Question 1

To decrease the money supply, the Fed could

Accepted Answer

A) sell government bonds. 
B) increase the discount rate. 
C) increase the reserve requirement. 
D) All of the above are correct. 
A) sell government bonds. 
B) increase the discount rate. 
C) increase the reserve requirement. 
D) All of the above are correct.

Question 2

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

Accepted Answer

A) True 
 B)False

Question 3

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following defer payments?

Accepted Answer

A) credit cards and debit cards 
B) neither credit cards nor debit cards 
C) credit cards but not debit cards 
D) debit cards but not credit cards 
A) credit cards and debit cards 
B) neither credit cards nor debit cards 
C) credit cards but not debit cards 
D) debit cards but not credit cards

Question 5

When prisoners use cigarettes or some other good as money, cigarettes become

Accepted Answer

A) commodity money, but do not function as a unit of account. 
B) commodity money and function as a unit of account. 
C) fiat money, but do not function as a unit of account. 
D) fiat money and function as a unit of account. 
A) commodity money, but do not function as a unit of account. 
B) commodity money and function as a unit of account. 
C) fiat money, but do not function as a unit of account. 
D) fiat money and function as a unit of account.

Question 6

The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 million dollars in loans. The Fed then raises the reserve requirement from 10 percent to 15 percent. Assuming everything else stays the same, how much is the bank holding in excess reserves after the increase in the reserve requirement?

Accepted Answer

A) $0 
B) $20 million 
C) $40 million 
D) $60 million 
A) $0 
B) $20 million 
C) $40 million 
D) $60 million

Question 7

Which of the following is included in M2 but not in M1?

Accepted Answer

A) demand deposits 
B) corporate bonds 
C) large time deposits 
D) money market mutual funds 
A) demand deposits 
B) corporate bonds 
C) large time deposits 
D) money market mutual funds

Question 8

The agency responsible for regulating the money supply in the United States is

Accepted Answer

A) the Comptroller of the Currency. 
B) the U.S. Treasury. 
C) the Federal Reserve. 
D) the U.S. Bank. 
A) the Comptroller of the Currency. 
B) the U.S. Treasury. 
C) the Federal Reserve. 
D) the U.S. Bank.

Question 9

Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below.  
-Refer to Table 16-2. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

Accepted Answer

A) 1.33. 
B) 10.00. 
C) 10.81. 
D) 13.33. 
A) 1.33. 
B) 10.00. 
C) 10.81. 
D) 13.33.

Question 10

The amount of currency per person in the United States is about

Accepted Answer

A) $125. 
B) $300. 
C) $2,500. 
D) $3,700. 
A) $125. 
B) $300. 
C) $2,500. 
D) $3,700.

Question 11

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could

Accepted Answer

A) buy $300,000 worth of bonds. 
B) buy $450,000 worth of bonds. 
C) sell $300,000 worth of bonds. 
D) sell $450,000 worth of bonds. 
A) buy $300,000 worth of bonds. 
B) buy $450,000 worth of bonds. 
C) sell $300,000 worth of bonds. 
D) sell $450,000 worth of bonds.

Question 12

Reserve requirements are regulations concerning

Accepted Answer

A) the amount banks are allowed to borrow from the Fed. 
B) the amount of reserves banks must hold against deposits. 
C) reserves banks must hold based on the number and type of loans they make. 
D) the interest rate at which banks can borrow from the Fed. 
A) the amount banks are allowed to borrow from the Fed. 
B) the amount of reserves banks must hold against deposits. 
C) reserves banks must hold based on the number and type of loans they make. 
D) the interest rate at which banks can borrow from the Fed.

Question 13

Other things the same, if reserve requirements are increased, the reserve ratio

Accepted Answer

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

Question 14

Which type of money has intrinsic value?

Accepted Answer

A) commodity money 
B) fiat money 
C) both commodity money and fiat money 
D) neither commodity money nor fiat money 
A) commodity money 
B) fiat money 
C) both commodity money and fiat money 
D) neither commodity money nor fiat money

Question 15

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

Accepted Answer

A) 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
B) 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
C) 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
D) 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
A) 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
B) 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors. 
C) 12 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. 
D) 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of Governors.

Question 16

Table 16-1. The information in the table pertains to an imaginary economy. $\begin{array}{|l|l|}
\hline \text { Type of Money } & \text { Amount } \
\hline \text { Large time deposits } & \$ 80 \text { billion } \
\hline \text { Small time deposits } & \$ 75 \text { billion } \
\hline \text { Demand deposits } & \$ 75 \text { billion } \
\hline \text { Other checkable deposits } & \$ 40 \text { billion } \
\hline \text { Savings deposits } & \$ 10 \text { billion } \
\hline \text { Traveler's checks } & \$ 1 \text { billion } \
\hline \text { Money market mutual funds } & \$ 15 \text { billion } \
\hline \text { Currency } & \$ 110 \text { billion } \
\hline \text { Credit card balances } & \$ 10 \text { billion } \
\hline \text { Miscellaneous categories of M2 } & \$ 25 \text { billion } \
\hline
\end{array}$

-Refer to Table 16-1. What is the M2 money supply?

Accepted Answer

A) $125 billion 
B) $296 billion 
C) $351 billion 
D) $431 billion 
A) $125 billion 
B) $296 billion 
C) $351 billion 
D) $431 billion

Question 17

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Accepted Answer

A) being a unit of account. 
B) being a medium of exchange. 
C) serving as a store of value. 
D) having intrinsic value. 
A) being a unit of account. 
B) being a medium of exchange. 
C) serving as a store of value. 
D) having intrinsic value.

Question 18

Table 16-4.  
-Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it

Accepted Answer

A) has $10,000 of excess reserves. 
B) needs $10,000 more reserves to meet its reserve requirements. 
C) needs $5,000 more reserves to meet its reserve requirements. 
D) just meets its reserve requirement. 
A) has $10,000 of excess reserves. 
B) needs $10,000 more reserves to meet its reserve requirements. 
C) needs $5,000 more reserves to meet its reserve requirements. 
D) just meets its reserve requirement.

Question 19

What does the Fed auction at the Term-Auction Facility?

Accepted Answer

A) government bonds of a quantity it sets 
B) government bonds with the quantity determined at the auction 
C) loans of a quantity it sets 
D) loans with the quantity determined at the auction 
A) government bonds of a quantity it sets 
B) government bonds with the quantity determined at the auction 
C) loans of a quantity it sets 
D) loans with the quantity determined at the auction

Question 20

Credit cards are

Accepted Answer

A) a medium of exchange. 
B) counted as part of M2 but not as part of M1. 
C) important for analyzing the monetary system. 
D) All of the above are correct. 
A) a medium of exchange. 
B) counted as part of M2 but not as part of M1. 
C) important for analyzing the monetary system. 
D) All of the above are correct.

To decrease the money supply, the Fed could

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Which of the following defer payments?

When prisoners use cigarettes or some other good as money, cigarettes become

Which of the following is included in M2 but not in M1?

The agency responsible for regulating the money supply in the United States is

The amount of currency per person in the United States is about

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could

Reserve requirements are regulations concerning

Other things the same, if reserve requirements are increased, the reserve ratio

Which type of money has intrinsic value?

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Table 16-4. -Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it

What does the Fed auction at the Term-Auction Facility?

Credit cards are

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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Exam 16: The Monetary System

To decrease the money supply, the Fed could

The chair of the Board of Governors regularly testifies to Congress about Fed policy.

Which of the following defer payments?

When prisoners use cigarettes or some other good as money, cigarettes become

Which of the following is included in M2 but not in M1?

The agency responsible for regulating the money supply in the United States is

The amount of currency per person in the United States is about

If the money multiplier is 2 and the Fed wants to increase the money supply by $900,000, it could

Reserve requirements are regulations concerning

Other things the same, if reserve requirements are increased, the reserve ratio

Which type of money has intrinsic value?

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Table 16-4. -Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it

What does the Fed auction at the Term-Auction Facility?

Credit cards are

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