tool of the Fed?
I. setting the required reserve ratios
Ii. conducting open market operations
Iii. quantitative easing

Accepted Answer

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

Question 19

In response to the financial crisis in 2008, the Fed created which of the following policy tools?

Accepted Answer

A) quantitative easing 
B) the required reserve ratio 
C) the discount rate 
D) the federal funds rate 
E) open market operations 
A) quantitative easing 
B) the required reserve ratio 
C) the discount rate 
D) the federal funds rate 
E) open market operations

Question 20

When people make deposits of currency into a bank, the quantity of M1

Accepted Answer

A) immediately decreases by the amount of the deposit. 
B) immediately increases by the amount of the deposit. 
C) does not immediately change. 
D) immediately changes but whether it increases or decreases depends on whether the bank had excess reserves or did not have excess reserves. 
E) changes only if the deposit is an open market operation. 
A) immediately decreases by the amount of the deposit. 
B) immediately increases by the amount of the deposit. 
C) does not immediately change. 
D) immediately changes but whether it increases or decreases depends on whether the bank had excess reserves or did not have excess reserves. 
E) changes only if the deposit is an open market operation.

At any point in time, a single bank can loan an amount equal to

The quantity of money decreases if

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank. As a result, the monetary base , and the quantity of money will $50 million due to the .

The unit of account is defined as

Money is used as a ________ when you visit the local farmers' market and compare prices across different vendors.

Which of the following is NOT held as an asset by banks?

Money market mutual funds

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

An increase in the currency drain ratio

The Citizens First Bank sells $100,000 of government securities to the Fed. This sale immediately

Open market operations are when the Fed buys or sells

Open market operations are the

The Board of Governors has

When money is used to compare the relative price of a burrito and a taco, money is being used as a

The Federal Reserve System is organized into

Which of the following is a policy tool of the Fed? I. setting the required reserve ratios Ii. conducting open market operations Iii. quantitative easing

In response to the financial crisis in 2008, the Fed created which of the following policy tools?

When people make deposits of currency into a bank, the quantity of M1

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

At any point in time, a single bank can loan an amount equal to

The quantity of money decreases if

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank. As a result, the monetary base ________, and the quantity of money will ________ $50 million due to the ________.

The unit of account is defined as

Money is used as a ________ when you visit the local farmers' market and compare prices across different vendors.

Which of the following is NOT held as an asset by banks?

Money market mutual funds

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

An increase in the currency drain ratio

The Citizens First Bank sells $100,000 of government securities to the Fed. This sale immediately

Open market operations are when the Fed buys or sells

Open market operations are the

The Board of Governors has

When money is used to compare the relative price of a burrito and a taco, money is being used as a

The Federal Reserve System is organized into

Which of the following is a policy tool of the Fed? I. setting the required reserve ratios Ii. conducting open market operations Iii. quantitative easing

In response to the financial crisis in 2008, the Fed created which of the following policy tools?

When people make deposits of currency into a bank, the quantity of M1

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

Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank. As a result, the monetary base , and the quantity of money will $50 million due to the .