Question 1

To increase the quantity of money in the economy, the Federal Reserve can

Accepted Answer

A) print more money and give it to the banks. 
B) increase the required reserve ratio. 
C) buy government bonds in an open market operation. 
D) sell government bonds in an open market operation. 
E) cut taxes. 
A) print more money and give it to the banks. 
B) increase the required reserve ratio. 
C) buy government bonds in an open market operation. 
D) sell government bonds in an open market operation. 
E) cut taxes.

Question 2

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?

Accepted Answer

When the Fed buys $50,000 of government

Question 3

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________.

Accepted Answer

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

Question 4

What is the central bank of the United States?

Accepted Answer

A) There is no central bank in the United States. 
B) The Department of Treasury 
C) The Federal Reserve System 
D) Each state has its own central bank, which, when all taken together, constitute the central bank of the United States. 
E) The U.S. Mint 
A) There is no central bank in the United States. 
B) The Department of Treasury 
C) The Federal Reserve System 
D) Each state has its own central bank, which, when all taken together, constitute the central bank of the United States. 
E) The U.S. Mint

Question 5

The desired reserve ratio is 3 percent. Robert deposits $3,000 in Bank America. Bank America keeps its minimum desired reserves and lends the excess to Fredrica. How much does Bank America lend to Fredrica?

Accepted Answer

A) $3,000 
B) $2,910 
C) $300 
D) $2700 
E) $900 
A) $3,000 
B) $2,910 
C) $300 
D) $2700 
E) $900

Question 6

In order to influence the interest rate, the Federal Reserve System can immediately adjust the

Accepted Answer

A) reserves of the banking system. 
B) inflation level. 
C) unemployment rate. 
D) taxes that citizens must pay. 
E) amount the government borrows. 
A) reserves of the banking system. 
B) inflation level. 
C) unemployment rate. 
D) taxes that citizens must pay. 
E) amount the government borrows.

Question 7

The discount rate is the

Accepted Answer

A) interest rate paid when a bank borrows reserves from another bank. 
B) interest rate paid when a commercial bank borrows reserves from the Fed. 
C) reduction in the interest rate given to the bank's best customers. 
D) another name for the long-term interest rate. 
E) interest rate the Fed pays banks for the reserves the banks keep at the Fed. 
A) interest rate paid when a bank borrows reserves from another bank. 
B) interest rate paid when a commercial bank borrows reserves from the Fed. 
C) reduction in the interest rate given to the bank's best customers. 
D) another name for the long-term interest rate. 
E) interest rate the Fed pays banks for the reserves the banks keep at the Fed.

Question 8

The Federal Open Market Committee is

Accepted Answer

A) the main policy making body of the Fed. 
B) a seven-member board, each serving a 14-year term. 
C) comprised of the presidents of the 12 Federal Reserve banks. 
D) another name for the Board of Governors. 
E) the government committee charged with determining income tax rates. 
A) the main policy making body of the Fed. 
B) a seven-member board, each serving a 14-year term. 
C) comprised of the presidents of the 12 Federal Reserve banks. 
D) another name for the Board of Governors. 
E) the government committee charged with determining income tax rates.

Question 9

The monetary base is the sum of

Accepted Answer

A) Federal Reserve notes and banks' reserves at the Fed. 
B) coins, Federal Reserve notes, and individuals' deposits at the Fed. 
C) Federal Reserve notes, Treasury deposits at the Fed, banks' reserves at the Fed, and coins. 
D) coins, Federal Reserve notes, and banks' reserves at the Fed. 
E) coins, Federal Reserve notes, and gold at the Fed. 
A) Federal Reserve notes and banks' reserves at the Fed. 
B) coins, Federal Reserve notes, and individuals' deposits at the Fed. 
C) Federal Reserve notes, Treasury deposits at the Fed, banks' reserves at the Fed, and coins. 
D) coins, Federal Reserve notes, and banks' reserves at the Fed. 
E) coins, Federal Reserve notes, and gold at the Fed.

Question 10

Assume First Central Bank has a desired reserve ratio of 15 percent; $80,000 in total deposits, loans equal to $60,000, and has $20,000 in actual reserves. First Central can make additional loans totaling

Accepted Answer

A) $8,000. 
B) $12,000. 
C) $20,000. 
D) $60,000. 
E) $80,000. 
A) $8,000. 
B) $12,000. 
C) $20,000. 
D) $60,000. 
E) $80,000.

Question 11

Define money and list its functions.

Accepted Answer

Money is any commodity or toke

Question 12

If the money multiplier is 3.0, a $1,000 increase in the monetary base

Accepted Answer

A) increases quantity of money by $3,000. 
B) decreases quantity of money by $3,000. 
C) increases the monetary base by $300. 
D) increases the money multiplier by 3 percent. 
E) decreases the quantity of money by 3 percent. 
A) increases quantity of money by $3,000. 
B) decreases quantity of money by $3,000. 
C) increases the monetary base by $300. 
D) increases the money multiplier by 3 percent. 
E) decreases the quantity of money by 3 percent.

Question 13

Checkable deposits are money because

Accepted Answer

A) they are protected by the Federal Reserve. 
B) they are guaranteed by banks. 
C) checks bounce when there are not enough funds to cash them. 
D) they can be converted into currency on demand and are used directly as a means of payment. 
E) only banks and other financial institutions can offer them. 
A) they are protected by the Federal Reserve. 
B) they are guaranteed by banks. 
C) checks bounce when there are not enough funds to cash them. 
D) they can be converted into currency on demand and are used directly as a means of payment. 
E) only banks and other financial institutions can offer them.

Question 14

If you deposit $1,000 in cash in your checkable deposit at your bank, the quantity of M1 immediately

Accepted Answer

A) increases by $1,000. 
B) decreases by $1,000. 
C) increases by $2,000. 
D) does not change in size. 
E) changes, but more information about the required reserve ratio is necessary to determine the amount of the change. 
A) increases by $1,000. 
B) decreases by $1,000. 
C) increases by $2,000. 
D) does not change in size. 
E) changes, but more information about the required reserve ratio is necessary to determine the amount of the change.

Question 15

When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1

Accepted Answer

A) decreases. 
B) does not change. 
C) increases. 
D) changes, but the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank. 
E) changes only if Bank of America does not have excess reserves. 
A) decreases. 
B) does not change. 
C) increases. 
D) changes, but the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank. 
E) changes only if Bank of America does not have excess reserves.

Question 16

A bank reports reserves of $100,000, government securities of $250,000, loans of $750,000, checkable deposits of $900,000, and owners' equity of $200,000. The desired reserve ratio is 10 percent and the bank wants to hold as reserves only the amount it is required to hold. What is the amount of excess reserves for this bank?
 Show your work.

Accepted Answer

Excess reserves equal the actual reserve

Question 17

Money serves as a

Accepted Answer

A) means of payment, legal obligation, and public tax. 
B) medium of exchange, unit of account, and store of value. 
C) means of settling debts, transaction lubricant, and private commodity. 
D) means of worker exploitation and capitalist enrichment. 
E) means to conduct barter transactions. 
A) means of payment, legal obligation, and public tax. 
B) medium of exchange, unit of account, and store of value. 
C) means of settling debts, transaction lubricant, and private commodity. 
D) means of worker exploitation and capitalist enrichment. 
E) means to conduct barter transactions.

Question 18

Describe how actual reserves are calculated. Explain the difference between required reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Accepted Answer

Actual reserves are equal to the bank's

Question 19

Fiat money means

Accepted Answer

A) Italian currency. 
B) money's value does not change. 
C) the government has decreed that something is money. 
D) the money can be converted into gold. 
E) only currency counts as money. 
A) Italian currency. 
B) money's value does not change. 
C) the government has decreed that something is money. 
D) the money can be converted into gold. 
E) only currency counts as money.

Question 20

The currency drain reduces the amount of

Accepted Answer

A) reserves available to banks to make loans. 
B) currency the Fed has outstanding in the economy. 
C) currency available for banks to borrow from the Fed. 
D) the monetary base. 
E) open market operations the Fed can make. 
A) reserves available to banks to make loans. 
B) currency the Fed has outstanding in the economy. 
C) currency available for banks to borrow from the Fed. 
D) the monetary base. 
E) open market operations the Fed can make.

To increase the quantity of money in the economy, the Federal Reserve can

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves , bank deposits , and the quantity of money .

What is the central bank of the United States?

The desired reserve ratio is 3 percent. Robert deposits $3,000 in Bank America. Bank America keeps its minimum desired reserves and lends the excess to Fredrica. How much does Bank America lend to Fredrica?

In order to influence the interest rate, the Federal Reserve System can immediately adjust the

The discount rate is the

The Federal Open Market Committee is

The monetary base is the sum of

Assume First Central Bank has a desired reserve ratio of 15 percent; $80,000 in total deposits, loans equal to $60,000, and has $20,000 in actual reserves. First Central can make additional loans totaling

Define money and list its functions.

If the money multiplier is 3.0, a $1,000 increase in the monetary base

Checkable deposits are money because

If you deposit $1,000 in cash in your checkable deposit at your bank, the quantity of M1 immediately

When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1

Money serves as a

Describe how actual reserves are calculated. Explain the difference between required reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Fiat money means

The currency drain reduces the amount of

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

To increase the quantity of money in the economy, the Federal Reserve can

The Fed conducts an open market operation and buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?

When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________.

What is the central bank of the United States?

The desired reserve ratio is 3 percent. Robert deposits $3,000 in Bank America. Bank America keeps its minimum desired reserves and lends the excess to Fredrica. How much does Bank America lend to Fredrica?

In order to influence the interest rate, the Federal Reserve System can immediately adjust the

The discount rate is the

The Federal Open Market Committee is

The monetary base is the sum of

Assume First Central Bank has a desired reserve ratio of 15 percent; $80,000 in total deposits, loans equal to $60,000, and has $20,000 in actual reserves. First Central can make additional loans totaling

Define money and list its functions.

If the money multiplier is 3.0, a $1,000 increase in the monetary base

Checkable deposits are money because

If you deposit $1,000 in cash in your checkable deposit at your bank, the quantity of M1 immediately

When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1

Money serves as a

Describe how actual reserves are calculated. Explain the difference between required reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

Fiat money means

The currency drain reduces the amount of

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 the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves , bank deposits , and the quantity of money .