Question 1

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re

Question 2

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

Accepted Answer

A) falls. The larger the reserve ratio is, the more the money supply falls. 
B) falls. The larger the reserve ratio is, the less the money supply falls. 
C) rises. The larger the reserve ratio is, the more the money supply rises. 
D) rises. The larger the reserve ratio is, the less the money supply rises. 
A) falls. The larger the reserve ratio is, the more the money supply falls. 
B) falls. The larger the reserve ratio is, the less the money supply falls. 
C) rises. The larger the reserve ratio is, the more the money supply rises. 
D) rises. The larger the reserve ratio is, the less the money supply rises.

Question 3

Consider five individuals with different occupations. $$\begin{array} { | l | l | l | } 
\hline \text { Mary } & \text { provides lepal advice } & \text { wants kaves shapened } \
\hline \text { Chark } & \text { prows tomatoes } & \text { wants Iepal advice } \
\hline \text { Nathan } & \text { styles hair } & \text { wants tomatoes } \
\hline \text { polly } & \text { hrews bee } & \text { wants kaves shapened } \
\hline \text { Paud } & \text { shapens kaives } & \text { wants bee } \
\hline
\end{array}$$ Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A) Mary and Clark 
B) Clark and Nathan 
C) Nathan and Polly 
D) Polly and Paul 
A) Mary and Clark 
B) Clark and Nathan 
C) Nathan and Polly 
D) Polly and Paul

Question 4

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Accepted Answer

A)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease 
C) The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
D)     The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease 
A)   Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase. 
B) Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease 
C) The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease. 
D)     The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease

Question 5

The regional Federal Reserve Banks

Accepted Answer

A) are not allowed to make loans to banks in their region. 
B) regulate banks in their regions. 
C) have more voting members on the FOMC than does the Board of Governors. 
D) are each headed by a member of the Board of Governors. 
A) are not allowed to make loans to banks in their region. 
B) regulate banks in their regions. 
C) have more voting members on the FOMC than does the Board of Governors. 
D) are each headed by a member of the Board of Governors.

Question 6

When the Fed conducts open-market sales,

Accepted Answer

A) it sells Treasury securities, which increases the money supply. 
B) it sells Treasury securities, which decreases the money supply. 
C) it auctions term loans, which increases the money supply. 
D) it auctions term loans, which decreases the money supply. 
A) it sells Treasury securities, which increases the money supply. 
B) it sells Treasury securities, which decreases the money supply. 
C) it auctions term loans, which increases the money supply. 
D) it auctions term loans, which decreases the money supply.

Question 7

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Accepted Answer

A) True 
 B)False

Question 8

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal

Question 9

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A) term auctions 
B) open-market operations 
C) changes in reserve requirements 
D) changes in the discount rate 
A) term auctions 
B) open-market operations 
C) changes in reserve requirements 
D) changes in the discount rate

Question 10

Which of the following does the Federal Reserve not do?

Accepted Answer

A) It controls the supply of money. 
B) It acts as a lender of last resort to banks. 
C) It makes loans to any qualified business that requests one. 
D) It tries to ensure the health of the banking system. 
A) It controls the supply of money. 
B) It acts as a lender of last resort to banks. 
C) It makes loans to any qualified business that requests one. 
D) It tries to ensure the health of the banking system.

Question 11

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Accepted Answer

A) True 
 B)False

Question 12

Prisoners sometimes determine a single good to be used as money. This good becomes

Accepted Answer

A) a medium of exchange and a unit of account. 
B) a medium of exchange, but not a unit of account. 
C) a unit of account, but not a medium of exchange. 
D) neitehr a unit of account nor a medium of exchange. 
A) a medium of exchange and a unit of account. 
B) a medium of exchange, but not a unit of account. 
C) a unit of account, but not a medium of exchange. 
D) neitehr a unit of account nor a medium of exchange.

Question 13

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

Accepted Answer

A) increase by $1 million and the money supply eventually increases by $10 million. 
B) increase by $10 million and the money supply eventually increases by $100 million. 
C) decrease by $1 million and the money supply eventually increases by $10 million. 
D) decrease by $10 million and the money supply eventually decreases by $100 million. 
A) increase by $1 million and the money supply eventually increases by $10 million. 
B) increase by $10 million and the money supply eventually increases by $100 million. 
C) decrease by $1 million and the money supply eventually increases by $10 million. 
D) decrease by $10 million and the money supply eventually decreases by $100 million.

Question 14

The members of the Federal Reserve's Board of Governors

Accepted Answer

A) are elected to office by the public every fourteen years. 
B) are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C) are elected by bankers in each Federal Reserve Region. 
D) are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
A) are elected to office by the public every fourteen years. 
B) are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C) are elected by bankers in each Federal Reserve Region. 
D) are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Question 15

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A) You keep some money hidden in your shoe. 
B) You keep track of the value of your assets in terms of currency. 
C) You pay for your oil change using currency. 
D) None of the above is correct. 
A) You keep some money hidden in your shoe. 
B) You keep track of the value of your assets in terms of currency. 
C) You pay for your oil change using currency. 
D) None of the above is correct.

Question 17

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 18

Which of the following can the Fed do to change the money supply?

Accepted Answer

A) change reserves or change the reserve ratio 
B) change reserves but not change the reserve ratio 
C) change the reserve ratio but not change the reserve ratio 
D) neither change reserves nor change the reserve ratio 
A) change reserves or change the reserve ratio 
B) change reserves but not change the reserve ratio 
C) change the reserve ratio but not change the reserve ratio 
D) neither change reserves nor change the reserve ratio

Question 19

M1 equals currency plus demand deposits plus

Accepted Answer

A) nothing else. 
B) other checkable deposits. 
C) traveler's checks plus other checkable deposits. 
D) traveler's checks plus other checkable deposits plus savings deposits. 
A) nothing else. 
B) other checkable deposits. 
C) traveler's checks plus other checkable deposits. 
D) traveler's checks plus other checkable deposits plus savings deposits.

Question 20

Demand deposits are a type of

Accepted Answer

A) checking account. 
B) time deposit. 
C) money market mutual fund. 
D) savings deposit. 
A) checking account. 
B) time deposit. 
C) money market mutual fund. 
D) savings deposit.

Exam 16: The Monetary System

What makes the New York Federal Reserve regional bank so important?

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

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

The regional Federal Reserve Banks

When the Fed conducts open-market sales,

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

Compare the Board of Governors and the Federal Open Market Committee.

Which tool of monetary policy does the Federal Reserve use most often?

Which of the following does the Federal Reserve not do?

Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used by banks to meet their reserve requirements, but the Fed pays no interest on these deposits.

Prisoners sometimes determine a single good to be used as money. This good becomes

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

The members of the Federal Reserve's Board of Governors

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Which of the following best illustrates the medium of exchange function of money?

What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services?

Which of the following can the Fed do to change the money supply?

M1 equals currency plus demand deposits plus

Demand deposits are a type of

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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