Question 1

Banks generally earn the highest interest rate

Accepted Answer

A) on service charges on individuals' checking accounts. 
B) by making loans to business firms. 
C) by making mortgage loans to individuals. 
D) by making credit card loans. 
E) by buying government securities. 
A) on service charges on individuals' checking accounts. 
B) by making loans to business firms. 
C) by making mortgage loans to individuals. 
D) by making credit card loans. 
E) by buying government securities.

Question 2

The main policymaking committee of the Federal Reserve System is the

Accepted Answer

A) Federal Open Market Committee. 
B) Federal Monetary Policy Committee. 
C) Board of Governors. 
D) Committee on Money and Banking. 
E) Federal Committee on Monetary Conditions. 
A) Federal Open Market Committee. 
B) Federal Monetary Policy Committee. 
C) Board of Governors. 
D) Committee on Money and Banking. 
E) Federal Committee on Monetary Conditions.

Question 3

Money must be ________ which includes the fact that is should ________.

Accepted Answer

A) in physical form; not be transferable using electronic means 
B) accepted as a means of payment across countries' borders; not be fiat money 
C) generally accepted as a means of payment; be recognizable and divisible into small parts 
D) whatever is used in a barter system; transferable across countries' borders 
E) backed by gold; not decrease in value over time 
A) in physical form; not be transferable using electronic means 
B) accepted as a means of payment across countries' borders; not be fiat money 
C) generally accepted as a means of payment; be recognizable and divisible into small parts 
D) whatever is used in a barter system; transferable across countries' borders 
E) backed by gold; not decrease in value over time

Question 4

Money is any commodity or token that is

Accepted Answer

A) backed by gold. 
B) generally accepted as a means of measurement. 
C) generally accepted as a means of payment. 
D) issued by the government. 
E) a store of value. 
A) backed by gold. 
B) generally accepted as a means of measurement. 
C) generally accepted as a means of payment. 
D) issued by the government. 
E) a store of value.

Question 5

Suppose a bank has $1,000 in deposits and $100 in reserves. If the desired reserve ratio is 5 percent, how much can this bank increase its loans?

Accepted Answer

A) $0 
B) $400 
C) $80 
D) $50 
E) $100 
A) $0 
B) $400 
C) $80 
D) $50 
E) $100

Question 6

Money performs all of the following functions EXCEPT serving as a i. medium of exchange.
Ii. unit of account.
Iii. barter mechanism.

Accepted Answer

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

Question 7

Suppose the desired reserve ratio is 10 percent. If the Commerce Bank has total deposits of $20,000, total assets of $10,000, and actual reserves of $8000, the amount of excess reserves is

Accepted Answer

A) $2,000. 
B) $6,000. 
C) $800. 
D) $100. 
E) $0. 
A) $2,000. 
B) $6,000. 
C) $800. 
D) $100. 
E) $0.

Question 8

The medium of exchange is defined as

Accepted Answer

A) barter. 
B) the exchange of goods and services directly for goods and services. 
C) an object that is accepted in return for goods and services. 
D) credit cards. 
E) an item that can be stored and hold its value over time. 
A) barter. 
B) the exchange of goods and services directly for goods and services. 
C) an object that is accepted in return for goods and services. 
D) credit cards. 
E) an item that can be stored and hold its value over time.

Question 9

When the Fed purchases government securities,

Accepted Answer

A) excess reserves in the banking system increase, leading to more loans being made. 
B) required reserves in the banking system increase, leading to more loans being made. 
C) excess reserves in the banking system decrease, leading to fewer loans being made. 
D) required reserves in the banking system decrease, leading to fewer loans being made. 
E) the monetary base does not change. 
A) excess reserves in the banking system increase, leading to more loans being made. 
B) required reserves in the banking system increase, leading to more loans being made. 
C) excess reserves in the banking system decrease, leading to fewer loans being made. 
D) required reserves in the banking system decrease, leading to fewer loans being made. 
E) the monetary base does not change.

Question 10

The policy tool of "credit easing" refers to the ________.

Accepted Answer

A) Fed's purchase of private securities to stimulate banks' lending 
B) Fed's requirement that the federal government must lend to directly to home buyers 
C) federal government's requirement that the Fed must lend directly to home buyers 
D) Fed's lowering of the federal funds rate to zero 
E) Treasury's issuance of federal debt to finance home buying 
A) Fed's purchase of private securities to stimulate banks' lending 
B) Fed's requirement that the federal government must lend to directly to home buyers 
C) federal government's requirement that the Fed must lend directly to home buyers 
D) Fed's lowering of the federal funds rate to zero 
E) Treasury's issuance of federal debt to finance home buying

Question 11

The Fed conducts an open market operation and increases a bank's excess reserves by $2,000. Explain the first five rounds of the money creation process if the desired reserve ratio is 25 percent and if people keep no currency outside of the banking system.

Accepted Answer

In round one, the bank gains $2,000 of r

Question 12

When the Fed buys securities from the public, banks' reserves ________ and the quantity of money ________.

Accepted Answer

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

Question 13

The money multiplier is the

Accepted Answer

A) fraction of the monetary base that is kept in currency. 
B) factor by which a change in the monetary base is multiplied to give the change in the quantity of money. 
C) factor by which a change in the deposits base is multiplied to give the change in the monetary base. 
D) proportion by which a change in the quantity of money changes the monetary base. 
E) number of times that the Fed conducts open market operations in a month. 
A) fraction of the monetary base that is kept in currency. 
B) factor by which a change in the monetary base is multiplied to give the change in the quantity of money. 
C) factor by which a change in the deposits base is multiplied to give the change in the monetary base. 
D) proportion by which a change in the quantity of money changes the monetary base. 
E) number of times that the Fed conducts open market operations in a month.

Question 14

If the desired reserve ratio decreases, then

Accepted Answer

A) banks' desired reserves increase and their excess reserves decrease. 
B) bank customers become more willing to make deposits in banks. 
C) banks are able to make more loans. 
D) banks are forced to buy fewer government securities. 
E) banks' desired reserves decrease and their excess reserves do not change. 
A) banks' desired reserves increase and their excess reserves decrease. 
B) bank customers become more willing to make deposits in banks. 
C) banks are able to make more loans. 
D) banks are forced to buy fewer government securities. 
E) banks' desired reserves decrease and their excess reserves do not change.

Question 15

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

Accepted Answer

The bank can make loans equal to its exc

Question 16

When Grayce deposits $4,000 cash in her checkable deposit at the Beach Bank and the Beach Bank's excess reserves increase by $3,600, the desired reserve ratio is

Accepted Answer

A) 5 percent. 
B) 10 percent. 
C) 15 percent. 
D) 90 percent. 
E) $400. 
A) 5 percent. 
B) 10 percent. 
C) 15 percent. 
D) 90 percent. 
E) $400.

Question 17

Which of the following is a tool the Fed uses to adjust the quantity of money?
I. The Fed can change the interest rate banks charge for loans to their prime customers.
Ii. The Fed can change the discount rate on loans to banks.
Iii. The Fed can buy or sell government securities.

Accepted Answer

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

Question 18

Which of the following reduces the money multiplier?

Accepted Answer

A) Banks loan all their excess reserves. 
B) Bank customers hold some of the loan proceeds as currency outside the banking system. 
C) The Fed reduces the required reserve ratio. 
D) Banks impose a currency drain on bank customers. 
E) The Fed sells U.S. government securities. 
A) Banks loan all their excess reserves. 
B) Bank customers hold some of the loan proceeds as currency outside the banking system. 
C) The Fed reduces the required reserve ratio. 
D) Banks impose a currency drain on bank customers. 
E) The Fed sells U.S. government securities.

Question 19

Quantitative easing by the Fed refers to

Accepted Answer

A) the creation of bank reserves by engaging in large-scale open market operation at very low interest rates. 
B) selling private securities issued by the Fed. 
C) decreasing the money supply during a recession to prevent inflation. 
D) lowering the federal funds rate while increasing the discount rate. 
E) lowering the required reserve ratio to zero percent. 
A) the creation of bank reserves by engaging in large-scale open market operation at very low interest rates. 
B) selling private securities issued by the Fed. 
C) decreasing the money supply during a recession to prevent inflation. 
D) lowering the federal funds rate while increasing the discount rate. 
E) lowering the required reserve ratio to zero percent.

Question 20

Who regulates the quantity of money circulating in the economy?

Accepted Answer

A) the Federal Reserve 
B) the banking system 
C) the U.S. Congress 
D) the President of the United States 
E) The U.S. Congress and the President share the control. 
A) the Federal Reserve 
B) the banking system 
C) the U.S. Congress 
D) the President of the United States 
E) The U.S. Congress and the President share the control.

Banks generally earn the highest interest rate

The main policymaking committee of the Federal Reserve System is the

Money must be which includes the fact that is should .

Money is any commodity or token that is

Suppose a bank has $1,000 in deposits and $100 in reserves. If the desired reserve ratio is 5 percent, how much can this bank increase its loans?

Money performs all of the following functions EXCEPT serving as a i. medium of exchange. Ii. unit of account. Iii. barter mechanism.

Suppose the desired reserve ratio is 10 percent. If the Commerce Bank has total deposits of $20,000, total assets of $10,000, and actual reserves of $8000, the amount of excess reserves is

The medium of exchange is defined as

When the Fed purchases government securities,

The policy tool of "credit easing" refers to the ________.

The Fed conducts an open market operation and increases a bank's excess reserves by $2,000. Explain the first five rounds of the money creation process if the desired reserve ratio is 25 percent and if people keep no currency outside of the banking system.

When the Fed buys securities from the public, banks' reserves and the quantity of money .

The money multiplier is the

If the desired reserve ratio decreases, then

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

When Grayce deposits $4,000 cash in her checkable deposit at the Beach Bank and the Beach Bank's excess reserves increase by $3,600, the desired reserve ratio is

Which of the following is a tool the Fed uses to adjust the quantity of money? I. The Fed can change the interest rate banks charge for loans to their prime customers. Ii. The Fed can change the discount rate on loans to banks. Iii. The Fed can buy or sell government securities.

Which of the following reduces the money multiplier?

Quantitative easing by the Fed refers to

Who regulates the quantity of money circulating in the economy?

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

Banks generally earn the highest interest rate

The main policymaking committee of the Federal Reserve System is the

Money must be ________ which includes the fact that is should ________.

Money is any commodity or token that is

Suppose a bank has $1,000 in deposits and $100 in reserves. If the desired reserve ratio is 5 percent, how much can this bank increase its loans?

Money performs all of the following functions EXCEPT serving as a i. medium of exchange. Ii. unit of account. Iii. barter mechanism.

Suppose the desired reserve ratio is 10 percent. If the Commerce Bank has total deposits of $20,000, total assets of $10,000, and actual reserves of $8000, the amount of excess reserves is

The medium of exchange is defined as

When the Fed purchases government securities,

The policy tool of "credit easing" refers to the ________.

The Fed conducts an open market operation and increases a bank's excess reserves by $2,000. Explain the first five rounds of the money creation process if the desired reserve ratio is 25 percent and if people keep no currency outside of the banking system.

When the Fed buys securities from the public, banks' reserves ________ and the quantity of money ________.

The money multiplier is the

If the desired reserve ratio decreases, then

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

When Grayce deposits $4,000 cash in her checkable deposit at the Beach Bank and the Beach Bank's excess reserves increase by $3,600, the desired reserve ratio is

Which of the following is a tool the Fed uses to adjust the quantity of money? I. The Fed can change the interest rate banks charge for loans to their prime customers. Ii. The Fed can change the discount rate on loans to banks. Iii. The Fed can buy or sell government securities.

Which of the following reduces the money multiplier?

Quantitative easing by the Fed refers to

Who regulates the quantity of money circulating in the economy?

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

Money must be which includes the fact that is should .

When the Fed buys securities from the public, banks' reserves and the quantity of money .