Question 1

The existence of money leads to

Accepted Answer

A) greater specialization in production, but not to a higher standard of living. 
B) a higher standard of living, but not to greater specialization. 
C) greater specialization and to a higher standard of living. 
D) neither greater specialization nor to a higher standard of living. 
A) greater specialization in production, but not to a higher standard of living. 
B) a higher standard of living, but not to greater specialization. 
C) greater specialization and to a higher standard of living. 
D) neither greater specialization nor to a higher standard of living.

Question 2

Which list ranks assets from most to least liquid?

Accepted Answer

A) currency, demand deposits, money market mutual funds 
B) currency, money market mutual funds, demand deposits 
C) money market mutual funds, demand deposits, currency 
D) demand deposits, money market mutual funds, currency 
A) currency, demand deposits, money market mutual funds 
B) currency, money market mutual funds, demand deposits 
C) money market mutual funds, demand deposits, currency 
D) demand deposits, money market mutual funds, currency

Question 3

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Accepted Answer

A) store of value 
B) medium of exchange 
C) unit of account 
D) None of the above is correct. 
A) store of value 
B) medium of exchange 
C) unit of account 
D) None of the above is correct.

Question 4

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A) $29,000 
B) $28,100 
C) $19,100 
D) $11,000 
A) $29,000 
B) $28,100 
C) $19,100 
D) $11,000

Question 5

Which of the following is not correct?

Accepted Answer

A) The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B) The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C) The Fed's primary monetary policy tool is open-market operations. 
D) All of the above are correct. 
A) The president of the New York Federal Reserve bank is the only Federal Reserve Regional Bank President who gets to vote at every meeting of the Federal Open Market Committee. 
B) The Fed's policy decisions influence the economy's rate of inflation in the short run and the economy's employment and production in the long run. 
C) The Fed's primary monetary policy tool is open-market operations. 
D) All of the above are correct.

Question 6

Roundabout trade decreases production.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not included in M1?

Accepted Answer

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

Question 8

When in France you notice that prices are posted in euros, this best illustrates money's function as

Accepted Answer

A) a store of value. 
B) a medium of exchange. 
C) a unit of account. 
D) a method of barter. 
A) a store of value. 
B) a medium of exchange. 
C) a unit of account. 
D) a method of barter.

Question 9

The Federal Open Market Committee meets approximately

Accepted Answer

A) every three weeks 
B) every six weeks 
C) every 3 months 
D) every 6 months. 
A) every three weeks 
B) every six weeks 
C) every 3 months 
D) every 6 months.

Question 10

Which of the following entities actually executes open-market operations?

Accepted Answer

A) the Board of Governors 
B) the New York Federal Reserve Bank 
C) the Federal Open Market Committee 
D) the Open Market Committees of the regional Federal Reserve Banks 
A) the Board of Governors 
B) the New York Federal Reserve Bank 
C) the Federal Open Market Committee 
D) the Open Market Committees of the regional Federal Reserve Banks

Question 11

In the United States, currency holdings per person average about

Accepted Answer

A) $125; one explanation for this relatively small average is that many people use credit and debit cards to make transactions. 
B) $125; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. 
C) $3,700; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. 
D) $3,700; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency. 
A) $125; one explanation for this relatively small average is that many people use credit and debit cards to make transactions. 
B) $125; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. 
C) $3,700; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. 
D) $3,700; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency.

Question 12

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A) M1 growth. 
B) the federal funds rate. 
C) the number of Treasury Securities issued by the federal government. 
D) total reserves of banks. 
A) M1 growth. 
B) the federal funds rate. 
C) the number of Treasury Securities issued by the federal government. 
D) total reserves of banks.

Question 13

The Fed's policy decisions have an important influence on

Accepted Answer

A) inflation in the long run and employment and production in the short run. 
B) inflation in the long run and employment and production in the long run. 
C) inflation in the short run and employment and production in the short run. 
D) inflation in the short run and employment and production in the long run. 
A) inflation in the long run and employment and production in the short run. 
B) inflation in the long run and employment and production in the long run. 
C) inflation in the short run and employment and production in the short run. 
D) inflation in the short run and employment and production in the long run.

Question 14

The members of the Federal Reserve's Board of Governors

Accepted Answer

A) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
B) serve six-year terms. 
C) are also the presidents of the regional Federal Reserve banks. 
D) share power equally, with no governor having any more influence or power than any other governor. 
A) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
B) serve six-year terms. 
C) are also the presidents of the regional Federal Reserve banks. 
D) share power equally, with no governor having any more influence or power than any other governor.

Question 15

A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $50 in reserves and $4,950 in loans. 
B) It has $500 in reserves and $4,500 in loans. 
C) It has $555 in reserves and $4,445 in loans. 
D) None of the above is correct. 
A) It has $50 in reserves and $4,950 in loans. 
B) It has $500 in reserves and $4,500 in loans. 
C) It has $555 in reserves and $4,445 in loans. 
D) None of the above is correct.

Question 16

Scenario 16-2.The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 16-2. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks?

Accepted Answer

A) 6,900 million tazes 
B) 7,125 million tazes 
C) 7,350 million tazes 
D) None of the above is correct. 
A) 6,900 million tazes 
B) 7,125 million tazes 
C) 7,350 million tazes 
D) None of the above is correct.

Question 17

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 18

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A) buying bonds. This buying would increase the money supply. 
B) buying bonds. This buying would reduce the money supply. 
C) selling bonds. This selling would increase the money supply. 
D) selling bonds. This selling would reduce the money supply. 
A) buying bonds. This buying would increase the money supply. 
B) buying bonds. This buying would reduce the money supply. 
C) selling bonds. This selling would increase the money supply. 
D) selling bonds. This selling would reduce the money supply.

Question 19

Scenario 16-2.The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 16-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Accepted Answer

A) 250 million tazes 
B) 200 million tazes 
C) 125 million tazes 
D) None of the above is correct. 
A) 250 million tazes 
B) 200 million tazes 
C) 125 million tazes 
D) None of the above is correct.

Question 20

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Accepted Answer

A) would increase. 
B) would not change. 
C) would decrease. 
D) could do any of the above. 
A) would increase. 
B) would not change. 
C) would decrease. 
D) could do any of the above.

Exam 16: The Monetary System

The existence of money leads to

Which list ranks assets from most to least liquid?

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Which of the following is not correct?

Roundabout trade decreases production.

Which of the following is not included in M1?

When in France you notice that prices are posted in euros, this best illustrates money's function as

The Federal Open Market Committee meets approximately

Which of the following entities actually executes open-market operations?

In the United States, currency holdings per person average about

In recent years the Federal Open Market Committee has focused on a target for

The Fed's policy decisions have an important influence on

The members of the Federal Reserve's Board of Governors

A bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

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

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