Question 1

Which of the following is not correct?

Accepted Answer

A) The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system. 
B) The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee. 
C) U.S. monetary policy is made by the Federal Open Market Committee. 
D) The Federal Open Market Committee meets every 12 weeks. 
A) The regional Federal Reserve Banks play a role in regulating banks and ensuring the health of the banking system. 
B) The President of the New York Federal Reserve Regional Bank always gets to vote on the decisions made by the Federal Open Market Committee. 
C) U.S. monetary policy is made by the Federal Open Market Committee. 
D) The Federal Open Market Committee meets every 12 weeks.

Question 2

The reserve requirement is 10%. Lucy deposits $200 into a bank. By how much do excess reserves change?

Accepted Answer

A) $200 
B) $180 
C) $20 
D) $10 
A) $200 
B) $180 
C) $20 
D) $10

Question 3

If the public decides to hold less currency and more deposits in banks, bank reserves

Accepted Answer

A) decrease and the money supply eventually decreases. 
B) decrease but the money supply does not change. 
C) increase and the money supply eventually increases. 
D) increase but the money supply does not change. 
A) decrease and the money supply eventually decreases. 
B) decrease but the money supply does not change. 
C) increase and the money supply eventually increases. 
D) increase but the money supply does not change.

Question 4

The Federal Reserve is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 5

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Accepted Answer

A) $60 of new money in the economy. 
B) $250 of new money in the economy. 
C) $500 of new money in the economy. 
D) $2,000 of new money in the economy. 
A) $60 of new money in the economy. 
B) $250 of new money in the economy. 
C) $500 of new money in the economy. 
D) $2,000 of new money in the economy.

Question 6

Members of the Board of Governors of the Federal Reserve System are appointed for life.

Accepted Answer

A) True 
 B)False

Question 7

If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves

Accepted Answer

A) increase by $20 million and the money supply eventually increases by $250 million. 
B) decrease by $20 million and the money supply eventually increases by $250 million. 
C) increase by $20 million and the money supply eventually decreases by $250 million. 
D) decrease by $20 million and the money supply eventually decreases by $250 million. 
A) increase by $20 million and the money supply eventually increases by $250 million. 
B) decrease by $20 million and the money supply eventually increases by $250 million. 
C) increase by $20 million and the money supply eventually decreases by $250 million. 
D) decrease by $20 million and the money supply eventually decreases by $250 million.

Question 8

The set of items that serve as media of exchange clearly includes

Accepted Answer

A) demand deposits. 
B) short-term bonds. 
C) credit cards. 
D) All of the above are correct. 
A) demand deposits. 
B) short-term bonds. 
C) credit cards. 
D) All of the above are correct.

Question 9

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Accepted Answer

A) rise from 10 to 20. 
B) rise from 5 to 10. 
C) fall from 10 to 5. 
D) not change. 
A) rise from 10 to 20. 
B) rise from 5 to 10. 
C) fall from 10 to 5. 
D) not change.

Question 10

Which list ranks assets from most to least liquid?

Accepted Answer

A) currency, fine art, stocks 
B) currency, stocks, fine art 
C) fine art, currency, stocks 
D) fine art, stocks, currency 
A) currency, fine art, stocks 
B) currency, stocks, fine art 
C) fine art, currency, stocks 
D) fine art, stocks, currency

Question 11

People can write checks against

Accepted Answer

A) demand deposits and money market mutual funds 
B) demand deposits but not money market mutual funds 
C) money market mutual funds but not demand deposits 
D) neither demand deposits nor money market mutual funds 
A) demand deposits and money market mutual funds 
B) demand deposits but not money market mutual funds 
C) money market mutual funds but not demand deposits 
D) neither demand deposits nor money market mutual funds

Question 12

If a bank has a reserve ratio of 8 percent, then

Accepted Answer

A) government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B) the bank's ratio of loans to deposits is 8 percent. 
C) the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D) the bank keeps 8 percent of its assets as reserves and loans out the rest. 
A) government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B) the bank's ratio of loans to deposits is 8 percent. 
C) the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D) the bank keeps 8 percent of its assets as reserves and loans out the rest.

Question 13

A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

Accepted Answer

A) 2 percent. 
B) 12.5 percent. 
C) 20 percent. 
D) 80 percent. 
A) 2 percent. 
B) 12.5 percent. 
C) 20 percent. 
D) 80 percent.

Question 14

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 reduce reserves. 
B) buying bonds. This buying would increase reserves. 
C) selling bonds. This selling would reduce reserves. 
D) selling bonds. This selling would increase reserves. 
A) buying bonds. This buying would reduce reserves. 
B) buying bonds. This buying would increase reserves. 
C) selling bonds. This selling would reduce reserves. 
D) selling bonds. This selling would increase reserves.

Question 15

Savings deposits are included in

Accepted Answer

A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) neither M1 nor M2. 
A) M1 but not M2. 
B) M2 but not M1. 
C) M1 and M2. 
D) neither M1 nor M2.

Question 16

Who can vote on Federal Open Market Committee decisions?

Accepted Answer

A) all of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
B) all of the members of the Board of Governors and some of the Federal Reserve Bank presidents 
C) some of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
D) some of the members of the Board of Governors and some of the Federal Reserve Bank presidents 
A) all of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
B) all of the members of the Board of Governors and some of the Federal Reserve Bank presidents 
C) some of the members of the Board of Governors and all of the Federal Reserve Bank presidents 
D) some of the members of the Board of Governors and some of the Federal Reserve Bank presidents

Question 17

When the Fed makes open-market purchases bank

Accepted Answer

A) withdrawals and lending increase. 
B) withdrawals increase and lending decreases. 
C) deposits and lending increase. 
D) deposits increase and lending decreases. 
A) withdrawals and lending increase. 
B) withdrawals increase and lending decreases. 
C) deposits and lending increase. 
D) deposits increase and lending decreases.

Question 18

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Accepted Answer

A) Ben Bernanke 
B) Christina Romer 
C) Timothy Geithner 
D) Bernie Madoff 
A) Ben Bernanke 
B) Christina Romer 
C) Timothy Geithner 
D) Bernie Madoff

Question 19

Which of the following is a function of money?

Accepted Answer

A) a unit of account 
B) a store of value 
C) medium of exchange 
D) All of the above are correct. 
A) a unit of account 
B) a store of value 
C) medium of exchange 
D) All of the above are correct.

Question 20

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 purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Accepted Answer

A) 625 million tazes 
B) 1,000 million tazes 
C) 1,250 million tazes 
D) None of the above is correct. 
A) 625 million tazes 
B) 1,000 million tazes 
C) 1,250 million tazes 
D) None of the above is correct.

Exam 16: The Monetary System

Which of the following is not correct?

The reserve requirement is 10%. Lucy deposits $200 into a bank. By how much do excess reserves change?

If the public decides to hold less currency and more deposits in banks, bank reserves

The Federal Reserve is a privately operated commercial bank.

If the reserve ratio is 20 percent, then $100 of new reserves can generate

Members of the Board of Governors of the Federal Reserve System are appointed for life.

If the reserve ratio is 8 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million of government bonds, bank reserves

The set of items that serve as media of exchange clearly includes

If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would

Which list ranks assets from most to least liquid?

People can write checks against

If a bank has a reserve ratio of 8 percent, then

A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

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

Savings deposits are included in

Who can vote on Federal Open Market Committee decisions?

When the Fed makes open-market purchases bank

Who was reappointed Chair of the Board of Governors in 2009 by President Barrack Obama?

Which of the following is a function of 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

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