Question 1

A double coincidence of wants

Accepted Answer

A) is required when there is no item in an economy that is widely accepted in exchange for goods and services. 
B) is required in an economy that relies on barter. 
C) is a hindrance to the allocation of resources when it is required for trade. 
D) All of the above are correct. 
A) is required when there is no item in an economy that is widely accepted in exchange for goods and services. 
B) is required in an economy that relies on barter. 
C) is a hindrance to the allocation of resources when it is required for trade. 
D) All of the above are correct.

Question 2

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

Accepted Answer

A) and the money supply increase. 
B) and the money supply decrease. 
C) increase, but leaves the money supply unchanged. 
D) decrease, but leaves the money supply unchanged. 
A) and the money supply increase. 
B) and the money supply decrease. 
C) increase, but leaves the money supply unchanged. 
D) decrease, but leaves the money supply unchanged.

Question 3

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a

Accepted Answer

A) $400 increase in excess reserves and no increase in required reserves. 
B) $400 increase in required reserves and no increase in excess reserves. 
C) $360 increase in excess reserves and a $40 increase in required reserves. 
D) $40 increase in excess reserves and a $360 increase in required reserves. 
A) $400 increase in excess reserves and no increase in required reserves. 
B) $400 increase in required reserves and no increase in excess reserves. 
C) $360 increase in excess reserves and a $40 increase in required reserves. 
D) $40 increase in excess reserves and a $360 increase in required reserves.

Question 4

Paper dollars

Accepted Answer

A) are commodity money and gold coins are fiat money. 
B) are fiat money and gold coins are commodity money. 
C) and gold coins are both commodity monies. 
D) and gold coins are both fiat monies. 
A) are commodity money and gold coins are fiat money. 
B) are fiat money and gold coins are commodity money. 
C) and gold coins are both commodity monies. 
D) and gold coins are both fiat monies.

Question 5

A bank's reserve ratio is 10 percent and the bank has $2,000 in deposits. Its reserves amount to

Accepted Answer

A) $20. 
B) $200. 
C) $400. 
D) $1,800. 
A) $20. 
B) $200. 
C) $400. 
D) $1,800.

Question 6

Which of the following is included in M1 and M2?

Accepted Answer

A) traveler's checks 
B) savings deposits 
C) money market mutual funds 
D) small time deposits 
A) traveler's checks 
B) savings deposits 
C) money market mutual funds 
D) small time deposits

Question 7

Which of the following is not included in M1?

Accepted Answer

A) currency 
B) demand deposits 
C) traveler's checks 
D) credit cards 
A) currency 
B) demand deposits 
C) traveler's checks 
D) credit cards

Question 8

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to

Accepted Answer

A) $62.25. 
B) $126.75. 
C) $22,500.00 
D) $30,000.00. 
A) $62.25. 
B) $126.75. 
C) $22,500.00 
D) $30,000.00.

Question 9

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

Accepted Answer

A) sell bonds to increase reserves 
B) sell bonds to decrease reserves 
C) buy bonds to increase reserves 
D) buy bonds to decrease reserves 
A) sell bonds to increase reserves 
B) sell bonds to decrease reserves 
C) buy bonds to increase reserves 
D) buy bonds to decrease reserves

Question 10

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Accepted Answer

A) True 
 B)False

Question 11

Table 16-5.  
-Refer to Table 16-5. The Bank of Pleasantville's reserve ratio is

Accepted Answer

A) 1 percent. 
B) 5 percent. 
C) 10 percent. 
D) 20 percent. 
A) 1 percent. 
B) 5 percent. 
C) 10 percent. 
D) 20 percent.

Question 12

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his savings account. As a result of this transfer by itself

Accepted Answer

A) M1 increases by $2,100 and M2 stays the same. 
B) M1 increases by $2,100 and M2 increases by $2,100. 
C) M1 decreases by $2,100 and M2 increases by $2,100. 
D) M1 decreases by $2,100 and M2 stays the same. 
A) M1 increases by $2,100 and M2 stays the same. 
B) M1 increases by $2,100 and M2 increases by $2,100. 
C) M1 decreases by $2,100 and M2 increases by $2,100. 
D) M1 decreases by $2,100 and M2 stays the same.

Question 13

Credit cards

Accepted Answer

A) defer payments. 
B) are a store of value. 
C) have led to wider use of currency. 
D) are part of the money supply. 
A) defer payments. 
B) are a store of value. 
C) have led to wider use of currency. 
D) are part of the money supply.

Question 14

In a fractional-reserve banking system, an increase in reserve requirements

Accepted Answer

A) increases both the money multiplier and the money supply. 
B) decreases both the money multiplier and the money supply. 
C) increases the money multiplier, but decreases the money supply. 
D) decreases the money multiplier, but increases the money supply. 
A) increases both the money multiplier and the money supply. 
B) decreases both the money multiplier and the money supply. 
C) increases the money multiplier, but decreases the money supply. 
D) decreases the money multiplier, but increases the money supply.

Question 15

To increase the money supply, the Fed could

Accepted Answer

A) sell government bonds. 
B) decrease the discount rate. 
C) increase the reserve requirement. 
D) None of the above is correct. 
A) sell government bonds. 
B) decrease the discount rate. 
C) increase the reserve requirement. 
D) None of the above is correct.

Question 16

Which list ranks assets from most to least liquid?

Accepted Answer

A) money, bonds, cars, houses 
B) money, cars, houses, bonds 
C) bonds, money, cars, houses 
D) bonds, cars, money, houses 
A) money, bonds, cars, houses 
B) money, cars, houses, bonds 
C) bonds, money, cars, houses 
D) bonds, cars, money, houses

Question 17

Fiat money

Accepted Answer

A) has no intrinsic value. 
B) is backed by gold. 
C) is a medium of exchange but not a unit of account. 
D) is any close substitute for currency such as checkable deposits. 
A) has no intrinsic value. 
B) is backed by gold. 
C) is a medium of exchange but not a unit of account. 
D) is any close substitute for currency such as checkable deposits.

Question 18

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply?

Accepted Answer

A) $50 
B) $100 
C) $150 
D) $200 
A) $50 
B) $100 
C) $150 
D) $200

Question 19

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Accepted Answer

A) reserves and the money supply increase by less than $100 million. 
B) reserves increase by $100 million and the money supply increases by $100 million. 
C) reserves increase by $100 million and the money supply increases by more than $100 million. 
D) both reserves and the money supply increase by more than $100 million. 
A) reserves and the money supply increase by less than $100 million. 
B) reserves increase by $100 million and the money supply increases by $100 million. 
C) reserves increase by $100 million and the money supply increases by more than $100 million. 
D) both reserves and the money supply increase by more than $100 million.

Question 20

Paper money

Accepted Answer

A) has a high intrinsic value. 
B) is the primary medium of exchange in a barter economy. 
C) is valuable because it is generally accepted in trade. 
D) is valuable only because of the legal tender requirement. 
A) has a high intrinsic value. 
B) is the primary medium of exchange in a barter economy. 
C) is valuable because it is generally accepted in trade. 
D) is valuable only because of the legal tender requirement.

Exam 16: The Monetary System

A double coincidence of wants

During wars the public tends to hold relatively more currency and relatively fewer deposits. This decision makes reserves

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent receives a deposit of $400 it has a

Paper dollars

A bank's reserve ratio is 10 percent and the bank has $2,000 in deposits. Its reserves amount to

Which of the following is included in M1 and M2?

Which of the following is not included in M1?

A bank's reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to

The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do?

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

Table 16-5. -Refer to Table 16-5. The Bank of Pleasantville's reserve ratio is

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his savings account. As a result of this transfer by itself

Credit cards

In a fractional-reserve banking system, an increase in reserve requirements

To increase the money supply, the Fed could

Which list ranks assets from most to least liquid?

Fiat money

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $100. If customers deposit $50 into the bank, what is the value of the money supply?

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

Paper money

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters