Question 1

If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the

Accepted Answer

A) assets of First Union Bank decrease by $100,000. 
B) assets of the Fed decrease by $100,000. 
C) assets of First Union Bank change in composition but not in the amount. 
D) liabilities of the Fed change in composition but not in amount. 
E) liabilities of First Union decrease by $100,000. 
A) assets of First Union Bank decrease by $100,000. 
B) assets of the Fed decrease by $100,000. 
C) assets of First Union Bank change in composition but not in the amount. 
D) liabilities of the Fed change in composition but not in amount. 
E) liabilities of First Union decrease by $100,000.

Question 2

"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement-is it correct or incorrect?

Accepted Answer

The statement is incorrect on several di

Question 3

Which of the following is NOT one of the Fed's monetary policy tools?

Accepted Answer

A) changing the discount rate 
B) conducting open market purchases of government securities 
C) changing the coupon rate 
D) changing the required reserve ratio 
E) conducting open market sales of government securities 
A) changing the discount rate 
B) conducting open market purchases of government securities 
C) changing the coupon rate 
D) changing the required reserve ratio 
E) conducting open market sales of government securities

Question 4

The largest category of commercial banks' assets is

Accepted Answer

A) loans. 
B) reserves. 
C) currency. 
D) securities. 
E) checkable deposits. 
A) loans. 
B) reserves. 
C) currency. 
D) securities. 
E) checkable deposits.

Question 5

During the 2008 financial crisis, banks restricted ________, and the M2 money multiplier ________.

Accepted Answer

A) lending; decreased 
B) lending; increased 
C) deposits; increased 
D) buying securities; increased 
E) deposits; decreased 
A) lending; decreased 
B) lending; increased 
C) deposits; increased 
D) buying securities; increased 
E) deposits; decreased

Question 6

The required reserve ratio is 20 percent and banks have no excess reserves. Katie deposits $300 in her bank. What are the bank's excess reserves immediately after Katie makes her deposit?

Accepted Answer

A) $30 
B) $90 
C) $240 
D) $60 
E) $300 
A) $30 
B) $90 
C) $240 
D) $60 
E) $300

Question 7

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent, the bank can loan a maximum of

Accepted Answer

A) $50,000. 
B) $40,000. 
C) $100,000. 
D) $90,000. 
E) $60,000. 
A) $50,000. 
B) $40,000. 
C) $100,000. 
D) $90,000. 
E) $60,000.

Question 8

The Fed is a central bank and as such

Accepted Answer

A) does business only with the federal government. 
B) provides banking services to banks but not individuals. 
C) provides banking services to individuals and firms. 
D) does business with international organizations such as the United Nations. 
E) is where the Federal Government turns when it needs to borrow. 
A) does business only with the federal government. 
B) provides banking services to banks but not individuals. 
C) provides banking services to individuals and firms. 
D) does business with international organizations such as the United Nations. 
E) is where the Federal Government turns when it needs to borrow.

Question 9

All of the following are financial institutions that accept deposits and make loans to people and businesses EXCEPT

Accepted Answer

A) commercial banks. 
B) savings and loans. 
C) credit unions. 
D) central banks. 
E) savings banks. 
A) commercial banks. 
B) savings and loans. 
C) credit unions. 
D) central banks. 
E) savings banks.

Question 10

If the Fed increases the discount rate,

Accepted Answer

A) commercial banks pay a higher interest rate if they borrow from the Fed. 
B) commercial banks pay a lower interest rate if they borrow from the Fed. 
C) commercial banks' assets increase. 
D) commercial banks find it more profitable to increase their loans to businesses. 
E) commercial banks increase their lending to the Fed. 
A) commercial banks pay a higher interest rate if they borrow from the Fed. 
B) commercial banks pay a lower interest rate if they borrow from the Fed. 
C) commercial banks' assets increase. 
D) commercial banks find it more profitable to increase their loans to businesses. 
E) commercial banks increase their lending to the Fed.

Question 11

List and define the three functions of money.

Accepted Answer

The three functions of money are a mediu

Question 12

The monetary base is equal to

Accepted Answer

A) M1. 
B) M2. 
C) currency and coins in circulation plus checkable deposits. 
D) the sum of coins, Federal Reserve notes, and banks' reserves at the Fed. 
E) the sum of coins, Federal Reserve notes, and gold at the Fed. 
A) M1. 
B) M2. 
C) currency and coins in circulation plus checkable deposits. 
D) the sum of coins, Federal Reserve notes, and banks' reserves at the Fed. 
E) the sum of coins, Federal Reserve notes, and gold at the Fed.

Question 13

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

Accepted Answer

A) the M2 money multiplier has fallen from about 9 to about 4. 
B) the M2 money multiplier more than doubled. 
C) the monetary base decreased by 50 percent. 
D) the ratio of currency to M2 deposits more than doubled. 
E) the reserve requirement ratio increased. 
A) the M2 money multiplier has fallen from about 9 to about 4. 
B) the M2 money multiplier more than doubled. 
C) the monetary base decreased by 50 percent. 
D) the ratio of currency to M2 deposits more than doubled. 
E) the reserve requirement ratio increased.

Question 14

For anything to be considered money it must be

Accepted Answer

A) a valuable commodity, such as gold. 
B) a token, such as a green piece of paper. 
C) either a commodity or a token, as long as it is generally accepted as a means of payment. 
D) a mystical token, such as whale teeth. 
E) used in barter transactions. 
A) a valuable commodity, such as gold. 
B) a token, such as a green piece of paper. 
C) either a commodity or a token, as long as it is generally accepted as a means of payment. 
D) a mystical token, such as whale teeth. 
E) used in barter transactions.

Question 15

If Bulge Bank has a desired reserve ratio of 10 percent, loans of $25,000, deposits of $100,000, vault cash of $10,000, and reserves at the Fed of $65,000, then the bank

Accepted Answer

A) has no remaining capacity to make loans. 
B) does not have enough reserves to meet its requirement. 
C) has excess reserves of $65,000. 
D) has excess reserves of $55,000. 
E) has excess reserves of $75,000. 
A) has no remaining capacity to make loans. 
B) does not have enough reserves to meet its requirement. 
C) has excess reserves of $65,000. 
D) has excess reserves of $55,000. 
E) has excess reserves of $75,000.

Question 16

When the Fed sells government securities to banks, the sale

Accepted Answer

A) increases banks' reserves. 
B) increases the quantity of money. 
C) creates more excess reserves. 
D) decreases banks' reserves. 
E) increases the monetary base. 
A) increases banks' reserves. 
B) increases the quantity of money. 
C) creates more excess reserves. 
D) decreases banks' reserves. 
E) increases the monetary base.

Question 17

What makes up M1?
 Is M1 larger or smaller than real GDP?

Accepted Answer

M1 is the sum of currency held by indivi

Question 18

If Joe withdraws a $100 bill from his checking account and Jack deposits another $100 bill in his savings account, by how will M1 and M2 change?

Accepted Answer

A) M1 will decrease, but M2 will remain the same. 
B) M1 will increase, and M2 will increase. 
C) M2 will decrease by $100. 
D) Both M1 and M2 will remain the same. 
E) M1 will remain the same, and M2 will increase. 
A) M1 will decrease, but M2 will remain the same. 
B) M1 will increase, and M2 will increase. 
C) M2 will decrease by $100. 
D) Both M1 and M2 will remain the same. 
E) M1 will remain the same, and M2 will increase.

Question 19

"To count as required reserves, the reserves must be on deposit at the bank's district Federal Reserve Bank." Is the previous statement correct or incorrect?

Accepted Answer

The statement is inc

Question 20

Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero. If the Fed sells $100 million of U.S. government securities to Boise Bank, the monetary base increases by

Accepted Answer

A) $1 million. 
B) $10 million. 
C) $100 million. 
D) $1,000 million. 
E) $90 million. 
A) $1 million. 
B) $10 million. 
C) $100 million. 
D) $1,000 million. 
E) $90 million.

If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the

"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement-is it correct or incorrect?

Which of the following is NOT one of the Fed's monetary policy tools?

The largest category of commercial banks' assets is

During the 2008 financial crisis, banks restricted , and the M2 money multiplier .

The required reserve ratio is 20 percent and banks have no excess reserves. Katie deposits $300 in her bank. What are the bank's excess reserves immediately after Katie makes her deposit?

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent, the bank can loan a maximum of

The Fed is a central bank and as such

All of the following are financial institutions that accept deposits and make loans to people and businesses EXCEPT

If the Fed increases the discount rate,

List and define the three functions of money.

The monetary base is equal to

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

For anything to be considered money it must be

If Bulge Bank has a desired reserve ratio of 10 percent, loans of $25,000, deposits of $100,000, vault cash of $10,000, and reserves at the Fed of $65,000, then the bank

When the Fed sells government securities to banks, the sale

What makes up M1? Is M1 larger or smaller than real GDP?

If Joe withdraws a $100 bill from his checking account and Jack deposits another $100 bill in his savings account, by how will M1 and M2 change?

"To count as required reserves, the reserves must be on deposit at the bank's district Federal Reserve Bank." Is the previous statement correct or incorrect?

Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero. If the Fed sells $100 million of U.S. government securities to Boise Bank, the monetary base increases by

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

If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the

"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement-is it correct or incorrect?

Which of the following is NOT one of the Fed's monetary policy tools?

The largest category of commercial banks' assets is

During the 2008 financial crisis, banks restricted ________, and the M2 money multiplier ________.

The required reserve ratio is 20 percent and banks have no excess reserves. Katie deposits $300 in her bank. What are the bank's excess reserves immediately after Katie makes her deposit?

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent, the bank can loan a maximum of

The Fed is a central bank and as such

All of the following are financial institutions that accept deposits and make loans to people and businesses EXCEPT

If the Fed increases the discount rate,

List and define the three functions of money.

The monetary base is equal to

As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,

For anything to be considered money it must be

If Bulge Bank has a desired reserve ratio of 10 percent, loans of $25,000, deposits of $100,000, vault cash of $10,000, and reserves at the Fed of $65,000, then the bank

When the Fed sells government securities to banks, the sale

What makes up M1? Is M1 larger or smaller than real GDP?

If Joe withdraws a $100 bill from his checking account and Jack deposits another $100 bill in his savings account, by how will M1 and M2 change?

"To count as required reserves, the reserves must be on deposit at the bank's district Federal Reserve Bank." Is the previous statement correct or incorrect?

Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency drain is zero. If the Fed sells $100 million of U.S. government securities to Boise Bank, the monetary base increases by

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

During the 2008 financial crisis, banks restricted , and the M2 money multiplier .