Question 1

The components of M2 that are not also in M1:

Accepted Answer

A) sum to an amount that is smaller than the sum of the components of M1. 
B) pay lower rates of interest than do the components of M1. 
C) are not usable for making payments. 
D) are usable for making payments, but at a greater cost or inconvenience than currency or checks. 
A) sum to an amount that is smaller than the sum of the components of M1. 
B) pay lower rates of interest than do the components of M1. 
C) are not usable for making payments. 
D) are usable for making payments, but at a greater cost or inconvenience than currency or checks.

Question 2

When a bank makes a loan by crediting the borrower's checking account balance with an amount equal to the loan:

Accepted Answer

A) money is created. 
B) the bank gains new reserves. 
C) the bank immediately loses reserves. 
D) the Fed has made an open-market purchase. 
A) money is created. 
B) the bank gains new reserves. 
C) the bank immediately loses reserves. 
D) the Fed has made an open-market purchase.

Question 3

One of the serious drawbacks of the deposit insurance system in the United States is that:

Accepted Answer

A) bank failures continue to occur regularly. 
B) the system took away the Federal Reserve's ability to conduct open-market operations. 
C) the system took away the Federal Reserve's ability to change reserve requirements. 
D) if insured intermediaries make many bad loans, the taxpayers may be responsible for covering the losses. 
A) bank failures continue to occur regularly. 
B) the system took away the Federal Reserve's ability to conduct open-market operations. 
C) the system took away the Federal Reserve's ability to change reserve requirements. 
D) if insured intermediaries make many bad loans, the taxpayers may be responsible for covering the losses.

Question 4

The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless:

Accepted Answer

A) there is fractional reserve banking. 
B) there is 100 percent reserve banking. 
C) the public holds no currency. 
D) banks' desired reserve/deposit ratio is 0.20. 
A) there is fractional reserve banking. 
B) there is 100 percent reserve banking. 
C) the public holds no currency. 
D) banks' desired reserve/deposit ratio is 0.20.

Question 5

The Federal Open Market Committee makes decisions about ________ policy.

Accepted Answer

A) monetary 
B) fiscal 
C) banking 
D) deposit insurance 
A) monetary 
B) fiscal 
C) banking 
D) deposit insurance

Question 6

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

Accepted Answer

A) conducting open-market operations. 
B) changing the Federal Reserve discount rate. 
C) changing bank reserve requirement ratios. 
D) changing interest rates. 
A) conducting open-market operations. 
B) changing the Federal Reserve discount rate. 
C) changing bank reserve requirement ratios. 
D) changing interest rates.

Question 7

M1 differs from M2 in that:

Accepted Answer

A) M1 includes currency and balances held in checking accounts, which are not included in M2. 
B) M2 includes savings deposits, small-denomination time deposits, and money market mutual funds that are not included in M1. 
C) M1 is a broader measure of the money supply than M2. 
D) the assets in M2 are more liquid than the assets in M1. 
A) M1 includes currency and balances held in checking accounts, which are not included in M2. 
B) M2 includes savings deposits, small-denomination time deposits, and money market mutual funds that are not included in M1. 
C) M1 is a broader measure of the money supply than M2. 
D) the assets in M2 are more liquid than the assets in M1.

The components of M2 that are not also in M1:

When a bank makes a loan by crediting the borrower's checking account balance with an amount equal to the loan:

One of the serious drawbacks of the deposit insurance system in the United States is that:

The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless:

The Federal Open Market Committee makes decisions about ________ policy.

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

M1 differs from M2 in that:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Exam 22: Money Prices and the Federal Reserve

The components of M2 that are not also in M1:

When a bank makes a loan by crediting the borrower's checking account balance with an amount equal to the loan:

One of the serious drawbacks of the deposit insurance system in the United States is that:

The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless:

The Federal Open Market Committee makes decisions about ________ policy.

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

M1 differs from M2 in that:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters