Question 1

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

Accepted Answer

A) True 
 B)False

Question 2

If the money multiplier decreased from 20 to 12.5, then

Accepted Answer

A) the Fed increased the reserve ratio from 5 percent to 8 percent. 
B) the Fed increased the fed funds rate from 5 percent to 8 percent.. 
C) the Fed decreased the reserve ratio from 8 percent to 5 percent. 
D) the Fed decreased the fed funds rate from 8 percent to 5 percent. 
A) the Fed increased the reserve ratio from 5 percent to 8 percent. 
B) the Fed increased the fed funds rate from 5 percent to 8 percent.. 
C) the Fed decreased the reserve ratio from 8 percent to 5 percent. 
D) the Fed decreased the fed funds rate from 8 percent to 5 percent.

Question 3

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent. If you deposit $9,000 into First Jayhawk Bank,

Accepted Answer

A) First Jayhawk's required reserves increase by $900. 
B) First Jayhawk will be able to lend out $8,100. 
C) First Jayhawk's assets and liabilities both will increase by $9,000. 
D) All of the above are correct. 
A) First Jayhawk's required reserves increase by $900. 
B) First Jayhawk will be able to lend out $8,100. 
C) First Jayhawk's assets and liabilities both will increase by $9,000. 
D) All of the above are correct.

Question 4

Table 16-4.  
-Refer to Table 16-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

Accepted Answer

A) have $65,000 in excess reserves. 
B) have $55,000 in excess reserves. 
C) need to raise an additional $5,000 of reserves to meet the reserve requirement ratio 
D) None of the above is correct. 
A) have $65,000 in excess reserves. 
B) have $55,000 in excess reserves. 
C) need to raise an additional $5,000 of reserves to meet the reserve requirement ratio 
D) None of the above is correct.

Question 5

The Fed's primary tool to change the money supply is

Accepted Answer

A) changing the interest rate on reserves. 
B) changing the reserve requirement. 
C) conducting open market operations. 
D) redeeming Federal Reserve notes. 
A) changing the interest rate on reserves. 
B) changing the reserve requirement. 
C) conducting open market operations. 
D) redeeming Federal Reserve notes.

Question 6

One surprising thing about the U.S. money stock is that

Accepted Answer

A) banks hold so much currency relative to the public. 
B) the public holds so much currency relative to banks. 
C) there is so little currency per person. 
D) there is so much currency per person. 
A) banks hold so much currency relative to the public. 
B) the public holds so much currency relative to banks. 
C) there is so little currency per person. 
D) there is so much currency per person.

Question 7

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 8

If the public decides to hold more currency and fewer 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 9

In a system of 100-percent-reserve banking,

Accepted Answer

A) banks do not accept deposits. 
B) banks do not influence the supply of money. 
C) loans are the only asset item for banks. 
D) All of the above are correct. 
A) banks do not accept deposits. 
B) banks do not influence the supply of money. 
C) loans are the only asset item for banks. 
D) All of the above are correct.

Question 10

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Accepted Answer

A) FOMC 
B) the Board of Governors 
C) the New York Fed 
D) the regional Federal Reserve Banks 
A) FOMC 
B) the Board of Governors 
C) the New York Fed 
D) the regional Federal Reserve Banks

Question 12

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Accepted Answer

A) cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by. 
B) American dollars in exchange for goods and services, because rubles were extremely hard to come by. 
C) goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money. 
D) All of the above are correct. 
A) cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon become hard to come by. 
B) American dollars in exchange for goods and services, because rubles were extremely hard to come by. 
C) goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money. 
D) All of the above are correct.

Question 13

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

Accepted Answer

A) True 
 B)False

Question 14

On a bank's T-account, which are part of the banks liabilities?

Accepted Answer

A) both deposits made by its customers and reserves 
B) deposits made by its customers but not reserves 
C) reserves but not deposits made by its customers 
D) neither deposits made by its customers nor reserves 
A) both deposits made by its customers and reserves 
B) deposits made by its customers but not reserves 
C) reserves but not deposits made by its customers 
D) neither deposits made by its customers nor reserves

Question 15

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

Accepted Answer

A) balances that lie behind debit cards. 
B) demand deposits. 
C) other checkable depositis. 
D) All of the above are correct. 
A) balances that lie behind debit cards. 
B) demand deposits. 
C) other checkable depositis. 
D) All of the above are correct.

Question 16

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 17

If people decide to hold more currency relative to deposits, the money supply

Accepted Answer

A) falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B) falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C) rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D) rises. The Fed could lessen the impact of the by selling Treasury bonds. 
A) falls. The Fed could lessen the impact of this by buying Treasury bonds. 
B) falls. The Fed could lessen the impact of this by selling Treasury bonds. 
C) rises. The Fed could lessen the impact of this by buying Treasury bonds. 
D) rises. The Fed could lessen the impact of the by selling Treasury bonds.

Question 18

Credit card limits 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 19

An increase in the reserve requirement ratio increases reserves and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 20

Given the following information, what are the values of M1 and M2? Small time deposits
$1,100 billion
Demand deposits and other checkable deposits
$800 billion
Savings deposits
$1,350 billion
Money market mutual funds
$900 billion
Traveler's checks
$30 billion
Large time deposits
$750 billion
Currency
$150 billion
Miscellaneous categories in M2
$40 billion

Accepted Answer

A) M1 = $830 billion, M2 = $4,370 billion. 
B) M1 = $980 billion, M2 = $4,370 billion. 
C) M1 = $980 billion, M2 = $3, 390 billion. 
D) M1 = $1,020 billion, M2 = $3,390 billion. 
A) M1 = $830 billion, M2 = $4,370 billion. 
B) M1 = $980 billion, M2 = $4,370 billion. 
C) M1 = $980 billion, M2 = $3, 390 billion. 
D) M1 = $1,020 billion, M2 = $3,390 billion.

Exam 16: The Monetary System

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

If the money multiplier decreased from 20 to 12.5, then

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 10 percent. If you deposit $9,000 into First Jayhawk Bank,

Table 16-4. -Refer to Table 16-4. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $50,000 into his account at the bank. If the bank takes no other action it will

The Fed's primary tool to change the money supply is

One surprising thing about the U.S. money stock is that

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

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

In a system of 100-percent-reserve banking,

As banks create money, they create wealth.

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend financial institutions funds. When the Fed did this, it was acting in its role of lender of last resort.

On a bank's T-account, which are part of the banks liabilities?

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

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

If people decide to hold more currency relative to deposits, the money supply

Credit card limits are included in

An increase in the reserve requirement ratio increases reserves and decreases the money supply.

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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